What is an NFT?
A digital asset that depicts real-world elements like as art, music, in-game items, and films is known as an NFT. They’re bought and traded online, often using cryptocurrency, and they’re usually encoded with the same software as many other cryptos.
Despite the fact that they’ve been there since 2014, NFTs are gaining popularity currently as a popular means to buy and sell digital artwork. Since November 2017, a whopping $174 million has been spent on NFTs.
NFTs are also one-of-a-kind, or at the very least one of a very small run, and contain unique identifying codes. “Essentially, NFTs generate digital scarcity,” explains Arry Yu, managing director of Yellow Umbrella Ventures and chair of the Washington Technology Industry Association’s Cascadia Blockchain Council.
This is in sharp contrast to the vast majority of digital products, which are nearly always available in endless quantities. If a certain asset is in demand, cutting down the supply should theoretically increase its value.
However, many NFTs have been digital works that already exist in some form elsewhere, such as legendary video clips from NBA games or securitized versions of digital art that are already floating around on Instagram, at least in these early days.
For example, acclaimed digital artist Mike Winklemann, better known as “Beeple,” created “EVERYDAYS: The First 5000 Days,” possibly the most famous NFT of the moment, which sold at Christie’s for a record-breaking $69.3 million.
Individual images—or perhaps the full collage of images—can be viewed for free on the internet. So, why are people prepared to spend millions of dollars on something that might be easily screenshotted or downloaded?
Because a non-financial transaction permits the buyer to keep the original object. It also comes with built-in authentication, which acts as proof of ownership. The “digital bragging rights” are almost as valuable as the item itself to collectors.
What Is the Difference Between an NFT and Cryptocurrency?
The term “non-fungible token” refers to a token that is not fungible. It’s usually programmed in the same way as cryptocurrencies like Bitcoin or Ethereum, but that’s where the similarities end.
Cryptocurrencies and physical money are both “fungible,” meaning they may be traded or exchanged for one another. They’re also worth the same amount of money—one dollar is always worth another dollar, and one Bitcoin is always worth another Bitcoin. The fungibility of cryptocurrency makes it a secure way to execute blockchain transactions.
NFTs aren’t like other materials. Each contains a digital signature that prevents NFTs from being substituted for or compared to one another (hence, non-fungible). Simply because they’re both NFTs, one NBA Top Shot clip isn’t the same as EVERYDAYS. (For that matter, one NBA Top Shot footage isn’t necessarily equal to another NBA Top Shot clip.)
Choosing an NFT Marketplace: Some Points to Consider
To begin, keep in mind that a non-fungible token (NFT) merely indicates asset ownership. You’ll need to decide what type of digital asset you wish to buy, sell, or create before you choose an NFT marketplace. Because nearly anything digital can be tokenized on a blockchain (such as Ethereum (CRYPTO:ETH), the most prevalent blockchain network on which NFTs are developed), narrowing down your interests is a good place to start.
Another factor to examine is the type of tokens that a marketplace supports. Some exchanges accept a wide range of tokens. Others are closed exchanges that use a unique proprietary token. When creating an account on the NFT marketplace, make sure to fund your blockchain wallet with the appropriate coin or token to engage in the site’s activities. Once you’ve created an account, you’ll be invited to link your wallet to the NFT marketplace. Check to discover what kind of security the marketplace has in place, as well as if it has ever had any problems.
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