What better way to leave you wondering, "Um... what's going on here?" than an explosion of blockchain news?
That's how I've felt when reading about how Grimes made millions of dollars selling NFTs, or how Nyan Cat was marketed as one. And just when we all thought we figured it out, Twitter's founder put an autographed tweet up for auction as a non-traditional collectible. People still spend thousands of dollars for clip art of rocks, and some people doesn't really grasp what an NFT is, after we first published this explainer.
You may be asking, "What is NFT?"
I think I've figured it out after several hours of research.
To begin, here are the essentials:
What is the acronym for NFT, and what does it mean?
NFT stands for "Non-fungible token." Non-fungible tokens are digital assets with unique identifiers stored in smart contracts.
The term "non-fungible" simply denotes that something cannot be substituted by anything else. It's possible to trade one bitcoin for another and get exactly the same thing. Although trading cards can be bought and sold, a one-of-a-kind trading card is nonfungible. A completely different card could be obtained by exchanging it. StadiumTalk deems this 1909 T206 Honus Wagner card "the Mona Lisa of baseball cards," for which you gave up a Squirtle.
As a result of this information, each NFT is unique and cannot be substituted by another token. Because no two NFTs are alike, they cannot be swapped like for like. Banknotes, on the other hand, can be easily swapped for one another if they are of comparable value; the owner will not notice the difference between, say, one dollar and another.
Bitcoin is a digital currency that may be exchanged for other forms of money. You can give one Bitcoin to someone, and they can send one back to you, and you'll still have one Bitcoin. (Of course, the value of Bitcoin may fluctuate during the transaction.) Because fungible tokens are divisible, you can transfer or receive smaller amounts of one Bitcoin, measured in satoshis (think of satoshis as Bitcoin cents).
Non-fungible tokens are typically not divisible, much like you couldn't mail someone part of a concert ticket because it wouldn't be worth anything on its own and wouldn't be redeemable. However, several investors have been experimenting with the concept of fractionalized NFTs in recent months, despite the fact that they remain a legal grey area and could be considered securities.
CryptoKitties collectibles were among the first non-fungible tokens. Each CryptoKitty is a one-of-a-kind blockchain technology-based digital kitten; if you send someone a CryptoKitty and receive one from someone else, the CryptoKitty you receive will be completely different from the one you sent. The objective of the game is to collect as many different digital cats as possible.
The unique information of a non-fungible token, like a CryptoKitty, is kept in its smart contract and immutably recorded on the token's blockchain. CryptoKitties were first issued on the Ethereum blockchain as ERC-721 tokens, but have now moved to their own blockchain, Flow, to make it easier for newcomers to get started with cryptocurrency.
What is the difference between cryptocurrencies and non-fungible tokens (NFTs)?
Both NFTs and cryptocurrencies are built on the same blockchain technology. Anyone may be required to purchase NFTs with a cryptocurrency on NFT exchanges. On the other hand, cryptocurrencies and NFTs are created and used for a variety of projects.
Cryptocurrencies are supposed to act like currencies by storing value and allowing you to purchase and sell goods. Cryptocurrency tokens, like fiat currencies like the dollar, are fungible. NFTs create one-of-a-kind tokens that can be used to prove ownership of digital assets and transfer rights.
What is it about NFTs that makes them so unique?
Non-fungible tokens have distinct characteristics and are usually associated with certain digital items. They can be used as proof of ownership of digital assets such as game items all the way up to tangible goods.
Other tokens, like coins and banknotes, can be redeemed for cash. The features and value of fungible tokens are interchangeable.
After David Hockney and Jeff Koons, digital artist Beeple sold an NFT collage of his work for $69 million in March 2021, making him the third most expensive living artist at auction.
How does NFT work?
Fungible tokens include Bitcoin and Ethereum-based ERC-20 tokens. Platforms like CryptoKitties and Decentraland leverage Ethereum's non-fungible token standard, ERC-721.
With non-fungible token tools and support, non-fungible tokens can also be developed on other smart-contract-enabled blockchains. Though Ethereum was the first blockchain to enable NFTs, the ecosystem is growing, with blockchains such as Solana, NEO, Tezos, EOS, Flow, Secret Network, and TRON now supporting them.
Non-fungible tokens and accompanying smart contracts enable for the addition of detailed properties such as the owner's identity, rich metadata, and secure file links. The use of non-fungible tokens to verify digital ownership in an increasingly digital environment is a significant step forward. They could imagine blockchain's promise of trustless security being applied to nearly any asset's ownership or trade.
Non-fungible coins, their protocols, and smart contract technologies are still being developed, as is the case with blockchain to date. Developing decentralized applications and platforms for non-fungible token administration and creation is still a challenge. The difficulty of setting a standard is also a concern. Many developers are working on their own blockchain projects, resulting in fragmentation in blockchain development. For success, unified standards and interoperability may be required.
How to buy NFT tokens?
Non-fungible tokens can be bought on a variety of NFT exchanges, including as OpenSea, Rarible, and SuperRare.
Rarible is where you can get your hands on some:
Step 1: Visit Rarible.com and click the 'Connect' link in the upper right corner. Log in using the wallet you want to link to the platform from here.
Before you can log in, you must first agree the terms of service.
We'll use Metamask, a popular web and mobile wallet, in our example.
Step 2: Once you've logged in, look for the NFT you wish to buy on the platform.
In this example, we'll show you how to buy Jango's 'Hand of Fate.' Regardless of the NFT you want to buy, the procedure will be the same (assuming it is available to purchase outright).
Click the 'Buy now' button after you've chosen the NFT you want to buy.
Step 3: A confirmation window will appear, requesting that you double-check the order's details.
If you're ready to move on to the next step, click the 'Proceed to payment' option.
Step 4: A message from your wallet will appear, requesting you to confirm the transaction. If you want to proceed, simply confirm the transaction and it will be completed.
Your NFT will be deposited immediately to your Ethereum address and will be yours to keep once it has been validated.
Note that you should avoid buying an NFT during peak hours to avoid paying an exorbitant gas fee.
The NFT space increased explosively in 2021, with trading volumes in Q3 topping $10.67 billion, according to DappRadar—a year-over-year surge of over 38,000 percent . OpenSea, the leading NFT platform, had a single-day trading volume of nearly $75 million in August, which was more than its whole trading volume in 2020.
In the meantime, NFTs began to change hands for exorbitant sums. Beeple, a digital artist, sold a single NFT digital artwork for $69.3 million at auction in March 2021, catapulting him into the top-selling living artists list overnight. Millions of cash were exchanged between CryptoPunks, Bored Apes, and Art Blocks. With the emergence of a new market in mind, venerable institutions such as Christie's and Sotheby's have embraced NFTs, organizing sales and developing their own NFT platform. Art galleries grappled with the difficult task of displaying digital artwork. Non-fungible tokens, or NFTs, are gaining popularity these days. More people are creating an NFT in the hopes of profiting from the current fad, owing to the possibility for large sums of money. Video footage,real-world objects like art, Gif, PNG, Audio clip, and Video clips are all examples of digital arts that can be represented with NFTs. However, you can make as many copies of a digital file as you like, including the art that comes with an NFT.