There’s nothing like the rumble of news about blockchain technology to make you think, “Um… what’s going on here?” This is what I’ve had when reading about Grimes receiving millions of dollars from NFTs or the story of Nyan Cat being sold as a single. When we thought we kind of understood what was going on, the founder of Twitter tweeted an autographed tweet on auction under the name of an NFT. After a few months, when we first released this infographic we’re still getting reports about people paying money for clip art of rocks and my mom doesn’t know what is an NFT is.
You might be wondering What exactly is an NFT?
After days of studying, I’m thinking I have a clue. I’m also beginning to think that I’m going to weep.
Okay, let’s begin with the fundamentals:
WHAT IS AN NFT? WHAT DOES NFT STAND FOR?
This doesn’t make it any easier to understand.
Right, sorry. “Non-fungible” more or less signifies that the item is unique and cannot be replaced by something else. For instance, bitcoin is fungible. You can exchange one bitcoin for another and you’ll get the identical thing. A unique trading card, however, isn’t fungible. If you were to trade it in to get a different card, you’d end up with an entirely different card. You sold the Squirtle and received a 1909 Honus Wagner that StadiumTalk describes as “the Mona Lisa of baseball cards.” (I’ll trust their word.)
How do NFTs function?
On a high level, the majority of NFTs make up the Ethereum blockchain. Ethereum can be described as crypto similar to dogecoin or bitcoin however, its blockchain allows for these NFTs to contain additional information, which creates a different working model from, for example, the ETH coin. It is important to note that other blockchains have the ability to use their version of NFTs.
What’s NFT worth of being purchased
NFTs could encompass anything digital (such as music, sketches that you download or your brain converted into an AI) however, the majority of the buzz is about using this technology to the market digital artwork.
How do NFTs trade?
Similar to cryptocurrencies, NFTs can be traded and bought on specific platforms. OpenSea is the most well-known NFT marketplace. A sale doesn’t necessarily require any transfer or exchange of items depicted in the token. Famous paintings that have NFTs are sold, for instance, but the purchaser doesn’t receive the painting.
What’s changed hands is proof of ownership for the NFT that is registered with the blockchain. The certificate should be stored in a digital wallet which may take a variety of shapes. The wallet can be accessed through Metamask an internet browser add-on, or even a physically secure device. It could also be in the basic form of a code that is printed on the surface of a piece of paper.
To buy an NFT the wallet has to have enough of the appropriate currency, such as it is ether (ETH) in the case of someone who purchases a token from Ethereum. Ethereum blockchain. If you have a little know-how in the technical realm it is also possible to create”mint,”, or “mint”, your own NFT. In essence, NFTs are digital contracts with specific rules, such as the number of copies available to purchase.
Is every NFT is different? And does NFT worth taking a risk?
In the technical, boring sense, every NFT is a distinct token that is stored on the blockchain. However, while it may be similar to an image by van Gogh, where there’s only one authentic version, it can also be a kind of trading card, with hundreds or even thousands of numbered versions of the same painting.
What are the odds?
The trading of NFTs requires technical procedures which are often misunderstood and can result in investors not being aware of what they’re dealing with.
Every transaction made on the blockchain is subject to fees to be paid to pay for “mining” — the massively energy-intensive computer calculations that are required to validate each transaction.
A large number of people could be rushing to purchase a highly sought-after NFT when it’s issued and then pay for the costs even if they go home empty-handed. Certain buyers employ bots to ensure that they can get the token and make the market more difficult for investors who are just beginning their journey.