Non-Fungible Token or NFT has gained remarkable popularity this year in March 2021 after NFT digital artworks were sold for millions in the market. NFT is a type of digital asset broadening its boundaries not only in the tech world but also in the entertainment world. The surge in trend of NFT, especially blockchain-certified digital artworks, has inspired celebrities to join the club to create, buy, sell, and trade non-fungible tokens. If you are among people scratching heads to understand NFTs, then you are at the right place. Here is an article with all you need to know about NFTs, their uses, and how they are different from cryptocurrencies.
Nitty Gritty About Non-Fungible Token
A non-fungible token is a technically advanced digital asset being used to cryptographically allocate as well as prove the ownership of different types of digital goods. NFTs are changing the thought process of people about the artwork and collectibles – and investors have started taking interest in this asset. But are NFTs actually worth the money, or are they just a part of any trend that will pass away? Let’s dive in.
What is a Non-Fungible Token?
NFT is an abbreviation that stands for a non-fungible token, and it means one of a kind. It is a unique digital asset that represents a gamut of objects like videos, digital art, images, music, and any other collectibles. NFTs are used to associate the ownership of digital or physical objects, and they cannot be duplicated.
The non-fungible tokens are backed by blockchain technology. They are encoded, have unique identifying codes, and are sold online for cryptocurrencies. NFTs have been around since 2014, but they have gained notoriety now as they have become an easy and effective way to trade digital artwork.
NFTs are a type of contemporary collectibles. They are highly encoded and recorded on the blockchain, which is the technology used for cryptocurrencies. This technology ensures that the asset is unique and cannot be copied.
Many NFTs are digital creations and are already present somewhere. For example, secured versions of various digital assets like music, images, or videos are floating on social media platforms. Anyone can view these digital assets, and you do not need to make any payment for viewing them.
Now you must be thinking, why are people ready to spend millions and billions on something that can be viewed, downloaded, or screenshot? The answer is that NFT allows buyers to have ownership of original items. Moreover, it includes built-in authentication that acts as legit proof of ownership.
What is the Difference Between Fungible and Non-Fungible Assets
Now that you know what non-fungible tokens are, the next question is if they are made using blockchain, then how are they different from cryptocurrencies. In order to understand this difference, first of all, let’s understand the difference between fungible and non-fungible items.
Fungible Items
These items are not unique and can be easily exchanged with one another. For instance, you can exchange your $100 bill with another $100 bill. Now you still have a $100 bill only with a different serial number.
Non-fungible Items
These items are unique and cannot be interchanged. Each NFT token possesses unique properties and also has a different worth from the other similar tokens. Moreover, they have unique identifying codes, making them one of a kind.
For instance, individual diamonds have different sizes, colors, grades, and cuts, they are referred to as non-fungible items. Hence, they can never be exchanged for the same value.
What is the Difference between NFT and Cryptocurrency?
Non-fungible tokens or NFTs are developed using blockchain technology. The technology is the same as that of cryptocurrencies like Ethereum or Bitcoins. This is the only similarity between NFT and cryptocurrency.
Cryptocurrency
Cryptocurrencies are fungible tokens. It means you can trade or exchange them for one another. Moreover, they hold the same value. For instance, one bitcoin equals one bitcoin and will always be the same. The fungibility of cryptocurrencies makes them a trusted medium for carrying secured transactions on the blockchain.
Non-Fungible Token
NFTs are different as they are non-fungible. Each NFTs has a unique digital signature due which they cannot be exchanged or be made equal to each other. In short, they are one-of-a-kind and cannot be replaced.
How NFT works?
NFTs are present on the blockchain, which represents a decentralized public ledger widely used to record transactions. Most people know about blockchain as an underlying technology or procedure used to create cryptocurrencies.
Non-fungible tokens are present on the Ethereum blockchain. However, other blockchains also support them. An NFT is minted to developed from different digital objects that can be intangible or tangible like gifs, art, music, collectible, and more. In addition to this, tweets can also be counted in for NFTs.
To succinctly describe, NFTs are similar to physical collectibles but in digital form. So instead of buying physical artwork, people go for digital ones. The buyers get exclusive ownership right for purchasing NFTs. Therefore, one NFT can have only one owner at a time. The uniqueness of NFT makes it easier to verify the right owner of the asset.
What are the uses of NFTs?
NFTs offer a unique opportunity to content creators and artists to monetize their work. The artists can directly sell their NFTs to other people as an NFT, which allows them to keep most of the profits. Moreover, the artists can create royalties for their NFTs, so every time their artwork is sold to the new owner, they get a fixed percentile of the profit.
Apart from art, NFTs are also being used in the world of sports, fashion, collectibles, and certifications. Popular celebrities like Snoop Dogg have also joined the NFT bandwagon and releasing his artworks, and memories are encoded NFTs.
How to Purchase NFTs?
If you are planning to purchase NFT, you will have to get a digital wallet. The wallet allows you to store cryptocurrencies and NFTs. Moreover, you will also have to buy cryptocurrency as NFTs can only be purchased using cryptos. Before buying the cryptos, make sure to check which cryptos the NFT seller is accepting.
You can purchase cryptocurrency using different credit cards present on platforms such as PayPal, Kraken, Robinhood, and Coinbase. After buying crypto, you can move it to your preferred digital wallet.
There are different platforms where you can buy NFT, like Rarible and Foundation. The verification process of NFT platforms is not the same. Some platforms are stricter as compared to others. These platforms host millions of NFTs but make sure to do proper research before finalizing one for your purchase.
To Conclude
The word non-fungible is used for something that is one of a kind. These assets are unique and cannot be replaced. They are created using blockchain technology but are different from cryptocurrencies.
NFTs have unique digital signatures, which makes it impossible to exchange them. Moreover, their uniqueness makes it easy to identify their real owner. If you are interested in purchasing NFTs, then you can get them on various platforms using cryptocurrencies, but make sure to do proper research and understand the risks. If you have more questions about NFTs, feel free to ask us by dropping a comment.
FAQs
What is NFT?
NFT or non-fungible token is a one-of-a-kind digital asset that is used to represent the ownership of digital assets.
What is the most expensive NFT ever sold?
The most expensive NFT ever sold is Everyday: The First 5000 Days at the price of $69.3 million.
What is the most popular NFT?
The first tweet, which was sold for $2.9 million, is the most popular NFT.
What is the first NFT?
“Quantum,” which is an octagon-shaped animation, is the first NFT. It was created by Kevin McCoy, a New York artist.
