NFT – What it means and How it works

What is an NFT?

NFT stands for ‘non-fungible token’. Non-fungible means that something is unique and can’t be replaced. By contrast, physical money and cryptocurrencies are fungible, which means they can be traded or exchanged for one another. Every NFT contains a digital signature which makes each one unique. NFTs are digital assets and could be photos, videos, audio files, or another digital format.

How do NFTs work?

For the creation and issuing of NFTs, there are several different frameworks. On the Ethereum blockchain, the ERC-721 and ERC-1155 are the most well-liked. The BEP-721 and BEP-1155 are the standards used by the BNB Chain. Even the NFT’s issuer cannot duplicate or transfer NFTs without the owner’s consent.

 

NFTs can be traded on public marketplaces like Treasureland, OpenSea, and Binance NFT Marketplace. These marketplaces assist in bringing together buyers and sellers, and each NFT has its own value. NFTs are likewise subject to price variations as a result of supply and demand in the market.

What can NFTs be used for?

People interested in Crypto-trading and people who like to collect artwork often use NFTs. Other than that, it has some other uses too like:

 

Digital Content – The most significant use of NFTs today is in digital content. Content creators see their profits enhanced by NFTs, as they power a creator economy where creators have the ownership of their content over to the platforms they use to publicize it.

 

Gaming Items – NFTs have garnered considerable interest from game developers. NFTs can provide a lot of benefits to the players. Normally, in an online game, you can buy items for your character, but that’s as far as it goes. With NFTs, you can recoup your money by selling the items once you’re finished with them.

 

Investment and Collaterals – Both NFT and DeFi (Decentralized Finance) share the same infrastructure. DeFi applications let you borrow money by using collateral. NFT and DeFi both work together to explore using NFTs as collateral instead.

 

Domain Names – NFTs provide your domain with an easier-to-remember name. This works like a website domain name, making its IP address more memorable and valuable, usually based on length and relevance.

 

Even celebrities like Snoop Dogg, Shawn Mendes, and Jack Dorsey are taking an interest in the NFT by releasing unique memories and artwork and selling them as securitized NFTs.

How to buy an NFT?

Where to buy an NFT?

NFTs are sold in many ways, including through private sales, traditional auction houses and online marketplaces.

 

For most beginners, it’s a good idea to start with a reputable online marketplace. Some well-known examples of art include OpenSea and Nifty Gateway. But there may be others depending on what you’re looking to buy. NBA Top Shot, which makes licensed NFTs based on basketball games and players, has its own marketplace, for instance.

How to select an NFT?

Online shops allow users to search for NFTs based on the kind of art, the creator, the price and other filters. If you’re interested in buying one that has more cachet, look at famous collections such as CryptoPunks and Bored Ape Yacht Club.

 

Wherever you shop, be cautious. In a fast-growing and loosely regulated space, imitators and scammers can crop up quickly. Platforms often have verified accounts for notable creators, which can help you choose.

 

For lesser-known creators (whose NFTs are likely to be far more affordable), we suggest looking at information such as what they’ve sold previously and how many of a given type of NFT they intend to make. If they haven’t set up an external website to provide information about their art, for instance, that could be a red flag.

How to pay for an NFT?

Some marketplaces accept payment in fiat currencies such as U.S. dollars, but in other cases, you can’t use cash or credit cards to pay directly for an NFT. Prices are often set in the cryptocurrency used by the network on which the NFTs are registered. If a creator minted your NFT on the Ethereum blockchain, for example, you’d use Ether (ETH), the native token on the Ethereum network, to pay for it. If the blockchain is Solana, you’d use Solana (SOL), the native token on the Solana network. If you don’t already own crypto, the easiest way is to buy it on a centralized exchange like FMCPAY.

How to store an NFT?

Before you buy, you may have to set up a cryptocurrency wallet that also stores NFTs. MetaMask is one wallet commonly used to buy and store NFTs and cryptocurrency.

 

Before you buy anything, though, make sure you have access to a wallet (or multiple wallets) able to store both the currency that you’re using and the NFT you want to hold.

 

Some services, such as Nifty Gateway, will hold your NFT for you, which can simplify the process if you’re willing to entrust your purchase to a third party.

 

Whatever you decide, you’re not alone if you’re feeling unsure about how to value digital ownership. People have argued for centuries about how to place a monetary price on art. NFTs may be just another round in that debate.