The word NFT stands for Non-Fungible Token. An NFT is a digital asset that represents ownership of a unique item. This item could be an object or piece of content, such as artwork, collectables, or virtual real estate. NFTs are based on blockchain technology, which gives them some unique features.
Unlike traditional digital assets, like a JPEG or MP3 file, one can’t replicate or replace NFTs, making them one-of-a-kind. You cannot trade NFTs in the exact same way as cryptocurrencies. NFTs gave found applications not just in the art world but also in gaming and other digital industries.
What is the history of NFTs?
The history of NFTs goes back to the initial days of blockchain technology. Specifically to the creation of the cryptocurrency Bitcoin in 2008. However, it wasn’t until the rise of Ethereum in 2015 that the technology became widely available for the creation of NFTs.
In the early days of NFTs, they found value in digital collectables such as CryptoKitties and CryptoCollectibles. Colored Coins were actually the first NFTs and were smaller portions of bitcoin with a mark on them.
In 2017, NFTs began to gain more mainstream attention, with the first NFT art sales taking place. This trend continued in 2018, with a number of high-profile NFT art sales. By 2019, the NFT market had grown significantly, with the total value of NFTs sold reaching $100 million. Calculating from November 2017, a whopping 174 million dollars have been spent on NFTs
In 2020, the NFT market exploded, and the total amount of NFTs sold reached over $2 billion. A number of high-profile sales took place. This included a digital artwork by the artist Beeple selling for $69 million at Christie’s auction house. This popularity and recognition have continued in 2021, with more and more creators, artists, musicians, and celebrities exploring NFTs as a new way to monetize their digital creations.
How do NFTs work?
As mentioned earlier, NFTs are created and stored on a blockchain. Blockchain is a decentralized and distributed digital ledger that records transactions.
When an NFT is produced, a unique digital signature, or “token,” is generated. This token contains information about the NFT, such as its title, description, and the address of the wallet that owns it. This token is then saved on the blockchain, creating a permanent and unchangeable record of the NFT’s existence.
To purchase an NFT, an individual will need to use a cryptocurrency, such as Ethereum. It is needed to make a payment to the NFT’s owner. After completion of the payment, the transfer of ownership of the NFT occurs. It goes to the buyer’s wallet and the new owner’s address becomes a part of the blockchain.
One of the key benefits of NFTs is that users can easily buy, sell, and trade them on various online marketplaces. The creation of the ledger record of the asset ownership happens in a transparent, unchangeable and secure way.
How do you purchase NFTs?
To buy an NFT, you will need to follow these steps:
Get a cryptocurrency wallet
In order to buy an NFT, you will need a cryptocurrency wallet that supports the Ethereum blockchain. Some popular options include MetaMask, MyEtherWallet, and Trust Wallet.
Purchase Ethereum
The purchase of NFTs typically requires Ethereum. Hence so you will need to acquire or collect some Ethereum before you can buy an NFT. You can purchase Ethereum on a cryptocurrency exchange, such as Coinbase or Binance, using fiat currency or another cryptocurrency.
Find an NFT marketplace
There are a number of online marketplaces where you can spot and purchase NFTs, such as OpenSea, Rarible, and SuperRare. You can browse these marketplaces to discover an NFT that you would have an interest in.
Make a purchase
Once you’ve found an NFT that you want to buy, you can perform a purchase. You can do this by sending Ethereum from your wallet to the seller’s wallet. NFT prices can vary over a period of time, however, their listing is usually always in Ethereum.
What are the use cases of NFTs?
NFTs have a wide range of potential applications, some of which include:
Digital art and collectables
NFTs are extremely massive in the digital art space. They allow artists to create unique digital pieces and sell them to collectors as unique assets.
Gaming and virtual reality
NFTs can in fact be very useful to represent the hold of land and assets in online gaming and virtual reality, such as in-game items or digital real estate.
Music and video
NFTs also find application in representing ownership of exclusive digital music and video content. For example, live concert recordings or limited edition music videos.
Sports and collectables
Users can use NFTs to acquire unique sports memorabilia and collectables. These include finite volume trading cards or game-worn jerseys.
Collaterals
Many DeFi protocols need solid collateral to approve the investment. These protocols collaborate with NFTs to use the asset as a plausible collateral.
Certificates and credentials
NFTs can be used to display proof of authenticity or ownership of certificates and credentials. For example degrees or professional licenses.
Digital identity
NFTs also could serve as a reflection of an individual’s digital identity and personal information, allowing for more secure and private online interactions.
Supply Chain Management
In supply chain management authentication and tracking of the origin of goods and products require many mechanisms and NFTs can be one of them.
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To summarise
In conclusion, NFTs are a revolutionary technology that allows for the creation, control and trading of extraordinary and exclusive digital assets. The possibilities of NFTs are vast and the industry has experienced rapid growth in recent years.
However, it’s important to be aware of the criticisms and concerns surrounding the technology, particularly with regard to its environmental impact, and to approach the market with caution. As the space for NFTs continues to evolve, it will be interesting to see how it shapes up the future of digital ownership and monetization.
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