What is an NFT?
What is an NFT? If you've read about the exploding blockchain-based game market, or if you've seen articles about the rising popularity of EOS and TRON, then you might have heard this term before. But what exactly are NFTs? Let's find out!
What is an NFT?
Non-Fungible Tokens (NFTs) are a type of digital asset that are unique and can be traded.
NFTs are different from fungible tokens, which have the same value. Fungible tokens can be redeemed for whatever they represent—for example, you could buy a share in Apple stock or redeem your token for an Amazon gift card. Because NFTs are unique and have their own values, they don’t have to be redeemed for anything else. They can just exist as their own entity and still retain value on their own merits.
NFTs are used in a variety of applications: blockchain art galleries like Maecenas or cryptocollectibles like CryptoKitties give users digital assets that hold real value; virtual gaming worlds like Decentraland allow players to control land within their game; decentralized marketplaces such as Rarebits let users trade items with each other without relying on centralized platforms like eBay or Etsy; prediction markets like Stox let users bet on outcomes using NFTs instead of fiat currency (or even cryptocurrencies).
NFTs and the blockchain
A blockchain is a distributed database that keeps a record of all transactions across
a peer-to-peer network. The name comes from how blocks are added one after another
to create an immutable chain (which is sometimes called a ledger). A token represents ownership of something, like digital property or physical assets. And smart contracts
are computer programs that run on blockchains to enforce the rules of an agreement between two parties or more.
NFTs can be used for anything from voting rights to real estate titles or personal identity information — depending on how they're designed and who controls them.
Are NFTs worth anything?
As a digital asset, NFTs are worth what people are willing to pay for them. In other words,
an individual user will determine the value of a specific NFT based on how much he or
she is willing to pay for it in a transaction.
For example, if you have an NFT that's worth $20 and another person wants it but doesn't have any money, they might offer something else valuable instead—like a service or product. The key idea here is that this type of value exchange isn't possible with regular currency;
only with things like artwork or collectibles can you trade goods and services (or access) instead of cold hard cash because they're non-fungible tokens.
On top of this intrinsic value, there's also potential external factors at play when determining how valuable an NFT may be: scarcity; popularity; demand; etc.—but we'll get into those later!
Why are people buying NFTs?
Collectible: With the rise of digital art and collectibles, many people like to buy NFTs as an investment.
Curiosity: People often enjoy buying NFTs because they're curious about what will happen next with the work of art or game item.
Fun: Just like collecting baseball cards or comic books, it's fun to buy and own something rare and unique.
Social status: In some communities, owning certain kinds of things is seen as being part of a group or having high social status—even if the thing itself isn't particularly valuable financially. This may be true for crypto-collectibles in general (e.g., owning a CryptoKitty) but can also apply to specific types where there are few copies available (e.g., SuperRare).
Aesthetics: Some people just think these things look cool! You might have heard that aesthetics are important in art; they're also important when considering why we buy things—when someone buys an artwork that looks good on their wall or desk, this could be part of what motivates them to make the purchase over another similar one by another artist who has been more successful commercially (e.g., “I'm going to buy this because it looks better than any other piece out there”).
Is it possible to make money off NFTs?
Whether or not an NFT can be traded for money—or whether it has any value at all—depends on the platform where it was created. If a game developer decides to give away free skin-themed hats for a new skinning system, those hats are worth nothing because there
is no market in which they can be exchanged. But if the same developer sells users
the ability to use those hats in-game, then that right becomes an asset with monetary value.
There are two types of markets where you can trade your NFTs: decentralized markets
and centralized exchanges. In both cases, you must first convert your crypto into fiat currency before trading them for other cryptocurrencies or NFTs on these markets.
How can you buy an NFT?
NFTs are bought and sold on the blockchain. You can purchase them from an NFT marketplace, an auction site or peer-to-peer over LocalBitcoins. In order to buy an NFT,
you will need to set up a wallet with a compatible cryptocurrency (such as Bitcoin
or Ethereum) and link it to your account in order to make a deposit.
How can someone create an NFT?
To create an NFT, you need to do four things:
Create an ERC-721 token.
Create a digital asset that conforms to the ERC-721 standard.
Create a digital collectible with unique properties (like being able to play the piano).
Generate your non-fungible token.
How are brands making money with NFTs?
NFTs can be used to create a community around a brand, a piece of art, or even music.
For example, if you buy an NFT for a brand like Nike, you might be able to earn points
by walking around in their shoes or by sharing photos of yourself wearing their clothes
on social media. You can also redeem these points for reward items that are specific
to Nike and their products.
NFTs allow brands like Nike to build direct relationships with consumers by giving them incentives for participating in the marketplace. The more active participants are within
this marketplace, the more likely they will be interested in buying something from that brand later on down the road (like sneakers).
Earned rewards could also lead them into making repeat purchases because they know they'll receive something cool just for being loyal customers.
When selling NFTs directly through exchanges instead of secondary marketplaces like eBay or Craigslist (which are often filled with fakes), companies get paid directly from collectors who purchase these unique assets through automated protocols set up by each exchange platform manager before listing it publicly using smart contracts written onto blockchain technology systems so no one else can access these assets without permission from owner(s) themselves."
The first step to understanding the exploding NFT market is understanding what they are.
An NFT is a digital asset stored on a blockchain. It’s like a cryptocurrency, but unlike most cryptocurrencies, it can be physical (a physical object), virtual (a digital copy of the object)
or tokenized (the original object has been broken down into individual tokens).
NFTs are stored in what we call the “realm”—a place where all NFTs live. The realm sits atop the Ethereum network and is managed by an ERC-721 smart contract that controls how many of each NFT exist and who owns them.
NFTS are created through smart contracts, which means they can be thought of as having two parts: one part lives on the blockchain, while another part lives online (in your browser).
In short, NFTs are a new breed of digital assets that can have real-world value.
They’re used to represent ownership in games and oth
er digital content, and they have the potential to revolutionize how we think about ownership in general—not just in gaming but also with physical items like cars and houses. There may be some bumps along the way as the industry grows, but NFTs are clearly here to stay.