What is an NFT?
Home > What is an NFT?
Killian Bell
Aug 22, 2022 7 mins read

What is an NFT?

More and more people are choosing to invest their hard-earned cash in NFTs, and that’s hardly surprising given that in recent years, unique works of digital art have been fetching millions of dollars on the open market. The current record for a single NFT sale is a rather eye-watering $69 million.

Some of the world’s biggest brands and most famous celebrities — including Eminem, Snoop Dogg, and Justin Bieber — have already launched their own NFT collections, and others are quickly following suit. So, what exactly is an NFT, how do you buy them, and what do you do with them once you own them?

Here’s our beginner’s guide to NFTs.

Non-fungible tokens, also known as NFTs, are unique digital assets that cannot be replicated or replaced. Most people think of them as colorful pictures, because most NFTs are exactly that. But in actual fact, they can be so much more, like videos, audio and music recordings, 3D models and animations, and even social media posts, like tweets.

The reason why NFTs are “non-fungible” is that unlike “fungible” assets, such as gold, conventional fiat currencies, or even cryptocurrency tokens, an NFT cannot be easily interchanged with other goods or assets. In other words, you cannot swap an NFT with something of equal value in the same way you can swap a $10 bill for another $10 bill.

Just like other forms of art, however, NFTs can be easily bought and sold, and for some collectors and creators, it can be an incredibly lucrative hobby. Not all NFTs are worth a substantial sum of money, but some have sold for millions of dollars.

How does an NFT work?

NFTs represent something that has its own unique properties — like a piece of art, a collectible, or even real estate — on a blockchain such as Ethereum. It’s a way to make an asset of some kind more tradable online. For instance, it wasn’t always possible to sell a viral tweet, or a video you uploaded to YouTube. But thanks to NFTs, that’s now a reality.

Now, you might be thinking that anyone can save a picture off the internet, or screenshot a tweet, or download a YouTube video. And while that’s true, only one person can truly own it, and an NFT provides proof of ownership. NFTs cannot be modified or replaced in any way, and you cannot copy and paste an NFT into existence.

Before an NFT can be sold, however, it must be “minted.”

What is NFT minting?

Minting is the process of turning a digital object, such as a picture or the deeds to a house, into a token on the blockchain. It is similar to the process used to create cryptocurrency tokens in that it requires the creation of a new block that must be validated and added to the rest of the blockchain. The token is then transferred to its owner.

Once an NFT has been created, anyone can see it on the blockchain to verify its authenticity, and its owner can sell the NFT if they want to. They may choose to do this through an NFT marketplace, such as OpenSea or Mintable, or they could sell the NFT directly to someone else. However, there are risks involved with selling NFTs privately.

While it is possible for creators to mint NFT themselves, most rely on a third-party service — such as the marketplaces mentioned above — to take care of the hard work for them. If you do this, it’s important to be aware of any fees that may be involved.

You might be interested in: Things to look for before investing in crypto assets

What are NFTs used for?

Many NFTs are made purely for collectible purposes, while others are minted to prove ownership of an asset. However, as the NFT industry matures, others have found unique uses for NFTs that give them even more utility. Some of these include:

  1. Art

NFTs are changing the art industry by giving creators greater freedom, control, and security. It’s not only easier to sell their creations, but they can now prove ownership, which helps prevent duplication. They can even use smart contracts to claim royalties on a piece of art long after they have sold it if they choose to.

  1. Business

In much the same way artists are using NFTs to transfer ownership of a piece of art, businesses have begun to use NFTs to manage ownership of property and other assets. It not only allows them to store deeds and certificates more securely in the blockchain, but it can make transferring those assets faster, safer, and more affordable.

  1. Entertainment

Some companies have started turning things like tickets and membership cards into NFTs to cut down on fraud. While it may be possible to counterfeit a ticket, it’s not possible to counterfeit an NFT. What’s more, using NFTs in this way helps cut down on illegal scalping, which is when tickets are bought up just to be sold off at a higher price.

  1. Sport and fashion

NFTs are revolutionizing sports and fashion in more ways than one. The NBA’s “Top Shot” collection cards allow basketball fans to purchase clips and highlights from their favorite games, while Belgian’s Jupiler Pro League has partnered with Ubisoft to create a fantasy football game that uses NFTs to represent players.

 Meanwhile, Nike, Adidas, Dolce & Gabbana, and other brands from all over the fashion industry are using NFTs to represent shoes, outfits, accessories, and other collectibles.

  1. Gaming and the Metaverse

One of the biggest uses for NFTs is in gaming and the Metaverse. More and more companies are using NFTs to represent characters, outfits, and other digital assets inside their games. And some developers have built entire games around NFTs. Two of the most popular NFT games are Axie Infinity and CryptoKitties.

Both of these titles give players the opportunity to earn and collect NFT assets that can be used in-game, as well as traded and sold.

You might be interested in: What is Metaverse?

What is NFT art?

NFT art is much like any other piece of art, except it is represented by a token on the blockchain. This gives the art’s creator more freedom over how their art is used and how it is sold. It also gives them better security, since an NFT cannot be replicated or replaced.

How is an NFT different from a cryptocurrency?

In many ways, NFTs and cryptocurrencies are very similar. Both are digital assets that reside on a blockchain, and both can be bought and sold. However, unlike cryptocurrencies, NFTs are non-fungible, which means they cannot be exchanged for another object of similar value.

For instance, if you have one Bitcoin, you could swap it for another Bitcoin, or approximately 13 ETH (Ethereum) tokens, which are worth roughly the same amount as of August 17, 2022. However, NFTs are not defined by their value in the same way cryptocurrencies are. They are instead defined by their unique properties, which are not interchangeable.

References

Frequently Asked Questions

NFT stands for “non-fungible token.” They represent assets on the blockchain and they cannot be replicated, replaced, or interchanged.

You can buy an NFT from one of many NFT marketplaces like OpenSea, Rarible, and Mintable. Some marketplaces allow you to buy NFTs with a credit or debit card in some markets, while others require cryptocurrency of some kind. You will also need a cryptocurrency wallet.

Firstly, you’ll need to start by creating a digital asset if you don’t already have one. This could be a piece of art or music, a video, or the digital deeds to a car or house. You can then “mint” that digital asset into an NFT on the blockchain using a marketplace like those listed above.

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About the author

Killian Bell
Senior content writer
United Kingdom
Senior copywriter for AAG Marketing team with the focus of educating our community on all things web3, blockchain and Metaverse.

Disclaimer

This article is intended to provide generalized information designed to educate a broad segment of the public; it does not give personalized investment, legal, or other business and professional advice. Before taking any action, you should always consult with your own financial, legal, tax, investment, or other professional for advice on matters that affect you and/or your business.

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