Many of us are saying, “Oh, brother!”
With all these new terms like ‘blockchain,’ ‘ethereum,’ and ‘cryptocurrency,’ flying around these days, we are now seeing around one.
The new acronym we see is ‘NFT.’ Not only has it made its rounds through headlines recently, but people are also making a fortune off of them.
I don’t know about you, but the first time I heard about them, I also heard how they are being sold for millions by celebrities such as Tom Brady and Jack Dorsey. So it seemed that everyone else knew about them but me. Talk about feeling out of touch!
So it’s time to take a closer look.
What are NFTs?
NFT stands for a non-fungible token. The term itself, ‘non-fungible, directly means that it’s not only one of a kind, it’s also irreplaceable.
So when you hear about NFTs, they represent a unique one-of-a-kind digital item that someone owns exclusively – just like a painting or piece of art. Believe it or not, a graphic designer called Beeple recently sold an NFT artwork at an auction for $69 million!
And like we eluded to earlier, an NFT of Twitter founder Jack Dorsey’s very first tweet one sold for almost $3 million.
How do these NFTs work in the real world?
To begin with, NFTs are a part of the blockchain from the Ethereum version of cryptocurrency. And yes, there are many confusing terms in that sentence – let’s explain further.
A blockchain is the data structure of a cryptocurrency. For instance, there is a bitcoin blockchain, and there’s a litecoin blockchain, and so on.
Ethereum is an advanced type of blockchain that can do more than ordinary cryptocurrency. It has a native cryptocurrency which is called ether.
So whenever you buy an NFT using a cryptocurrency, you can verify on this blockchain that you, and only you are the sole owner of that work. No one can ever steal or undo your ownership of that NFT, and no one can ever duplicate it either.
NFTs are somewhat like collectible cards that people can look at, but that just one person can ever own it at any time. Although the image of an NFT may be reproducible, the proof of purchase remains with the buyer.
These seals of uniqueness and authenticity are one of the significant allures of the cryptocurrency market. It eliminates fraud.
How long have NFTs been around?
The idea of an NFT started around 2012 when a bevy of cryptocurrency researchers began bouncing around the notion of unique “colored” bitcoins that could possess a unique value aside from the fixed price of each bitcoin.
NFTs were definitely around in 2017 when CryptoPunks and CryptoKitties were first created in a more current version. Several of these first generations of these NFTs have been bought and sold for at least six figures.
Why would someone buy an NFT?
NFTs are like stocks or any other financial investment. Their value can fluctuate up and down rapidly and cause some people to make a lot of money and others to lose it.
Today’s NFT values are driven by the scarcity of NFT items and the demand from early-adopting investors, collectors, and gamers. These trendsetters are willing to pay more significant sums of money to be first.
Should I buy an NFT?
This all depends on many factors. For most of us, it’s too risky of an investment. As with many new markets, they are volatile and can fluctuate wildly in a short time. We’ve seen this happens in other non-traditional markets like art, baseball cards, and even cryptocurrencies themselves.
However, if this is something you’re interested in, then you must exercise due diligence. It pays to understand what drives prices and how trending is moving at any current time.
You would have to watch an investment like an NFT actively – it is not something you put your money in and then leave it for the long run. At this point, no one is sure they will even be around for the long run.
How to buy an NFT?
There are a few things you must decide before jumping into NFTs.
The first thing you must consider is which marketplace you will use to purchase NFTs. There are many options like Mintable, Nifty Gateway, OpenSea, and Rarible. And then some are topic-specific such as Valuables and NBA Top Shot.
Secondly, you will need a ‘digital wallet’ for storing your NFTs, as well as your digital money, credentials, and other identifiers. Your digital wallet is your access portal for interacting with blockchain entities.
Some of the most common wallets used for NFTs are TrustWallet, MetaMask, MyEtherWallets, and Dapper – all of these are compatible with hardware wallets like Trezor and Ledger.
What type of cryptocurrency will you use to buy NFTs?
For NFT transactions, most people are using Ethereum, but there are now cryptocurrencies that are creating an ability to process them.
How do I make my own NFT?
Yes, you can create your own NFT. In order to do this, you’ll need a digital wallet, a small quantity of Ethereum, and access to an NFT marketplace.