What Are NFTs?

NFT stands for non fungible token; if something is non-fungible it means that it cannot be replaced by another item identical to it or it is not mutually interchangeable. This is actually a legal term that represents the state of property, and that's exactly what an NFT is, digital property stored in a digital file.

The digital assets exist on a blockchain which supports its creation, trading and storage. They are always linked to a user (via a singular blockchain address such as a digital wallet) which means you can always see who owns it and who created the NFT.

Essentially, non fungible tokens (NFTs) are a tradable, online only assets - effectively making digital artwork tradable with physical money in the same way physical art is traded. They represent either a digital or non-digital property and are uncopyable, cannot be forged or stolen. The NFT market has been largely credited with starting the digital artwork wave within the metaverse, as well as holding real possible utility within trade, funding, marketing and business.

What Is the Purpose of NFTs?

The purpose of a non fungible token (NFT) is to represent an asset, whether that is online or offline. They are cryptographic tokens that are stored on the blockchain and cannot be copied, forged, or replaced.

One of the core purposes of this kind of technology is to limit fraud and forgery. Each digital asset, or NFT, has its own unique hash. A hash is a string of numbers and letters that gives an asset its unique identity. This means you could not buy a fake trading card or forged piece of art; each asset is verified and understood in its entirety.

Some secondary purposes popular within the crypto industry are:

• Staking

• Identity representation and verification

• Real estate transactions

• Supply chain management

• NFT games

How Do NFTs Work?

Non fungible tokens (NFTs) are a representation of a digital or non-digital asset on a blockchain.

Example: Ethereum Blockchain Network NFT

NFTs on the Ethereum Network are represented as an ERC-721 token. These tokens are unique in both content and value. The NFT gives the ability to assign assets to an address on the Ethereum Network or to claim ownership of them. All of this is fully trackable on the Ethereum ledger that stores the history of all transactions.

The key part of how NFTs work is their transferability. This is undertaken using smart contracts which is why only certain networks, like Ethereum, can support NFTs.

It is the initial stage of creation, or minting, that triggers the code in the smart contract and assigns ownership of the NFT asset. Once this happens it needs to be verified which then goes through much the same process as any transaction that occurs on the Ethereum Network. A block is created once verified, the transaction is confirmed and then recorded on the Ethereum distributed ledger.

Because each ERC-721 token, or NFT, is linked to one Ethereum address it can never be copied or misunderstood as an asset. Who created it and who owns it are extremely easily viewed - creating a strong layer of security and a core part of an NFT asset.

Why Are NFTs Important?

NFTs, and the NFT market, are important because they are a novel technology with a plethora of potential use cases. They offer a way of providing digital proof of ownership and can even contain things like rights to physical assets or access to exclusive content.

There is so much hype around NFTs for two main reasons.

Firstly: whilst somewhat superficial and is the most widely understood: people are making a lot of money minting, trading and selling non fungible tokens.

Secondly: NFTs provides a form of online verification without the need for a centralized authority (derived from the blockchain). Like their name suggests these assets are non-fungible and therefore each are completely unique.

Why Are NFTs Controversial?

There are three core reasons that NFTs remain a controversial type of asset. They are currently highly resource-consuming, they arguably disincentivize ‘true’ artists and they are often linked with scams. We have outline each in more detail below.

What Are the Different Types of NFTs?

Within the NFT market there are different types of NFTs.

NFTs by Blockchain

NFTs are minted through the creation of smart contracts. If we take the Ethereum network as our example, an ERC-721 token is what needs to be created. The language that is used to code this is the Solidity Programming Language which can also be used on other blockchains. To create an NFT the Truffle framework, Javascript and HTML/CSS would be used alongside Solidity.

What Are NFTs Used For?

NFTs, Metaverse and DeFi

NFTs, the Metaverse and Defi are often mentioned together - but are they related?

What Are The Most Popular NFTs?

The NFT market and NFT marketplaces are awash with digital assets from different non fungible token projects - many of which have different floor values and max sale prices.

Best NFTs to Buy Right Now

Biggest and Most Successful NFTs

Most Expensive NFTs Sold

Rarest NFTs

Top Selling NFTs

How to Buy and Sell NFTs?

Are NFTs Worth Buying?

This depends on what NFT it is you’re buying; like cryptocurrencies, NFTs are extremely risky assets. It is also critical to remember that because most of these assets are collectables or pieces of art their value is highly volatile and difficult to objectively quantify. In fact, people love NFTs for this exact reason; overnight you could see the value of an NFT 10x and it could be difficult to understand why it did. If we look at some of the more extreme examples for instance, one Bored Ape NFT recently sold for close to $3million.

As is the same with art, NFTs are cultural artifacts and therefore their value to society is dictated by the conscious state of contemporary culture. What is valuable today may just as easily be worthless tomorrow. So, an NFT is worth buying if you enjoy speculating on assets and risking your money. If you prefer a more secure investment then this may not be the asset worth buying for you. But it must be at least noted that as NFTs develop we are seeing assets that perhaps could represent something more attractive to investors, whether that is a representation of a real asset or even an NFT with real world utility.

How to Know What NFTs Are Worth Buying?

It can be worth buying an NFT if it has some kind of real-world tangible value; for example, some NFTs contain prizes, rights, or products that they represent in the real world. This is the type of asset that has more of a guarantee of retaining value. Other than that, it's an asset that you see gaining traction on the market and that you think will increase in value. Once purchased either direct or through NFT marketplaces, non fungible tokens can be stored in a digital wallet until the time you wish to sell.

• Can you spot popular NFTs by tracking whales?

How to buy NFTs?

Buying NFTs is as simple as buying cryptocurrencies. First of all, you need to have tokens available that your NFT provider accepts, such as ETH, MATIC, CRO or other ERC20 altcoin. If you don't have these yet, check out our top guides on the best tokens to buy NFTs with:

• How to buy Ethereum on an exchange

• How to buy MATIC

Once you have these ready, follow these steps:

1. Move your tokens over to an NFT supported wallet (for example Metamask, Binance chain wallet or Trust wallet)

2. Sign up to the NFT marketplace of your choice from the list below.

3. Connect your wallet with tokens to the platform

4. Brose the marketplace and select your desired NFT

5. Now some NFTs will require a bid while other will have Buy Now button

6. Either place a bit or click Buy

7. Your wallet will pop up to verify the transaction and request your digital signature

8. Confirm the selection, pay the fees and you're done.

9. Once the transaction goes through and your digital signature is confirmed, you will find the NFT stored in your wallet.

Where to Buy NFTs

What Coins Are Used to Buy NFTs?

The coins that are used to buy NFTs depends on which platform you use. Almost always Ether will be accepted, the native currency for the Ethereum network, because such a high percentage of NFTs are made on that network. Similarly, if you buy NFTs on the Binance platform you can use BNB and BUSD. And for SOlana you can use SOL.

Some platforms, like Nifty Gateway, also offer the chance to buy NFTs in fiat currency. So really it depends on which platform you choose.

Cheapest Way to Buy NFTs

What defines a cheap NFT probably depends on how much money you have to spend on one. It is worth noting that these assets are extremely volatile and you can incur bug losses when buying an asset like an NFT.

How to Sell NFTs

You can sell non fungible tokens (NFTs) on the same marketplaces that you can buy them on. However, if you buy an NFT directly from a platform that minted the NFT you may not be able to sell them there. Some of the most popular places to sell NFTs are:

Further NFT exchanges could be an option for those looking to trade or get involved with a specific NFT project.

How to Make Money With NFTs?

What Are Royalties in NFTs?

NFT royalties are a new way of making money and earning royalties even after you no longer own a specific asset, this is due to the way blockchain technology works. By utilizing smart contract technology NFTs can contain code that when an NFT is sold on a marketplace it automatically sends a percentage of the proceeds to the original owner or creator. This means money can be made even when a previous holder doesn't own NFTs.

For example, when a creator designs a collection of NFTs they can dictate that 10% of all secondary sales after minting will go to the creator. This can also be applied for those who first mint a specific NFT. For example, 10% of all secondary sales of an NFT go to the person that first minted it.

Are There NFTs That Are Worth Millions?

Why NFTs are worth as much as they are is quite a complex question. Most of the collections that are worth millions were some of the first on the scene. For example, CryptoPunks was one of the original collections that generated so much hype.

Rarity also holds a massive stake in how valuable an NFT is. If there is a rare collection with a limited number of NFTs then of course it will be worth more. But a collection will need significant traction before rarity makes it worth $1,000,000.

Hype is what really drives traction. NFTs have been championed by many influencers, and as soon as high profile celebrities name the next big NFT it can soon rise in value.

NFTs are ultimately pieces of digital art which means whatever is touted as fashionable is going to sell. Additionally, collectibles offer users the unique opportunity to own something special. Some of these collections also give holders access to exclusive content and benefits which can also raise the price.

But really there is no clear cut reason as to why some NFTs are worth millions of dollars. Once a collection manages to get itself into this upper tier of assets it seems to stay there but how it gets there is down to a combination of factors.

What Are The Benefits And Risks Of Buying NFTs?

Why Are NFTs Bad for the Environment?

Currently, NFTs are very resource costly and have a huge environmental impact - in fact, blockchain technology in general is very resource heavy. Recently it was reported that one NFT called Space Cat had the same carbon footprint as an EU resident’s energy bill for two months. This is quite an incredible statistic that reveals just how truly energy consuming these assets are.

So why do NFTs use so much energy?

Ethereum, the platform most NFTs are built on, currently uses a Proof-of-Work consensus mechanism. This requires miners to solve complex mathematical problems with extensive levels of computing power to verify transactions on the network and in turn earns miners rewards. Its key features are:

• Very energy consuming

• Requires specialist hardware

• Mining is ongoing and indefinite in order to solve problems and verify blocks

So, it's not that NFTs are directly bad for the environment but rather the network that they are using. Some other networks like Solana propose valid alternatives, but at the moment Ethereum is truly the dominant force in the market and will be for the foreseeable future.

Creating NFTs

What Programs Are Used to Make NFTs?

Any of the following can be used to create an NFT:

• Adobe Photoshop

• Illustrator

• NFT Creator

• Pixel Chain

• GoArt

What Is Minting an NFT?

Minting is the applicable technical term that describes the creation of a new NFT and its merge onto the blockchain. The NTF minting process represents the transition of digital files and data being converted into tradable crypto collections or other digital assets that are stored and tracked on the blockchain.

Can Anyone Make (Mint) an NFT?

Yes, anyone can mint an NFT; however you cannot mint an NFT anywhere, you will need a specific interface to facilitate your purchase.

FAQs

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