For the field of digital banking, the past ten years, and particularly the last five, have been genuinely amazing. The NFT, or Non Fungible Token, is riding this ground-breaking wave of technology in response to the crypto industry’s spectacular development, which has ushered in a new era of potential. What NFT is will be explained in this article.
One metric that can be used to estimate the size of the NFT craze is as follows:
In the third quarter of 2021, NFT’s sales volume increased significantly to $10.7 billion, which is more than eight times higher than the quarter before.
But there are many concerns about What is NFT that need to be answered before you start dealing in order to better understand this concept.
In this article, we’ll explore a variety of questions in depth, such as:
- what is NFT
- why NFT is so popular
- how does NFT work?
- is NFT related to cryptocurrency
- how to buy NFT
- will NFT last long or fade with time?
What is NFT (Non Fungible Token)?
In simple terms, NFTs (Non-Fungible Tokens) turn your digital assets into unique assets by generating a unique digital signature that defines your asset holdings and which can be bought and sold for real money, cryptocurrencies or other assets such as NFT.
NFTs indicate that they are not interchangeable or replaceable, and each represents a unique asset owned by one person.
Compared to NFT, Exchangeable Tokens are interchangeable and can be divided into smaller units to form the same value. Let’s illustrate this with an example.
The $50 note is interchangeable because it can be exchanged for five $10 bills or ten $5 bills. However, the Mona Lisa and the world-famous Dutch painter Vincent van Gogh are not interchangeable because they cannot be reproduced in multiple numbers. Even if it was copied, it wouldn’t be real.
In addition, each NFT has different information, such as who owns and sells digital assets, making them distinct and easy to verify. In addition, because such certification is impossible to fake, it ensures the integrity of the asset.
Sounds a little technical, right? Do not worry. Let’s look at an example to help you understand the same concept in layman’s terms.
Remember when you went to Disney World or any other theme park during the Christmas season and bought real tokens? Of course, you remember.
What are actually Tokens?
It indicates that you are exchanging money for tokens that ‘represent’ the same amount. Right? Tokens also signify your right to participate in certain rides or shows.
Similarly, in the cryptoverse, a token is nothing more than a piece of code that only you have access to that mirrors a particular record on a specific blockchain, such as Ethereum. This token indicates that you are the owner of a particular contract on that blockchain.
It also makes you eligible to transfer it to someone else. In simpler terms, the blockchain functions as a registry , and the tokens you own serve as proof of ownership.
So that’s what tokens are all about. However, there are two types of tokens: non-exchangeable tokens (NFT) and exchangeable tokens (FT). But how do these two forms differ from each other? Let’s look at this in more detail in the following section.
Fungible Vs. Non-Fungible (NFT)
The main difference between an exchangeable token and a non-exchangeable token (NFT) centers on how information is stored.
In economics, an exchangeable entity is an entity that can be exchanged for other assets or goods of the same value. Money is a prime example of a commensurate asset.
For example, a $10 note in one person’s pocket will still have value even if it is transferred to another person’s pocket. Similarly, two $10 bills have the same value as one $20 note. In short, commensurate items are standardized, and units of commensurate items are not unique.
NFT, on the other hand, is a unique token type that is not interchangeable with other tokens. In other words, NFT has several properties that prevent it from copying or exchanging the same code for identical tokens.
Now let’s differentiate between exchangeable and non-exchangeable tokens by analyzing important factors like exchange, share-ability, standard and uniqueness.
Interchangeable
Exchangeable Tokens: Tokens which can be exchanged for other tokens of the same type are known as interchangeable tokens. Dollar bills, for example, can be exchanged for other banknotes, and that makes no difference to the owner.
Non-match-able tokens: Non-match-able tokens are unique assets that cannot be exchanged for other non-equivalent tokens of the same type. They have different information and characteristics.
Can be shared
Exchangeable Tokens: Exchangeable tokens can be further subdivided into smaller parts. It makes no difference which or how many units you use as long as they reach the same value.
Non-Fungible Token: A non-fungible token is an indivisible asset and represents an entire entity which cannot be further subdivided into parts. The base unit consists of only one token.
Uniqueness
Exchangeable Tokens: Exchangeable tokens are uniform and have no distinct value proposition, unlike NFT.
Non-Fungible Tokens: NFTs have a different value proposition, and each token has a different ID.
Standard
Exchangeable Tokens : Exchangeable tokens use the ERC20 standard to generate exchangeable tokens on the Ethereum blockchain, enabling the issuance of tokens such as OMG and TRX.
Non-Fungible Tokens: Non-Fungible tokens use the ERC21 standard, which allows the creation of unique and non-equal tokens.
So those were the four main differences between exchangeable and non-exchangeable (NFT) tokens. We believe that these four differences have helped you understand how NFTs differ from commensurate tokens. Now let’s take a look at the popularity and rise of NFT.
Why is Digital Art at NFT So Popular?
Although NFT-Cryptocurrency has been around since 2014, its popularity skyrocketed in March of this year when Christie’s– the famous British auction house, sold NFT’s “Everyday – The First 5,000 Days,” an artwork by Mike Winkelmann , for $69 million. This is a collage of the 5,000 digital artworks Beeple has created every day since 2007.
The trade is also remarkable and one-of-a-kind as it marks the first time in Christie’s 250 year history that a completely digital work has been registered! This auction has given the NFT-crypto space a much-needed boost and worldwide acceptance.
The consistent increase in popularity of NFT can also be attributed to various other elements, including its high level of security. As previously stated, when you buy or sell NFT, you can be sure that no one can steal your artwork or have duplicate copies of it.
Any collection or digital art will always have a single and unique copy. Additionally, when you sell or buy NFT, you transfer or purchase digitally validated records confirming that there is only one owner and that the artwork is legit and not a forgery.
The purpose of the introduction of NFT is to solve the widespread issue of theft and duplication in the creative industries. Digital art, unlike historical sculpture or painting, can be easily downloaded and replicated. However, with the help of NFT, we were able to significantly reduce this malpractice.
Just as blockchain technology prevents cryptocurrencies from being owned by more than one person, it also prevents NFT from being owned by more than one person.
Another element that has contributed to the popularity of NFTs is that, unlike traditional works of art, which may be damaged, lost, or destroyed, NFTs cannot be destroyed because they are recorded on the blockchain in the same way as cryptocurrency transactions.
As a result, all factors—security, capacity to build ownership, and preservation of the arts – all contributed to the growing popularity of NFT. Now let’s move on to the next section and learn how NFT works.
How Does NFT Work?
NFT basically generates blockchain based certificates for your digital valuables like games, music, paintings, art, tweets, pixelated photos, toilet paper and many more items!
This certificate will give your artwork a distinct identification. The core technology and programming language of NFT is very similar to cryptocurrencies such as blockchain, while the programming language is ether or script .
Also, keep in mind that NFT is primarily based on the Ethereum blockchain, which is a distributed public ledger that records all transactions.
However, NFT is not the same as cryptocurrency. For example, Bitcoin, Eth and other cryptocurrencies are exchangeable tokens, which means that if you trade any coin, you will receive the same value or commodity in return – money.
However, in the case of NFTs, if you try to trade them, you may end up with something very different on your hands. Crypto punk, for example, is a fantastic example of NFT. It allows you to buy, trade and store 10,000 collectibles while keeping proof of ownership on the Ethereum blockchain.
People are now willing to pay hundreds of thousands of dollars for NFT due to its growing popularity. For example, Vignesh Sundaresan, known as “Metakovan,” purchased $69.3 million of NFT artwork at Beeple.
But the question now is how NFT differs from cryptocurrency as it uses the same technology as cryptocurrency – blockchain. Let’s find the answer to this question in the next section.
Is there any Relation between NFT and Cryptocurrency?
Many beginners in the cryptosphere believe that NFT is a kind of cryptocurrency. However, this is not the case. The only thing that NFT and Crypto have in common is that they are both built using the same technology.
In addition, the purpose of crypto and NFT is very different. On the one hand, cryptocurrencies can be traded against each other and are always of the same value regardless of price variations.
On the other hand, every NFT has a digital signature via encoding, making exact duplication impossible. In short, the only thing crypto and NFT have in common is the technology used to develop them. In addition, they perform completely different functions.
The next thing we need to learn is the advantages of NFT.
4 Main Benefits of NFT
Along with a high level of security, NFT provides several other advantages such as ownership, ease of transfer, authenticity and non-share-ability. Let’s take a quick look at each one.
1. Authenticity
The first major advantage of NFT is its authenticity. When you buy an NFT, you can be sure of its legitimacy because the NFT is created on the blockchain and contains a unique code.
This means that each item has one code and one owner, ensuring no duplication. This will greatly benefit art enthusiasts by providing a guarantee that their purchase is completely genuine and original.
2. Transferability
As previously stated, an NFT can only have one owner at any given time. Unique IDs and information, which cannot be reproduced by other tokens, are used to manage ownership.
Thus, the NFT smart contract manages not only the ownership but also the transferability of the NFT. In addition, market coverage makes it easy for NFTs to trade.
3. Ownership
When you buy something, it is very important for everyone involved in the field to know who the real owner is. In the case of real art, it is not surprising to find many copies of the same artifact on the market.
In such cases, it is difficult for the buyer to determine the true owner of the artwork. However, in the case of NFT, proprietary information can be easily recovered, and the true owner can be identified.
4. Inseparability
Another important advantage of NFT is that it cannot be shared. NFT cryptocurrency tokens are indivisible and unique, which means that one NFT cannot be exchanged for another, and the entire token cannot be divided into smaller parts and used.
So those are the 4 main advantages of non-fungible tokens (NFTs). Now, let’s move on to the last part of this blog, where we will study how NFT affects the environment, how to buy NFT, and whether NFT will remain popular or will soon disappear.
What is the Impact of NFT on the Environment?
One of the most common objections raised against NFT is that it has a harmful effect on the environment. In the last two years or so, environmentalists around the world have criticized NFT-crypto proponents for bringing the energy-consuming technology into the mainstream.
But how accurate are these accusations? On a certain level, this criticism is valid.
But you may be wondering how generating NFT affects the environment. Well, this is how it happened. When you, as an artist, upload an artwork to the NFT marketplace and proceed to ‘print’ it, you are starting the mining process.
The mining process involves difficult puzzles, tremendous processing power and a large amount of energy.
This is due to the fact that Ethereum creates non-exchangeable digital assets such as tokens through a process known as proof of work. In order to successfully add assets to the blockchain’s master ledger, miners must compete to solve cryptographic problems.
The miner who finds the correct answer first wins and their assets are uploaded to the blockchain.
That’s how the manufacture of NFT consumes a lot of energy and has an impact on the environment.
However, it is important to mention that the environmental impact is relatively small compared to the benefits it provides to the financial system.
However, there is no denying that there is huge room for improvement in the production of NFTs to be more environmentally friendly.
The next question that should be on your mind is whether the NFT will last or fade away.
Is NFT Still Existing Or Will It Disappear Soon?
We are not astrologers who can see or predict the future. But one thing we know for sure is that NFT will be around for a long time. And we have some real facts to back up our argument. For example, the market cap of NFT increased tenfold between 2019 and 2020, reaching $338.04 million!
Additionally, a number of MNCs and celebrities, including Paris Hilton, Lindsay Lohan, Snoop Dogg, Ellen DeGeneres, Tony Hawk, Shawn Mendes, Eminem, Kate Moss, Jack Dorsey, Cara Delevingne, Emily Ratajkowski, and others, have jumped into the NFT.
Also, the famous DC Comics aims to explore their NFT options, asking freelancers to produce NFTs based on their characters.
In the end, all these developments have convinced us that NFT will still be around and won’t be going away anytime soon.
So far, we have learned a lot about Crypto-NFT, including what it is, why it is so popular, how it works, what are its benefits, the difference between non-exchangeable and exchangeable tokens, the impact of NFT on the environment, and the future of NFT.
However, there is one important point that has not been covered: How to buy NFT?
How to Buy and Sell NFT
How to Buy Non-Fungible Tokens (NFT) – Step-by-Step Guide
We believe that the information provided above has convinced you of the benefits and promising future embodied in NFT and that you have decided to invest in NFT or sell your artwork as NFT.
So, how can you buy NFT?
Well, this method is actually much simpler than you think. All you have to do is follow the steps below.
- First , select the NFT you like, such as gifs, tweets, artwork, music, or video game items.
- Second , determine which form of cryptocurrency is required to purchase the NFT. Keep in mind that each NFT marketplace has unique crypto wallet requirements.
- Third , open and fill a cryptocurrency wallet on the exchange market. It allows you to send, receive, and store digital assets.
- Lastly , you can buy NFT at a fixed price or through a virtual auction. Buy your favorite NFT, or place a bid and wait to see if you get lucky or not.
That’s how you get non-exchangeable tokens. Now let’s also understand how to sell NFT.
How to Sell Non-Fungible Tokens (NFT) – Step-by-Step Guide
Once you know what NFT is and how it works, then you can buy the NFT of your choice. The digital assets you purchase can be entirely yours.
You can keep it as a collectible or sell it at a higher price to others. To sell NFT, you must complete the steps outlined below:
- Send your NFT to the market of your choice. However, make sure it supports the blockchain on which the NFT was created.
- Next, you can choose the type of sale – either a fixed price or an auction-style sale where buyers place bids.
- Marketplace will authenticate the NFT once it is delivered.
- Once sold, the market will handle the NFT transfer from seller to buyer, as well as cryptocurrency transfer to your wallet.
So, that’s how you can buy and trade non-fungible tokens (NFT).
This brings us to the end of this blog. We learned almost everything about NFT, including its benefits, how it works, the difference between cryptocurrencies and NFTs, exchangeable vs non-exchangeable tokens, how to buy NFT, how to sell NFT, and the future of NFT.
With the exception of the fact that they were both built on the same technology—blockchain—NFT and cryptocurrencies have no direct connections. However, these two technologies have a bright future and provide a number of significant advantages.
However, before making any trades, we advise that you thoroughly study the artwork and the artist and only purchase or sell NFT through reliable platforms.
Also, if you are new to the cryptoverse, start with a small investment and build up gradually over time.
NFT with tokenization system can even change the financial and banking system in the future.
