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What Is a Non-Fungible Token (NFT)?
NFTs are tokens that we can use to represent ownership of unique objects. They allow us to symbolize things like art, collectibles, even real estate. They can only have one official owner at a time and are protected by the Ethereum blockchain – no one can edit the ownership record or copy/paste a new NFT.
NFT stands for non-fungible token. Non-fungible is an inexpensive term you could use to describe things like your furniture, a music file, or your computer. These things are not interchangeable with other items because they have unique properties.
Although maybe far from straightforward for the uninitiated to understand, the payoff has been huge for many artists, musicians, influencers, and others, with investors spending the biggest dollar to own NFT versions of digital images.
How do NFTs work?
Like physical money, cryptocurrencies are fungible, meaning that they can be traded with each other. For example, a Bitcoin always has the same value as another Bitcoin. Likewise, a single unit of Ether is always equal to another unit. The fungibility feature makes cryptocurrencies suitable for use as a secure transaction medium in the digital economy.
NFTs change the cryptographic paradigm by making each token unique and irreplaceable, making it impossible for one non-fungible token to be the same as another. These are digital representations of assets and have been compared to digital passports because each token contains a unique, non-transferable identity to distinguish it from other tokens. They are also expandable, which means that you can combine one NFT with another to “create” a unique third NFT.
Just like Bitcoin, NFTs also contain ownership details for easy identification and transfer between token holders. Owners can also add metadata or attributes related to assets in NFTs.For example, tokens representing coffee beans can be classified as fair trade. Or, artists can sign their own digital work with their own signature in the metadata
The internet of assets
NFT and Ethereum solve some of the problems that exist on the Internet today. As everything becomes more digital, there is a need to replicate the properties of physical objects such as rarity, uniqueness, and proof of ownership. Not to mention that digital items often only work in the context of their product.
|An NFT internet
|The internet today
|NFTs are digitally unique, no NFTs are the same.
|A copy of a file, like a .mp3 or .jpg, is similar to the original.
|Every NFT should have AN owner and this can be of public record and simple for anyone to verify.
|Ownership records of digital things are stored on servers controlled by institutions – you need to take their word for it.
|The NFTs are a bit compatible, which was built with Ethereum.
|Companies with digital items must build their own infrastructure.
|Content creators can sell their work anywhere and can access a global market.
|Creators can retain ownership of their own work and claim resale licenses directly.
|Platforms, such as music streaming services, retain the majority of profits from sales.
Why Are Non-Fungible Tokens Important?
Non-fungible tokens are an evolution of the relatively simple concept of cryptocurrencies. Modern financial systems consist of sophisticated trading and lending systems for different types of assets, ranging from real estate and loan contracts to works of art. By enabling digital representations of physical assets, NFTs are a step forward in the reinvention of this infrastructure.
Non-fungible tokens are also great for identity management. Take the case of physical passports that must be produced at each point of entry and exit. By converting individual passports to NFTs, each with their own unique identifying characteristics, it is possible to streamline entry and exit processes for jurisdictions. By expanding this use case, NFTs can also be used for identity management in the digital realm.
Decentraland, a virtual reality platform on the Ethereum blockchain, has already implemented such a concept. As NFTs become more sophisticated and become part of the financial infrastructure, it may become possible to implement the same concept of symbolized plots of land, of different value and location, in the physical world.
How to buy NFTs
You can only purchase NFTs with Ether, so owning some of that cryptocurrency and storing it in a digital wallet is usually the first step. You can then buy NFTs from any of the online NFT marketplaces including OpenSea, Rarible, and SuperRare.
Are non-fungible tokens safe?
Non-fungible tokens, which use blockchain technology just like cryptocurrency, are generally safe. The distributed nature of blockchains makes NFTs difficult, if not impossible, to hack. The security risk of NFTs is that you risk losing access to your non-fungible token if the platform hosting the NFT goes down.
How to make an NFT?
Anyone can create an NFT. All you need is a digital wallet, a small purchase of Ethereum, and a connection to an NFT marketplace where you can download and turn the content into NFT or crypto art.