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A 4-word tweet. A gif of a bird whispering or an avatar of something unique. These all look normal, but they can represent NFTs and can be sold for over $40 million each. It looks impossible, but that is where we are today. They are just NFT, but we can change that story forever.
NFTs have become a new phenomenon that is revolutionizing the world. Since 2014, NFTs have been sold and bought online using cryptocurrency. NFT represents a unique token used to designate ownership of a particular digital item or art.
They are disrupting the crypto market, ranging from events to gaming to insurance. I was confused about this new trend, but it’s much more fun than I expected. At the end of this piece, you will learn everything worth knowing about NFTs. Let’s get started.
What are NFTs?
NFT is an acronym for non-fungible tokens. The word “fungible” represents an asset or good I can exchange for another asset or good of equal value. For example, the dollar is fungible since I can easily swap it with another dollar bill having the same value.
However, when something becomes “non-fungible,” it indicates that it can’t be exchanged for something with equal value. For instance, I would say a piece of land is non-fungible since it is unique and finding another land having the same value can be difficult if not impossible.
NFT indicates I have exclusive rights over a particular digital asset, which could be a tweet, a piece of art, or a gif. I can buy an NFT at a designated price and find its market value fluctuating since it is non-fungible.
Understanding how NFTs work
Even though I can purchase and sell NFTs with Ethereum and Bitcoin, that doesn’t make those NFTs cryptocurrencies. Similar to the US dollars and other currencies, cryptos are fungible. Whenever I trade bitcoin with another bitcoin, their value remains the same. I still have the same bitcoin. However, NFTs are distinct since they don’t have equivalent value besides an investor’s market value.
Buying NFTs – What do you get in exchange?
Only one person can own an NFT at a particular time. Therefore, when I purchase an NFT, I buy that asset’s exclusive right and ownership. Nevertheless, it doesn’t mean I have absolute right over who can share or look at that piece of work.
For instance, Beeple’s Everyday: The First 5000 Day is the most expensive NFT ever sold. The NFT owner is Vignesh Sundaresan, the founder of the MetaPurse NFT project. Although he owns the NFT, the images have been shared, copied, and viewed by millions worldwide. Therefore, when I purchase an NFT, it is similar to buying an autographed painting. It is signed to me while everyone can still view the work. An NFT includes the following:
- In-game purchases
- Domain names
Why do people purchase non-fungible tokens?
As I try to uncover everything about non-fungible tokens and how weird they can be, the more I want to know the reasons behind people buying NFTs. Nevertheless, several reasons contribute to why people are venturing into NFTs in their millions.
The first is the issue of scarcity. For instance, having an NFT gives or creates that sense of scarcity. The scarcity allows buyers to fixate on a particular art and contemplate how another person might become the next owner of such NFT. Assuming I am a fan of sneakers, I walked into this sneaker shop. I found out there is only one pair left throughout the world; it increases my urge to buy since it has a limited edition.
Like swapping baseball cards on the ground, I can also trade NFT cards. Although they are not intrinsically valuable, their prices fluctuate based on what the market regards them as. Because of this, people find it easy to highlight the key differences between the art market and NFT.
Nevertheless, the art market is different as NFT gives artists complete autonomy since they don’t depend on auction houses and galleries to sell their piece. They cut the middlemen, which provides more profits since they sell to buyers directly.
Investing in non-fungible tokens – How reliable can this be?
For risk-takers, NFTs provide investors with a unique way of making profits. Although not a get-rich scheme, NFTs are a sure way of investing money. The NFTs market has opened a lot of holes, allowing everyone to earn. Before starting, I need to open a digital wallet. Nowadays, many online sites provide more features than others.
The digital wallet is a place to store NFTs and cryptocurrency. I can find NFT to buy on websites such as Rarible and OpenSea.io. Once I purchase an NFT, the next phase is the most important – the waiting phase. It is a phase where I wait for my investment to grow.