What is an NFT and how does it work? – 101
Jack Dorsey, the billionaire co-founder of Twitter, raised an eyebrow when he put his first tweet for sale as an NFT. Many began wondering: what is an NFT?
The new kid on the block for cryptocurrency lovers is NFTs (Non-fungible tokens), which have taken the art and gaming world by storm. But what exactly is an NFT? Lately, the term NFT has been flying around our crypto headlines following some record-breaking transactions involving millions of dollars. The article is here to explain all that you need to know about NFTs: what they are and how they work.
What is an NFT?
An NFT is a collectible digital asset, which holds value as a form of cryptocurrency. However, unlike other cryptocurrencies tokens such as Bitcoin or Ethereum, NFT is unique like a piece of art, and can’t be exchanged like-for-like, thus the term ‘non-fungible.’
Look at NFT as a value-holding investment just like art. Just like a unique piece of drawing, NFTs store some extra information, which elevates it above other ordinary tokens. An NFT may be in various types, but they must be in the form to be called an NFT, mostly as a digital art or music file. Instead of getting the physical collector’s item, you receive it in a digital file such as JPG, GIFs, videos, MP3s, etc. It’s anything unique that could be stored digitally and be seen to hold value.
How do NFT’s work?
Just like most digital tokens, NFTs are part of the Ethereum blockchain. But NFT tokens have extra information that makes them unique- and this is the most important characteristic because they hold value through this special feature. Just like physical art, NFT value is defined by the market demand.
However, this is not to say that there are only original versions of a specific NFT on the blockchain but copies could be made out of it, and are all considered a valid part of the blockchain, albeit at a lesser value than the original.
Just like mining Bitcoin and other cryptocurrencies, anyone can create an NFT in a process called ‘minting’ and put it up for sale on a marketplace of choice. There are a variety of platforms selling various types of NFTs, and you can choose a platform based on what type of NFT you want to buy or sell. The platforms that sell NFTs are OpenSea, Foundation, VIV3, Axie Marketplace, etc.
The creative world is unique and keeps growing, and now NFTs are offering people the opportunity to create or search for valuable digital footprints to sell. NFTs gives new meaning to digital art, and the prices attached to them suggest it is the real future of collectibles, including art.