What are NFTs and how do they work?

The term NFT is buzzing all around and it is no news to today’s millennials. NFTs are one the most trending and a hot burning topic in the crypto world.

You might have often wondered What are NFTs and how do they work? and may have come across news over NFTs being traded aggressively by renowned personalities like CEO of Twitter Jack Dorsey who sold his first tweet on twitter for millions of dollars in the form of NFT and many other famous personalities like Snoop Dogg, Paris Hilton etc. have an NFT collection of their own. So one can well imagine the significance of this concept of NFT and the amount of money involved in trading these NFTs.

So in the below blog I have made a very sincere effort to explain the concept of NFT in a very simple form.

What is NFT?

NFT is a Non Fungible token which can be in any digital form such as image, song, graphics, any form of digital art etc. which is unique from others majorly owing to its single ownership factor (means there is only one owner of this digital form at a time).  

Before we dive into more detail lets understand the concept of Fungibilty.

Fungibility

Fungibility means something that is replaceable or exchangeable. An asset or a good (for example: Gold or Silver) is a fungible asset if you are able to replace or exchange one part of it with another indistinguishable part. Some examples are: Wheat, Currencies, Oil, Gold, Silver are all fungible goods as they are replaceable and exchangeable.

The items that are not rare, unique can also be categorized as fungible items.

Non-fungibility

Non- fungibility means something that is unique and irreplaceable. For example a rare coin or currency note, an autograph of some renowned personality, Rare painting, antiques etc. are a form of non-fungible items as they are unique and cannot be replaced.

In nutshell all goods and items that are rate and unique are non-fungible goods.

Let’s bounce back to NFTs again:

As stated earlier, NFT stands for non-fungible tokens which are unique and irreplaceable.

NFTs allows you to buy and sell the ownership of unique digital items. NFTs are basically blockchain tokens representing a unique form of digital art it can be in any of the form like art, graphics, music, videos, images, etc.

Difference between non-fungible tokens and cryptocurrencies?

The NFTs and cryptocurrencies are different from one another.

Most people often misconstrue NFTs to be cryptocurrency but the fact is both are different from each other however their underlying technology is the same i.e. Blockchain.

NFTs are neither a cryptocurrency nor like altcoin that you can buy from any crypto trading platform like Binance, WazirX

One more hard fact about NFT is that one cannot mine NFTs like cryptocurrencies- like Bitcoin.

It is important to note that a Cryptocurrency is not an NFT but a digital art in the form GIF can be an NFT. For example: A GIF of dogecoin or Shiba inu have a potential to be a NFT.

Also Read: The concepts of Cryptocurrencies- Bitcoins

NFTs can be any art in digital form

Working of non-fungible tokens?

Presently, most of the NFTs work on the Ethereum blockchain, however many work on other blockchains as well. Ethereum is a cryptocurrency like bitcoin or dogecoin but its blockchain technology also supports NFTs which store some extra information that makes them work differently from the Ethereum coins. It is also worth noting here that the blockchain companies are capable of implementing their own version of NFTs.

How to buy or sell NFTs?

There are many marketplaces where one can buy and sell NFTs. Although the buying and selling process of NFTs is very easy but it is important to do some personal research over the items that one is planning to buy or sell over this market place, like which NFT to trade in, what market place to be used to buy/sell NFT, what wallet to use to store your Ethereum coins that will facilitate the buying or selling process.

NFT marketplaces

NFT marketplaces are basically the websites where one can buy and sell NFTs. These marketplaces are similar to any market place like shares trading platform or like online shopping platform. Here one can buy or sell the NFT easily by placing the bids.

There are many popular marketplaces for NFTs like:

OpenSea

Axie Marketplace

Larva Labs/CryptoPunks

NBA Top Shot Marketplace

Rarible

Where to buy or sell NFTs?

Buying and selling NFTs is simple. Firstly you need to create an account on a marketplace of your choice and then set up an Ethereum wallet (since majority of the NFTs work on Ethereum blockchain).

NFT Wallet:

NFT Wallet

For to trade in the NFTs, one will need to have a digital wallet that actually contains the access to the address where the cryptocurrencies and NFTs are kept over the underlying technology i.e. blockchain.

Thus an NFT wallet does not actually store the NFT or cryptocurrency in the wallet but it actually provides the access to the assets that are held on the block chain. It does this by the way of a private key to that address on the blockchain that allows the owner to authorize the transactions, and this private key is the way to ownership of all the underlying digital assets in that digital wallet. This wallet also provides increased protection to one’s digital wallet through 2FA authentication that provides a secure and convenient access to one’s wallet.

5 Best  NFT Wallets in 2021

Metamask

Coinbase Wallet

Alpha Wallet

Enjin Wallet

Trust Wallet

What to look for when choosing an NFT wallet

Compatibility with your NFT marketplaces- The wallet must support the marketplace from where you intent to buy or sell the NFTs you want.

Robust security-The wallet should have robust security system since the underlying assets like NFTs or cryptocurrencies can be worth thousands or even millions of dollars.

User friendly interface- A user friendly interface will make buying and selling NFTs an easy affair.

Multi-device use- The wallet must be accessible easily through a desktop or mobile device.

Multichain support- However most of the NFTs are on the Ethereum blockchain but several other platforms also support NFTs, therefore it would be convenient in the longer run to choose a wallet that supports all sorts of such NFTs.

Can an NFT be duplicated?

Now you might be wondering whether NFTs can be duplicated, well I am not too sure about this but I guess NO, it cannot be duplicated however in cases of Image NFTs screenshots can be taken however the real rights of ownership will prevail with the actual owner of the NFT. Hence one need not to worry as duplicity has very little or nothing to do with the NFTs.

Therefore I would recommend if you are an artist or planning to be one no matter In whichever art you may be interested in just give it a try, you can make a painting, a GIF, a song with your own lyrics, or can sell your poetry or anything that you feel is unique and is capable of being traded in the digital world. Who knows you might end up being a famous and successful NFT creator or trader.

Here is a glimpse of few of my NFTs:

Word of caution: All the above pieces of advice are based on our personal research and we do not promote investments in any particular sort of avenues, hence please conduct research at your personal level before trading in the NFTs. Hence please form your own opinion before investing as it involves risk of losses as well.

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