Preface
What is an NFT for Dummies; A Non-Fungible token (NFT) is a virtual work of art created using blockchain technology. It has unique ownership and can represent a tweet, a piece of music, a video, or other digital media. Fiat and digital money are referred to as “fungible” because splitting notes doesn’t matter; we can exchange them for one another and use them in transactions.
Blockchain technology allocates each NFT a unique code that authenticates its ownership and authenticity. The digital world has seen a rise in the popularity of NFTs, and works of digital art fetch very high prices. NFTs are being employed by other industries, such as gaming, music, and sports, to produce large cash flows and gain cutting-edge marketing ideas.
Digital Assets: An Overview
Art is a creative skill that people use to create tangible works or paintings, some of which are very expensive. These days, creators create brand-new digital works that fetch high prices and are called “digital assets.” Here are some critical distinctions between real works of art (paintings) and virtual works of art (NFTs) to help you understand what is an NFT for dummies.
For example, paintings are made with a brush, paint, and canvas, all of which are physically present in the finished product and are objects that can be touched and displayed in a physical space. While NFTs are digital files that can only be displayed on a computer screen, they are created virtually and exist only in the blockchain’s virtual space.
Unlike cryptocurrencies, which are the digital equivalent of fiat money, NFTs are the digital equivalent of paintings. Fiat money could change a painting’s ownership, but cryptocurrency can be used to establish NFT ownership. While creating a second copy of a painting is possible, it is impossible to duplicate NFTs.
NFT’s main features
The following are some essential characteristics of NFTs:
Unique
NFTs are digital assets, exclusive, one-of-a-kind creations that cannot be copied or recreated.
Ownership
NFTs signify ownership of a particular digital asset, such as a tweet, audio file, video, or piece of digital artwork, and ownership of NFTs is frequently used to establish and administer NFTs.
Verifiable
A blockchain that stores verifiable NFTs offers a safe and verifiable record of ownership and provenance.
Indivisible
NFTs that cannot be separated into smaller parts are indivisible.
Interoperable
Across multiple blockchain marketplaces and platforms, interoperable NFTs can be purchased, sold, and exchanged.
Smart Contracts
Smart contracts are automated contracts that automate the process of buying, selling and transferring.
Royalties
NFTs can be programmed to have a royalty system built in, where the original creator who created the NFT gets a cut of each sale going forward.
Various NFT examples: What is an NFT for Dummies
Assorted NFT examples are provided below:
Digital Art
The value of NFTs is in the millions of dollars, and their popularity in the digital art world has become indefinable. For example, in a 2021 Christie’s auction, the NFT for “Every Day: The First 5000 Days,” Beeple developed a virtual art piece in New York City, dated March 2021, and received $69 million for the NFT at Christie’s auction house.
Sports
Sports-related memorable moments have inspired the creation of NFTs. For instance, the NBA has developed NBA Top Shot, a platform enabling fans to purchase, sell, and exchange legally licensed NBA artefacts in NFTs.
Music
The music industry used NFTs to market remarkable digital music experiences like exclusive concert tickets or a musician’s studio access.
Gaming
In the video game industry, NFTs produce unique and one-of-a-kind in-game items. For instance, gamers can purchase and sell NFTs symbolizing the Axies, virtual creatures appearing in the blockchain game Axie Infinity.
Social Media
The historical and most well-liked posts on social media sites like Facebook, Twitter, and Instagram are transformed into NFTs so that the post’s creator can generate money with them. For instance, Jack Dorsey, the creator of Twitter, turned his initial tweet into an NFT sold at $2.9 million in 2021.
Difference between NFTs and Cryptocurrencies
Blockchain technology underpins both NFTs and cryptocurrencies, but there are some significant differences:
Function
In addition to being a viable substitute for fiat money, cryptocurrencies also allow for trading and investment in goods and services. However, NFTs are a distinct class of digital assets with a distinctive ownership model that stores historical events as digital art.
Value
The supply and demand model that determines the value of cryptocurrencies results in price volatility that happens quickly and renders them unreliable. NFTs do not have an intrinsic value; their value is derived from their peculiarities and scarcity.
Interchangeability
Depending on the price of the cryptocurrency market, cryptocurrencies can be exchanged for one another and replaced. Conversely, NFTs cannot be replaced, exchanged, or traded.
Divisibility
One dollar can be divided into smaller sums so that 100 cents still equals one dollar. Satoshi is a unit of measure for a cryptocurrency (BTC), but doing so does not affect the value of BTC. NFTs, however, could not be divided or separated into tiny pieces.
Creation
Mining creates cryptocurrencies or other consensus mechanisms, while NFTs are unique tokens typically created through “minting,”
How does NFT Create
Creating an NFT can be a complicated process requiring technical skills, knowledge of blockchain technology, and smart contracts. However, some new services and platforms clarify the process and allow validators to quickly generate and sell their NFTs. NFTs are typically supported by blockchain technology as a platform for creation, reinforcement, and management, and an NFT can be made in the following general ways:
Choose a blockchain platform.
NFTs can be created on several blockchain platforms, including Ethereum, Binance Smart Chain, and Flow.
Create a digital asset.
The NFT will be created from sporting events, social media posts, music files, and fan moments. To implement that, choose the event, obtain the possession, and then enter the choice along with its legislation into NFT.
Mint the NFT
Creating an NFT that denotes digital asset ownership is known as minting. Smart contracts, self-executing contracts that automatically create and manage the NFT, are typically used to complete the project.
Set the NFT’s attributes.
Gather information about NFT’s attributes, such as its name, the event’s novelty (sports, music, social media, other historical events), a description of NFT, and any other essential details that might be included in this digital asset.
Publish the NFT
NFT would be published on a cryptocurrency marketplace where it could be bought, sold, or traded after the attributes, like name, description, vision, etc., are chosen and minted.
The top 10 most costly NFTs
The volatility in the price of NFTs is incredible, and the list of the most expensive NFTs is constantly evolving. However, as of March 2023, here are the top 10 most costly NFTs:
- “Everydays: The First 5000 Days” by Beeple was auctioned off by Christie’s in 2021 and brought in $69 million.
- “CryptoPunk #3100” was sold in 2021 for 4,420 ETH, or about $13.9 million.
- “The First 5000 Days” by Beeple was auctioned off by Christie’s in 2021, bringing in $22.5 million.
- Trevor Jones and Alotta Money’s “Crossroad” was sold in 2021 for $6.6 million.
- In 2021, “CryptoPunk #7804” was sold for 4,200 ETH, or about $7.57 million.
- The 2021 sale price for Pak’s “The Pixel” was $1.36 million.
- “Forever Rose” by Kevin Abosch was sold for 100 ETH ($1.1 million) in 2018.
- The coin “CryptoPunk #6965” was sold in 2021 for 800 ETH, or roughly $1.47 million.
- Chris Torres’ “Nyan Cat” was sold in 2021 for 300 ETH, or about $590,000.
- Victor Mosquera’s “MADOGO” was purchased in 2021 for $529,000.
Why are NFTs so expensive?
For various reasons, including the following, NFTs can be expensive.
Uniqueness
Unique digital assets, or NFTs, signify ownership of a particular product or content. An NFT’s value may increase due to its rarity or uniqueness, mainly if it is rare or in high demand.
Celebrity or Brand Association
Due to the item’s perceived prestige or cultural significance, NFTs connected to famous people or well-known brands may be worth more.
Artistic or creative value
Unlike conventional artwork, NFTs that are highly prized for their artistic or creative value may also fetch a high price.
Speculation and Investment
NFTs, like any market, are susceptible to speculation and investment, with buyers buying NFTs in the hope that their value will rise over time.
Innovation and Disruption
NFTs are a brand-new, cutting-edge technology that has the power to upend established markets like those for entertainment, music, and the arts. The perceived possibility of innovation and disruption also increases the value of NFTs.
How to buy NFTs
The purchasing process for NFTs consists of a few steps, but it can differ depending on your chosen platform. Following are the basic steps for purchasing an NFT:
Choose a marketplace:
You can purchase NFTs on many online markets, including OpenSea, Rarible, and SuperRare. Every market has a different range of NFTs and a different buying procedure.
Create a wallet
It would be best if you typically had a cryptocurrency wallet to purchase NFTs on NFT marketplaces. A wallet can be made using a service like Coinbase Wallet, Trust Wallet, or MetaMask. A wallet needs to be funded with the cryptocurrency after it has been created.
Browse and select an NFT.
Once you have a wallet, you can browse the NFTs on the market and decide which one to buy. The price of each NFT will vary, and you can pay with the cryptocurrency in your wallet.
Buy the NFT
You must finish the purchase after making your choice of an NFT. The process usually entails posting a blockchain transaction, through which the NFT will be transferred to your wallet in exchange for the cryptocurrency you used to purchase.
Conclusion
What is an NFT for Dummies? NFTs provide a new, transparent, and secure method of storing and exchanging digital assets and a record of ownership and provenance. Overall, although blockchain technology underpins both cryptocurrencies and NFTs, these two types of digital assets serve different purposes and have unique characteristics that set them apart from one another. Various NFT factors determine their value, such as NFTs’ distinctiveness, cultural significance, artistic or creative value, speculative nature, and potential for innovation and disruption.
FAQs:
1. How do you explain NFT to a child?
I will be excited to discuss NFTs with you and your children in a way that will be easy to understand. So you know, and you are explaining it to your children. In that case, you have some extraordinary things that belong only to you, like your favorite toys, paintings, favorite game avatar, and something you played with or made with them in school or at home. Well, NFTs are like digital versions of those unique things that belong to you.
2. What is the point of an NFT?
The point of an NFT is to create a digital certificate of ownership for a unique digital asset. It’s a way to prove that you own something one-of-a-kind or rare, like a piece of digital art. NFTs and cryptocurrencies use the same technology, which is blockchain technology. This technology permits the claim of ownership of the unique digital asset, which is responsible for a secure and transparent record.
3. What is an NFT, and what do you do with it?
Non-fungible tokens allow creators and collectors to establish ownership and authenticity of a digital asset in a way that was not previously possible. Once created, an NFT can be bought, sold, and traded on various online marketplaces. Over time, it became costly and profitable, emphasizing a whole new technological world.
4. What is an example of an NFT?
In New York City, dated March 2021, Beeple created a virtual art piece and got $69 million for the NFT at Christie’s auction house. The artwork, called “Everydays: The First 5000 Days,” has 5,000 virtual images collected by the artist and was created over 13 years. The artwork was sold as an NFT, meaning the buyer received a unique digital certificate of ownership stored on a blockchain.