The Ultimate Guide to Understand What Is NFT

Imagine buying a digital artwork on the internet at a reasonable price and getting a unique digital token known as an NFT, which proves your authority over the artwork you bought. Wouldn't it be great?

NFTs are currently taking the digital art and collectables world by storm. When everyone worldwide believed Bitcoin as the digital answer to currency, NFTs are now pitched as the digital answer to collectibles. Digital artists see their lives changing thanks to massive sales to a new crypto-audience. 

If you are interested and want to explore more about what an NFT is, then you are in the right place.

In this ‘What is NFT’ tutorial, you will explore the following topics:

  1. What is NFT?
  2. How does NFT work?
  3. Examples of NFT
  4. What are the uses of NFT?
  5. How is an NFT different from Cryptocurrency?
  6. Ethereum and NFTs
  7. How to Buy NFT?
  8. What is the future of NFTs?

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What is NFT?

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  • NFT stands for a non-fungible token, which means it can neither be replaced nor interchanged because it has unique properties.

Features - 

  • Digital Asset - NFT is a digital asset that represents internet collectibles like art, music, and games with an authentic certificate created by blockchain technology that underlies Cryptocurrency. 
  • Unique - It cannot be forged or otherwise manipulated. 
  • Exchange - NFT exchanges take place in cryptocurrencies such as Bitcoin on specialist sites.

Cryptopunks is a remarkable example of NFT. It enables you to buy, sell and store 10,000 collectibles with proof-of-ownership.

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How Does NFT Work?

Now that you’ve begun understanding what is NFT, you should explore and learn about how NFT works too

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  • The majority of NFTs reside on the Ethereum cryptocurrency's blockchain, a distributed public ledger that records transactions.
  • NFTs are individual tokens with valuable information stored in them.
  • Because they hold a value primarily set by the market and demand, they can be bought and sold just like other physical types of art.
  • NFTs' unique data makes it easy to verify and validate their ownership and the transfer of tokens between owners.

Examples of NFT

The NFT world is relatively new to people. Here are some examples of NFTs that exist today:

What is NFT Used For?

People interested in Crypto-trading and people who like to collect artwork often use NFTs. Other than that, it has some other uses too like:

  • Digital Content - The most significant use of NFTs today is in digital content. Content creators see their profits enhanced by NFTs, as they power a creator economy where creators have the ownership of their content over to the platforms they use to publicize it.

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  • Gaming Items - NFTs have seen a lot of interest from game developers. NFTs can provide a lot of benefits to the players. You can buy items for your game, and when you're done with that, you can recoup your money by selling them.

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  • Investment and Collaterals - Both NFT and DeFi (Decentralized Finance) share the same infrastructure. DeFi applications let you borrow money by using collateral. NFT and DeFi, both work together to explore using NFTs as collateral instead.

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  • Domain Names - NFTs provide your domain with an easier-to-remember name. This works similar to a website domain name, making its IP address more memorable and valuable, usually based on length and relevance.

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Even celebrities like Snoop Dogg, Shawn Mende,s and Jack Dorsey are taking an interest in the NFT by releasing unique memories and artwork and selling them as securitized NFTs.

Now that you’ve understood what is NFT used for, and the various ways you can benefit from it, let’s take a look at how it is specifically different from other forms on cryptocurrency

How is an NFT Different From Other Cryptocurrency?

Although NFTs are created using the same kind of programming language as other cryptocurrencies, that's where the similarity ends.

Other Cryptocurrency

NFT


  • Cryptocurrencies are “fungible”; they can be traded or exchanged for one another. They’re also equal in value.


  • For example, one Bitcoin is always equal to another Bitcoin, or one Dollar is always equal to one Dollar.

  • Each NFT acts as a digital signature that makes it impossible for them to be exchanged for or equal to one another.

  • For example, The Last Supper is a painting of a kind and cannot be exchanged with another painting.

Ethereum and NFTs

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Ethereum blockchain makes it possible for NFTs to work for several reasons:

  • Trading NFTs, without needing peer-to-peer platforms, can take significant cuts as compensation.
  • All Ethereum products share the same "backend", making NFTs portable to buy on one product and sell it on another effortlessly.
  • Once a transaction is confirmed, it's impossible to manipulate the data to forge the ownership.
  • Ethereum never goes down, which means your tokens will always be available to sell.

How to Buy NFTs?

Having understood what is NFT used for and its specific advantages over other cryptocurrencies, you might want to venture into buying NFTs. If yes, you will need to acquire some essential items before you can do that;

  • You’ll need a digital wallet that allows you to store your NFTs and cryptocurrencies.
  • Then you need to purchase some cryptocurrency depending on what currencies your NFT provider accepts, most likely Ether.
  • You can use platforms like OpenSea, Coinbase, Kraken, PayPal, etc., to buy cryptocurrencies.
  • Then you will be able to move it from the exchange to your wallet of choice.

Keep in mind that most exchanges charge at least a percentage of your transaction as fees when you buy crypto.

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Popular NFT Marketplaces

Once you’ve got your wallet ready, all you need to do is to buy NFT. Currently, the largest NFT marketplaces are:

  • Rarible - Rarible is a democratic marketplace that allows artists and creators to issue and sell NFTs. It enables holders to weigh in on features like fees and community rules.

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  • OpenSea - To get started, all you need to do is create an account on the official website of OpenSea and browse NFT collections and discover new artists. This platform is famously known as a vast collection of rare digital items and collectibles.

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  • Foundation - On this platform, artists need to receive from or send an invitation from fellow creators to post their art. This community’s exclusivity boasts higher-caliber artwork, assuming the demand for NFTs remains at current levels or even increases over time.

What is the Future of NFT?

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NFT has enhanced media exposure and special perks for aspiring artists on social media. Recently, Jack Dorsey, the CEO and co-founder of Twitter, with his very first and famous tweet, "just setting up my twttr," and Vignesh Sundaresan, famously known as "Metakovan," bought 69.3 million dollars worth of NFT art on Beeple. 

Owing to its increasing popularity, people are now willing to pay hundreds of thousands of dollars for NFTs.  

Like David Gerard, author of Attack of the 50-foot Blockchain, many experts in the crypto industry say that around 40% of new crypto users will use NFTs as their entry point. As a result of its growing popularity, NFT could represent a more significant part of the digital economy in the future.

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Conclusion

In this What is NFT tutorial, you saw everything about what an NFT is, and its concepts like how it works, its uses, and how you can buy NFTs.

Whether you're an experienced Blockchain developer or just an enthusiast who wants to explore more What is NFT, Cryptocurrencies, and Blockchain, enrolling in Simplilearn's Blockchain Certification Training program will help you learn and explore more about cryptocurrencies, Blockchain, and its technology with all level of experience.

Do you have any questions for us? Please feel free to drop them in the comments section of this article; our experts will get back to you as soon as possible.

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Simplilearn is one of the world’s leading providers of online training for Digital Marketing, Cloud Computing, Project Management, Data Science, IT, Software Development, and many other emerging technologies.

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