NFT stands for non-fungible token. A simple way to think about NFTs are as files that live on the blockchain. In simpler terms, NFTs turn digital conte nt into one-of-a-kind, verifiable assets. They prove ownership of a digital item. This means they can’t be copy-pasted, edited, deleted, or otherwise manipulated. NFTs make it possible to own digital media assets similar to how you can own a digital currency asset.
For example, let’s say you own an original Picasso painting. There may be millions of copies of this painting in the world, but you are the only person who owns the original. That’s the idea behind an NFT — it gives your digital content a unique identifier that can’t be copied so only one person can prove ownership of the original
How are NFTs created?
Digital content gets its unique identifier when the NFT is “minted” on the blockchain. The blockchain is a decentralized system of computers that is unchangeable and tamper-proof. When an NFT is minted on the blockchain, it can be tracked to verify the authenticity and to also see past history and owners.
How do NFTs work?
In practice, NFT is simply a unique token representing a digital file. Each has a canonical identifier, a unique ID. Hooked to that ID is arbitrary metadata, for example, who created it, what it’s about, or its price history. When an NFT is minted by a creator, this information is immutably registered on the blockchain and becomes a sort of digital passport for the work. Moving forward, anytime that piece of media is distributed on another platform, that platform can “check its passport” and see its entire history. This means that instances of an idea can point back to the original, immutable record registered on the blockchain. An image on the internet no longer needs to be a two-dimensional box. Instead, it can take on a “Z-Axis” where all of its history and context can be discovered by third-parties, adding to its cultural and financial value.
Is there value in buying digital art?
A common critique is that because digital art and digital collectibles can be copied, they don’t carry much value. But NFTs introduces a new possibility that enables true ownership to exist while a work continues to freely circulate online
The more a file is shared and seen online, the more cultural value it accrues. Consider the mass production of posters and t-shirts of Warhol imagery. With increase in notoriety, the concept of owning the canonical work becomes more thrilling, and more a marker of social status. It can also drive up the value that can be derived from reselling the work should its notoriety increase after purchase. NFTs enable collectors to reap most of the benefits of owning a physical work of art, with the added bonus that their collection can be freely shared across the internet without limitation — and thus accrue more value with wider distribution.
And its not just art. The growing universe of crypto collectibles, game assets, digital fashion, skins, and more blurs the line between art and programmed utility. More on that below.
Why would someone want to buy an NFT?
People place value on different things in life. And for some people, owning the original version of something is important. They may want the digital collectible as a keepsake or to sell for future gain. Others want to own NFTs as a way to support and invest in their favorite creators Either way, NFTs make it possible to own digital content.
Why should I care about NFTs?
As a creator, you should care about NFTs because they give you a way to control and make money off of your digital artwork. It ensures no one else can take credit for your creations. When you own an NFT, how it’s listed, if it can be purchased, future royalties on resales, and more.
What currency is used to buy and sell NFTs?
NFT transactions happen with cryptocurrency. Most NFTs are part of the Ethereum (ETH) blockchain, which is a specific cryptocurrency, like Bitcoin or Dogecoin. You can convert ETH to traditional currencies like USD$ using services like Coinbase or Netcoins.
If you’re new to cryptocurrency, we recommend checking out the Netcoins Crypto Academy. They have some great, easy-to-understand articles to help you learn the fundamentals of crypto.
What is a gas fee?
When you get started with NFTs, you will come across the term “gas fee.” This is a fee that is paid to process and validate blockchain transactions. Every time someone completes a transaction on the blockchain (for example, minting, selling, or purchasing an NFT), there is computational effort that goes into verifying the transaction. This work is performed by “miners.” Miners use computer resources to process transactions and store them on the blockchain. They are compensated with gas fees.
The amount you pay in gas fees depends on the complexity of the task. And, gas fees can fluctuate, just like the price of any good in any market.