With the world collectively scratching their heads after Eminem and Snoop Dogg performed as metaverse avatars of their own ‘Bored Apes’, many are asking what are NFTs and why do they matter. Let’s attempt to clear up some of the big questions around this technology.
NFTs have taken over the internet in the last year; even though they’ve been around for much longer. If you’ve been on social media recently, chances are that you’ve seen the hype surrounding these tokens, and you were wondering what the craze was all about. Well, you’d be surprised to know that NFTs are one of the fastest-growing categories in the cryptocurrency world.
Considering you’ve clicked on this post, you may be just getting started with NFTs, looking to find out more about them. And it’s very important to understand these tokens and the way they work before doing any transactions.
That being said, the following paragraphs will include in-depth information about NFTs, telling you how to buy and sell them. Let’s get started.
NFTs – What Are They?
NFTs or non-fungible tokens are unique digital assets on the blockchain. This means that an NFT is the only item of the sort, and it cannot be replicated. This gives it a value of its own and ensures people have something that nobody else owns.
NFTs are digital, and their data is stored on the digital ledger of a blockchain. What makes an NFT unique is all the data the file contains and the proof of who is the owner of said file.
For instance, cryptocurrencies such as Bitcoin are different from NFTs. Each crypto coin contains the same cryptographic data set – therefore, one Bitcoin will be the same as another Bitcoin. You can give someone a Bitcoin and they can give you one back – they will be indistinguishable. This is not the case with NFTs.
Now, you may be thinking “If an NFT is a digital artwork, can’t I just take a screenshot of it or download it?”
You can definitely do this – nothing is stopping you. Even in real life, you can take photos of paintings such as Edvard Munch’s iconic “The Scream”. But taking a photo of it will not make you the owner of the painting.
So, it is the same with NFTs. You can always take screenshots or download the digital artwork sold as an NFT, but this doesn’t give you ownership of the piece. An NFT provides a unique signature that will verify all related transactions as well as their authenticity.
How Did It All Begin?
Contrary to popular belief, NFTs did not just appear out of the blue one year ago. They’ve been around for several years; they just didn’t gain traction until recently.
People think of the Bitcoin blockchain coloured coins as the very first NFTs. They weren’t as effective or functional as the NFTs we can find nowadays, but they contributed to the creation of proper NFTs. All coloured coins depicted different assets like subscriptions, property, and more.
While this technology was still new and it didn’t become so popular, it allowed people to start thinking about how introducing assets to the blockchain could be beneficial. Therefore, NFTs started being developed in 2014, when Counterparty appeared. Counterparty was a platform that was founded on the Bitcoin blockchain. It included games and digital assets, with some of the most popular assets being Pepe Memes.
When Ethereum was getting popular around 2017, the Cryptopunks collection was released and appeared on the blockchain. The characters were actually some of the very first NFTs that were minted on the blockchain. This collection included 10,000 characters, with each one being unique.
Afterward, in October 2017, CryptoKitties was also released. This is when digital asset ownership began attracting more attention, with large investors investing in NFTs.
Over the next two years, large NFT marketplaces have started getting more fame. Rarible and OpenSea were some of the top marketplaces. What made them special was the fact that they allowed people to mint NFT art.
How Do NFTs Work?
NFTs are digital pieces that can be found on a blockchain. Someone can take intangible or tangible items and store them on the blockchain by transforming them into digital assets or crypto collections. Examples of such items include digital art, GIFs, music, avatars, videos, and many others.
The process of converting items into crypto collections or digital assets before adding them to the blockchain is known as “minting”.
Minting is what introduces the asset to the network, making it visible to potential buyers.
By purchasing an NFT, you can obtain ownership rights over a particular digital file.
The Difference Between Fungible and Non-Fungible
If you’re new to the world of NFTs, you may not be able to tell the difference between fungible and non-fungible assets. But if you’re going to sell or buy NFTs, you need to understand these terms.
Fungible tokens are items that are indistinguishable and interchangeable while offering the possibility of breaking them down into multiple parts.
For instance, currencies and cryptocurrencies are fungible. You can give someone a $10 bill, and they can give you back the same bill without anything changing. But you can also give someone the bill while they give you back two $5 bills or ten $1 bills. You’ll get the same amount in return.
Bitcoin and other cryptocurrencies work the same way. You can give someone a Bitcoin unit and get another Bitcoin unit back.
But non-fungible tokens are not the same. A Blue-Eyes White Dragon Yu-Gi-Oh card, which is one of the rarest cards of this kind, can hold a lot of value. But while you may sell it for $50 at an auction, someone else may sell the same card for a higher amount.
Similarly, you cannot exchange your pet with another person’s pet. Sure, you may exchange a parrot with a different one from the same species, such as giving a cockatiel to someone and getting another cockatiel back. While the birds may look the same and be part of the same species, their behaviour will be completely different – one may be noisier and bite you, while the other may be calmer and more loving, and not scared of human contact.
So, when it comes to NFTs, you are investing in a digital piece that cannot be replicated. It is yours, whether it is an online collectible card, artwork, or anything of the sort.
Types of NFTs You Can Find
There are many types of NFTs you can find on the blockchain. Although the most common one that you see circulating is art, you can get so much more. Here are some NFT types that you can invest in:
– Videos and films
– Tickets for different events
How Can You Purchase NFTs?
People can buy or sell NFTs on various marketplaces, such as OpenSea or Rarible. The process is not that difficult either. Here are the steps you will have to go through:
1 – Invest in Cryptocurrency – The first thing you have to do is purchase cryptocurrency. You can do this by joining Coinbase or a different marketplace for cryptos.
2 – Obtain a Wallet – Next, you will need a non-custodial wallet. This will allow you to keep your digital assets but also handle your cryptocurrency. Metamask is a great candidate.
3 – Send Your Cryptocurrency to Your Wallet – Now, it is time to transfer your coins to your preferred wallet.
4 – Sign Up on the Preferred NFT Marketplace – Choose the best NFT marketplace for you, such as OpenSea or Rarible, and join it. Then, connect your digital wallet to it so you can start buying NFTs.
5 – Search for NFTs – Once you sync the wallet to the marketplace, you can browse the available NFTs and buy the one you desire.
Most Popular NFTs on the Market
Are you new to the market and don’t know which NFT is suitable for you? Let’s take a look at some of the most popular tokens:
Bored Ape Yacht Club
The Bored Ape Yacht Club collection features 10,000 NFTs. When you invest in one of these Bored Ape NFTs, you can gain access to various features, including membership cards for the Yacht Club, among others.
There are 6.5k owners so far, so there are still some left if you’re interested in one.
CryptoPunks is a collection of NFTs that was released back in 2017. The collection features 10,000 characters with unique features. The characters are all pixelated, have unique features and they do not look similar to one another. It’s easy to find a punk that is interesting to you or suits you, so maybe you want to make room in your portfolio for one.
Mutant Ape Yacht Club
You can also find the Mutant Ape Yacht Club, which is a nice improvement on the Bored Ape Yacht Club NFTs. This collection is more numerous, having around 20,000 unique NFTs. As the name suggests, these NFTs will have a different and original design, so if a mutant theme attracts you, these NFTs may be great for you.
If you’re just getting into NFTs, it’s crucial to do your homework before any transaction. Understand what these tokens are and how you can buy or sell one. We hope this guide was helpful so that you can have an impeccable start to your NFT journey.