The use of non-fungible tokens (NFTs) proliferates in various industries, including gaming, art, and development. NFTs are a unique tool for blockchain developers and creatives to make digital items that have scarcity and can be bought, sold, and traded in the online marketplace. Here’s some more insight into NFTs and how they benefit creators and investors alike.
What are NFTs?
NFTs are unique digital items with tamper-proof ownership records. They’re created and transacted using smart contracts on a specific blockchain network, like Ethereum or EOS. In contrast to fungible assets (like bitcoin or any other cryptocurrency), which have exact replicates, these investments are non-fungible. Each NFT can be trusted as real property and not subject to inflation or deflation like fiat currency.
NFTs can be thought of as ‘digital collectibles that can be bought and sold in the same way that you would buy and sell physical items at a flea market or pawn shop. The unique history of each NFT is called its provenance – the story of how it came into existence, how it was used in the past and where it may go next. This record of provenance follows the NFT along its lifetime throughout the blockchain network where it is held. This record is essential for validating the originality of an NFT and the asset it represents, whether digital or real-world.
NFTs use blockchain technology to permanently record items’ ownership and attributes, making them easy to transfer between users on the network. NFTs can hold ownership records over anything from a physical house to digital artwork, making them an excellent tool for businesses and organizations looking for immutable record-keeping and secure ownership transactions.
NFTs Use Smart Contracts
Smart contracts are computer programs that run on a blockchain network. They can be used to transfer ownership of an asset from one person to another, but they can also be programmed to perform other functions.
The act of transferring ownership is called minting or creating an NFT, and it happens when a smart contract is invoked by one party and then executed by another party as part of their transaction. This way, individuals can transfer digital assets without interacting with third parties.
NFTs Give Artists Greater Control
NFTs can also make it easier to transfer rights to digital assets between creators and their partners or buyers, giving greater control to artists and creators. A real-world example would be the music industry, where a band could use NFTs to sell their music directly to fans in exchange for money or tokens. This eliminates the need for intermediaries like record labels and makes it possible for bands with small followings to earn royalties from selling their music on platforms like Spotify or Apple Music. In many cases, creators can make more money selling their work as NFTs rather than through these third parties that take out exorbitant fees from every deal and sale.
How to Buy NFTs
NFTs are available for purchase through a blockchain-based marketplace, just like cryptocurrencies. You can purchase them with cryptocurrency, fiat currency, and credit cards. To buy NFTs, you first need to open a digital wallet and fund it with crypto, which you can use to buy the NFT off the market. Most of the NFTs in the world are housed on the Ethereum blockchain, so you will most likely want to fund your digital wallet with ETH before you access the NFT marketplace. Select an exchange like FTX that offers you access to the NFT marketplace, the ability to mint your own NFTs, and competitive fees for minting, buying, and transacting across the platform.
Some NFTs are more valuable than others based on the popularity of the artist, uniqueness of the art piece, hype around the collection, etc. It’s important to remember that the NFT marketplace is just as volatile as cryptocurrencies, perhaps even more so because there is no cap on the number of NFTs that can be created worldwide. Some NFTs with promising valuations can be designated as blue-chip NFTs, meaning they will likely rise in value over time. However, this designation does not guarantee the success of that investment.
NFTs are an exciting way for artists and creators to sell their work online with less risk of fraud or theft. NFTs have started with digital assets but can also be used for tangible world assets and record keeping. NFTs are overall transforming the art, gaming, music, and entertainment industry. This technology is worth investing in if you can find the proper NFT collection to add to your digital portfolio.