An NFT is a digital asset that represents real-world objects like art, music, in-game items, and videos.
They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.
How Is an NFT Different from Cryptocurrency?
NFT stands for non-fungible token. It’s generally built using the same kind of programming as cryptocurrency, like Bitcoin or Ethereum, but that’s where the similarity ends.
Physical money and cryptocurrencies can be traded or exchanged for one another.
They’re also equal in value one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin.
Crypto’s fungibility makes it a trusted means of conducting transactions on the blockchain.
NFTs are different.
Each has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another.
How Does an NFT Work?
NFTs exist on a blockchain, which is a distributed public ledger that records transactions.
NFTs are typically held on the Ethereum blockchain, although other blockchains support them as well.
An NFT is created, or “minted” from digital objects that represent both tangible and intangible items, including:
• Art
• GIFs
• Videos and sports highlights
• Collectibles
• Virtual avatars and video game skins
• Designer sneakers
• Music
What Are NFTs Used For?
Blockchain technology and NFTs afford artists and content creators a unique opportunity to monetize their wares.
For example, artists no longer have to rely on galleries or auction houses to sell their art. Instead, the artist can sell it directly to the consumer as an NFT, which also lets them keep more of the profits.
In addition, artists can program in royalties so they’ll receive a percentage of sales whenever their art is sold to a new owner.
How to Buy NFTs?
If you’re keen to start your own NFT collection, you’ll need to acquire some key items:
1. Digital wallet
2. Purchase some cryptocurrency, like Ether, depending on what currencies your NFT provider accepts.
3. You’ll want to keep fees in mind as you research options.
But should You Buy NFTs?
Just because you can buy NFTs, does that mean you should? It depends, Yu says.
NFTs are risky because their future is uncertain, and we don’t yet have a lot of history to judge their performance
In other words, investing in NFTs is a largely personal decision.
If you have money to spare, it may be worth considering, especially if a piece holds meaning for you.