NFT stands for a non-fungible token, which exists in a blockchain. A blockchain is a public ledger that keeps records of transactions. Same way how Bitcoin transactions are tracked and recorded.
Going back to NFT, it is “non-fungible” meaning it cannot be exchanged for something, like, for example, an in-game item such as a virtual sword and a shield, one is not equal to the other one. In real life, it’s possible to trade them with each other, depending on how the negotiation goes, but it’s just not practical.
Fungible items, on the other hand, are like money or bitcoin. These two can be traded for certain goods and stuff. With enough of it, you can buy almost anything that you desire.
NFTs make online transactions secure since ownership can be easily forged or tampered with. NFT solves that problem. It’s like having your fingerprint on the item that you are trying to sell, showing that you have ownership of that specific item. It cannot be changed nor tampered with, it is a permanent record imprinted on the public ledger.
It’s like a smart virtual contract that lives on the blockchain, keeping track of the current and previous owners. NFTs can also be used to sell digital arts, unique in-game items, and even real estate! In Short, it can be used to sell anything that has a value that requires proof of ownership.
How it started
NFTs were first created in 2013 when people decided that they wanted to trade collectible items and digital arts, utilizing Ethereum’s blockchain, since, it is already well established and secure.
It first exploded when Cryptokitties and Cryptopunks joined the scene. Gaining a lot of attention, and over time, their collectibles increased in value due to their popularity.
How it’s going
At the moment there are dozens of games that have already launched or are soon to launch, that are utilizing NFTs for their game characters. For example, Axie Infinity, Thetan Arena, Illuvium, and Sipher.
And NFTs are also being utilized in the Metaverse – for example, Decentraland and Sandbox characters and in-game items are all NFTs that can be created, sold, and bought in NFT marketplaces.
How are they made?
Knowing the steps on how to make an NFT will help you further understand its concept.
I’ll simplify the steps and further explain the mechanics.
There are five easy steps to make it:
- First, you need to create something that is one of a kind. It must have some kind of value to the market, or the fact that it is rare is a good enough reason for it to be sold.
- Second, you need to set up a crypto wallet where you can store your cryptocurrency.
- Third, you’ll need to buy Ethereum for the fees associated with putting an NFT for sale or auction.
- Fourth, you’ll need to connect your crypto wallet to one of the popular NFT marketplaces like Rarible and OpenSea.
- And then finally, list your art for sale as an NFT to make a profit out of it.
Can anyone make an NFT?
Absolutely! Would you believe that the CEO of Twitter and Square, Jack Dorsey, even sold his first tweet as an NFT for over $2.9 million? Anyone can make an NFT. Its value would depend on the demand and popularity. Even A simple digital sticker or a GIF can even be sold as an NFT.
People can just download a copy of it, right? So why would people even consider buying them?
As mentioned above, the rightful owners of NFTs are recorded on the blockchain. Showing that they are the legitimate owners and have the bragging rights over it.
Can anyone make a profit out of it?
Yes, even non-creators can make a profit out of it. There’s a whole community for it. There are a lot of investors that would buy NFTs and hold it, waiting for their price to skyrocket. Collectible and rare digital arts are the most common type of NFT. It can be an old picture of a popular celebrity, a limited-edition virtual logo of a popular company, and so on. Your imagination is the limit. People are making thousands, and even millions of dollars buying and selling NFTs, that’s why it is becoming more and more popular. Some people are even taking this seriously and looking at it as the “next big thing” that would make them rich.
This is not financial advice; this is for educational purposes only. The NFT market is still in its early stage, so you should buy and invest at your own risk and perform due diligence rather than taking a leap of faith.