NFT is yet another term that has entered our language after Bitcoin and Blockchain. People are curious about NFT and its purpose because it is a buzzword that is used frequently. Actually, there isn’t a one-line explanation for this. That’s why we’ve included a thorough explanation of NFT, including how it’s used in digital art and other topics. So let’s get started learning everything there is to know about NFTs (Non-fungible Tokens) right away.
What is NFT: A Definitive Explainer (2021)
We’ve covered all the frequently asked questions about NFT in this article. You can use the table to navigate to each of the sections that we covered in this article by clicking on the corresponding link.
NFTs Explained: What is NFT in Crypto?
Let me first give you a rational explanation of NFT and what it stands for. NFT, or non-fungible token, is a term. By definition, fungible refers to something that can be used in place of another thing. A $10 note, for instance, can be exchanged for two $5 notes or another $10 note. In both situations, the value is unchanged, so exchanging the money won’t be a problem. Money is a fungible item in this situation because it can be exchanged without losing value.
Therefore, something that can’t be exchanged for a similar item of a similar value is said to be non-fungible. To give you a straightforward illustration, would it be the same if you replaced the Mona Lisa painting housed in the Louvre in Paris with a different printout of the same image? And perhaps more importantly, will its worth remain the same? No, is the response. The priceless Mona Lisa painting in this instance qualifies as a non-fungible item because it cannot be substituted with another object that has a similar appearance.
Here, uniqueness is crucial. Therefore, a non-fungible item is something that is genuine and one of a kind. something that is valuable because it is genuine. We are now at the token portion. A token is a 40-digit string of letters and numbers that contains information about the original creator of the work of art, the item’s current owner (there can only be one), and the item’s current price. Due to its decentralised architecture, Blockchain technology, which supports this information storage, cannot be changed in any way.
When these three terms are combined, NFT refers to an incorruptible token that contains ownership information about a distinct and genuine item.
What is the Use of NFT in Digital Art?
A certificate of ownership or authenticity is essentially what an NFT is. This is a general explanation of an NFT, but to really grasp the concept, you must use a specific example, such as digital art, which I have discussed in the next part.
NFT provides a means for digital creators to put their work in the public domain without having to worry about proving ownership or authenticity. Digital artists can generate NFT for their original work and auction it off to another person while maintaining the information about the original creator, the current owner, and the current value. The best part about NFT is that as many times the digital art is sold to another person, a share of the value will be transferred to the original creator. This makes NFT a great proposition to digital artists for earning money through their artwork.
Many people must be asking what the purpose of NFT is in digital art and why there has been such a fuss made over it. As I said above, the NFT is a signature of authenticity, and it offers that genuine seal of approval when dealing with digital artworks on the web. As we all know, everything can be tampered with in today’s society, and anyone can claim credit for other people’s efforts. In essence, it is nearly hard to identify the original author of an artwork on the web, which is where NFTs enter into the picture. With entirely digital art that is marketed as NFTs, NFTs essentially aim to usher in the digital era of art collecting.
Using a real-world example, Christie’s, a renowned British art auction house, recently sold a piece of digital art in NFT. Everydays The First 5000 Days is a piece of digital art created by Mike Winkelmann, also known as Beeple. The buyer received a 319MB digital file (JPEG image) together with the NFT (token) that contains the data regarding the image’s ownership, among other things, when the digital image was sold for $69 million.
How is Blockchain Related to NFT?
The interesting thing about NFT is that nowadays, individuals use it to purchase a wide variety of digital treasures rather than only paintings. For instance, Jack Dorsey has begun an NFT auction regarding his first tweet, which has a value of $2.5 million for now. Similar to how Kings of Leona announced their new album would be released alongside NFT, Strangely, the Nyan Cat GIF was sold for $587,000 using NFT, and a number of other NFT markets have emerged that offer digital collectibles using NFTs, like OpenSea and CryptoPunks. Although currently a niche business, the cryptocurrency industry is expanding quickly.
As I mentioned earlier, the foundation of NFT is founded on Blockchain technology. We already know that Blockchain is impenetrable and that it is widely utilised to manage many cryptocurrencies. Since every transaction made with NFT is recorded on a public ledger, the system as a whole is relatively open. Another feature of this technology is that everything can be traced back to its inventor because it establishes a chain.
A Brief History of NFT
One thing to keep in mind is that you can only purchase NFTs using cryptocurrencies, specifically Ethereum. Due to its early start, Ethereum now leads the industry in issuing and managing NFTs. But you may also purchase and sell Bitcoin using some services.
Now that we have a thorough understanding of NFT, let’s find out how it came to be. First off, Ethereum gets a head start on the initiative because they initiated it in 2015 with their new NFT blockchain architecture, known as ERC-721. Then, before Bitcoin and Flow could catch up, Ethereum introduced ERC-1155 and enhanced the technology.
In 2017, Ethereum released a blockchain game called CryptoKitties, which served as the public debut of NFT. Players might use ether to buy, gather, breed, and sell virtual cats in this game (Ethereum s cryptocurrency). At the time, the most expensive cat sold for $117,712, which was astonishing. As a result of taking a cue, Ethereum added the NFT method to their coin and is currently dominating the market.
The Cons of NFT
To give you an idea of the numbers, the NFT market had a total market share of $50 million in 2018, $150 million in 2019, and $338 million in 2020. With the current boom, it is now impossible to predict where the market will go next.
Even though we went over and beyond the benefits of NFT, there are some significant drawbacks that you should be aware of before making a purchase of a digital collectible through NFT. First off, the system is unsustainable and has a severe impact on the environment because it consumes a tremendous amount of energy to produce and maintain it. It’s because non-fungible tokens, unlike cryptocurrencies, operate on less energy-efficient proof-of-work blockchains. Aside: Due to excessive mining, GPU prices will likely increase much further in the near future.
In addition, detractors claim that NFT is a bubble and that individuals who pay exorbitant prices for uncommon GIFs or unusual video clips would eventually lose their money. According to experts, the value of paintings and rare collectibles is not simply due to the artistry itself, but also because there is a market for people who wish to acquire and collect rare paintings or unique pieces of art.
How to Buy NFTs
According to experts, people who purchase digital artwork are not paying exorbitant prices because they value art. Instead, they seek to inflate the market in order to sell it at a profit. In contrast to real masterpieces, the digital world does not have a shortage of art, therefore if the bubble collapses, prices will probably decline.
It’s as easy as going to one of the NFT marketplaces and making a transaction to purchase an NFT. However, before you make your first NFT purchase, there are a few things you should think about.
To begin with, make sure you have a crypto wallet that accepts NFTs. The second thing you need to do is decide which marketplace and cryptocurrency you want to use to acquire the NFT you’re interested in. For instance, there are markets that accept different cryptocurrencies in addition to Ethereum (ETH), one of the major players in NFTs. So make sure you have enough of the currency on hand to purchase the one-of-a-kind work of digital art you want.
How to Sell NFTs
You can check out NFT marketplaces like OpenSea, Rarible, Mintable, and Nifty Gateway (where Grimes sold her video), among others.
You can do the same on NFT marketplaces if you are the owner of a work of digital art or any other type of content that you want to sell as an NFT. You only need to submit your digital work, provide information about how it was made, etc., and select a price for your digital file; the specifics may vary.
How to Make NFTs
People wishing to acquire NFTs will then be able to purchase your NFT. You will get compensated for your work each time your NFT is sold. Keep in mind, though, that certain marketplaces may charge you for hosting and selling your NFT. Therefore, before selecting the marketplace where you wish to sell your NFT, make sure you carefully read the fine print.
Once the initial setup is complete, creating NFTs is pretty simple. The real process of figuring out the rest of the material is the challenging part. In essence, you’ll need a wallet that works with NFTs, like MetaMask.
When your wallet is ready, you can link it to the website where you want to sell your artwork (such as OpenSea, Rarible, etc). Now that your digital artwork has been uploaded to the site, you can set a price for it and launch an auction.
But things are a little bit tricky. For instance, there is a minimal listing cost for Rarible where you can list your artwork. Additionally, you will need to spend more money to have your artwork turned into an NFT. After your NFT sells, Rarible will also charge you a commission and some additional cash for sending the buyer’s cryptocurrency to your wallet.
Frequently Asked Questions (FAQs)
Is Ethereum an NFT?
Making a non-fungible token art is often simple, but selling it requires some effort. To avoid actually losing money by selling your artwork, don’t set your asking price too low and make sure you have plenty of time available before beginning.
Where can I sell NFTs?
No, one of the blockchains that houses NFTs is Ethereum. It’s a cryptocurrency that you may also use to purchase NFTs. Ethereum itself is not an NFT, though.
Verdict: Where is NFT Heading?
You can sell your NFT on any number of online markets, including as OpenSea, Rarible, Atomic Market, and many others.
That was a thorough explanation of NFT and what it represents in terms of digital art and other valuables. Although NFT can bring a new layer that can aid in determining authenticity, I believe the current trend of paying exorbitant prices to own digital goods is misguided.