Meaning of NFT and how it works

The meaning of NFT and how it works is a great investment for anyone at this time, Since the expansion of the digital world, there have been trends in digital assets. NFT is one of these digital asset platforms that have recently paved a great way for artists, photographers, celebrities, investors, art lovers, and many others to earn more money. 

NFT has been active since 2014 but came to the limelight in 2020. The question at heart could be, “What is NFT?’ Don’t worry; we’ve got the answer. In this article, we will explain the meaning of NFT and how it works.

What are NFTs?

An NFT is a non-fungible token that cannot be replaced with a similar item, in contrast to a fungible token (cryptocurrency) where one part or quantity can be replaced by another equal part or quantity in the satisfaction of an obligation. An NFT is distinctively unique and can’t be replaced by another object. It is a digital asset stored in a blockchain that serves as the signature of the owner.

What meaning of NFT and how it works?

An NTF is a cryptographic asset that sits on a blockchain. The process of creating an NFT and recording it in a blockchain is called minting. The minting process involves

• creating a new block
• validation of the information by a validator and
• closing of the block

The creation of this token makes easy the verification and identification of ownership and the making of transfers between owners because the owner’s details are attached to the token, which is made public. That is to say, even though you have several similar images or items of an NFT they still have unique differences and can be identified individually to a particular owner.

Difference between cryptocurrency and NFTs

Cryptocurrencies are similar to NFT, yet they have differences. Cryptocurrency is fungible, which means it can be exchanged for similar items. For instance, 10 notes of $10 can be exchanged for one $100 note because they are equal in value. Also, one Ethereum is equal in value to another Ethereum according to the exchange rate. That is why cryptocurrencies are acceptable as a digital means of exchange.

NFTs as the name implies are non-fungible tokens which means they cannot be used to exchange another, they have a non-transferable identity that distinguishes one token from another. These tokens are individually unique, they are digital assets or a representation of a physical asset. They are designed in a way that allows the addition of a new NFT to another one, that is a combination of several NTFs to form another unique one.

Forms of NFT

1. Art

The arts are growing big in the NFT market, both digital and physical artworks are sold in the NFT markets. This is an opportunity for the artist to make more money than they did with only gallery sales. The artist is entitled to 10% of his art each time the work is resold to a new buyer. That is to say, he will continue to earn whenever there is a new buyer, unlike one-time gallery sales.

2. Sports

NFTs provide an opportunity for athletes, clubs, and sports brands with a new means of monetization while enabling fans to connect with their favorite clubs and athletes in a new way.

3. Pictures

Photographers can now sell photographs on NFT when they tokenize their photos. Just like the arts when you create an NFT attaching royalty agreement, you are entitled to a percentage each time your photos are resold to a new buyer.

4. Music

Music artists on NFT platforms can sell their new videos to interested fans for millions of dollars after they have created a blockchain for their songs.

5. Videos

Trending videos or short video clips of NBA sports celebrities dunging can be sold for millions of dollars on the NFT platform. 

How do you buy NFTs?

Buying NFT gives you ownership over work, the previous owner loses his ownership and cannot reproduce the same work except on an agreed term. To buy an NFT, you have to first create a digital wallet or a crypto wallet where you can store cryptocurrencies like Ethereum.

Many NFT platforms use ether for purchasing NFTs. You must store the recovery phrase that will be given to you when you create your wallet because without it you may lose your account and not have access to it anymore.

There are two types of wallets, hot wallets, and cold wallets, and you may want to know which one you will prefer.

Hot wallets are always connected to the internet and cryptocurrency network. They are used in sending and receiving cryptocurrency. You can have it downloaded as an app on your desktop or phone or as an extension on your browser. Hot wallets can be easily attacked by cyber theft.

Cold wallets are not connected to the internet. They are also referred to as hardware wallets” because they are stored in hardware devices that look like USB storage devices. They are less vulnerable to cyber theft as long as your device is in safe hands. Your wallet will be lost once your device is missing.

Once you create your wallet, fund it with ether, and connect it to the Ethereum blockchain, then you can buy NFTs.

Popular NFT Marketplaces

OpenSea

This is the first and one of the biggest NFT markets. The OpenSea platform is known for its vast collection of rare digital items and collectibles. You will be required to create an account to have access to these collectibles and artists.

Rarible

Rarible is a democratic, open marketplace that allows artists and creators to issue and sell NFTs. It enables holders to weigh in on features like fees and community rules.

Nifty Gateway

Nifty Gateway collaborates with top artists and brands to create collections in multi- and mixed-media, video, fine art, and animation. The site is aimed at buyers whose goal is to collect or trade art with long-term value.

NBA Top Shot

NBA Top Shot is an NFT marketplace where fans can trade their short basketball video clips.

Why you should invest in an NFT

After you know the meaning of NFT and how it works, you also need to understand how important it is for you to invest in NFT.

• Investing in an NFT gives you the potential to make more money. When an NFT gains more popularity than when you bought it, you will be surprised at the amount you will eventually sell it for.
• All NFTs can be easily tracked to the owner because they are built on the blockchain, that is to say, you cannot be bypassed when a buyer wants to buy your work
• Anyone can invest and own an NFT, once they have an ether to pay for it.
• With NFT you can add asset diversity to your portfolio.

Sum up

NFT has certainly come to stay. Within the past few years, NFT has exploded in popularity, drawing the attention of many celebrities. One of its major advantages is the ability to verify the authenticity of an NFT before making any purchase.

For the artist, NFT has brought a total change to the world of art, it has provided a different and welcoming mode of partnership between creators, artists, fans, and investors. Both the artist and inventors are sure to make more money on NFT platforms.