What are NFTs?
Non-fungible tokens are unique digital assets, or collectibles, which are created using blockchain. NFTs, also known as Nifties, represent real-world objects like art, music, in-game items and videos. They are bought and sold online, mostly with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos. NFTs are usually bought with cryptocurrency Ether or in dollars and the blockchain keeps a record of transactions. While anyone can view the NFTs, the buyer has the status of being the official owner.
How is it different from cryptocurrency?
Unlike cryptocurrencies, which can be exchanged with one another NFT is unique and cannot be exchanged with another item. Also this: Bitcoin can be broken down into smaller units but NFTs cannot be broken down and exist as a whole.
How NFTs work?
NFTs use the same blockchain technology that powers cryptocurrencies. Now, when a user buys an NFT from any marketplace, the information of ownership of a particular token is registered in the blockchain. This ownership right can be verified and people can make out who is the actual owner of the particular NFT.
Many NFTs are created and stored on the Ethereum network, although other blockchains (such as Flow and Tezos) also support NFTs. Because anyone can review the blockchain, the NFT ownership can be easily verified and traced, while the person or entity that owns the token can remain pseudonymous.
Different types of digital goods can be “tokenized,” such as artwork, items in a game, and stills or video from a live broadcast. While the NFT that conveys ownership is added to the blockchain, the file size of the digital item doesn’t matter because it remains separate from the blockchain.
Trading in NFTs
You can start trading in NFTs by buying and selling NFTs.
• First of all, you need a marketplace to find NFTs.
• Once you find an NFT, you need to have a digital wallet that supports NFT for transactions.
• Since most NFTs are Ethereum based tokens, most marketplaces accept these tokens as payment. This is why you need to use a digital wallet that supports Ethereum.
• Your wallet should have a sufficient amount of relevant cryptocurrency to purchase an NFT.
• Now, connect MetaMask to an NFT marketplace where you can buy an NFT.
Whenever you buy something using NFT, you do not physically own the item. Instead, you get a certificate of ownership of the NFT that is associated with the item. This NFT is registered on the blockchain. The files are not stored on the blockchain itself. A link to the file and the NFT is stored, as proof of ownership. You need to keep the certificate safely in a digital wallet.
Wrapping it up
It is important to understand that you must do proper research before investing in an NFT. It is a new concept that may stay or fade in some time. However, it is based on blockchain which is a much grounded technology that is here to stay in the long run.