NFT's

How Does an NFT Work?

NFTs exist on the blockchain, which is essentially a distributed public ledger of transactions that is replicated and distributed across a huge network of nodes. The Ethereum blockchain, for example, has around 11 000 nodes. So NFTs are mainly held on blockchains like Ethereum and some other blockchains.

NFTs are “minted” from a digital object representing tangible or intangible items, including music, art, collectibles, videos, etc. So NFTs are like a digital form of collectible items, which only allows one owner at a time. The exclusive ownership rights are recorded on the blockchain so that no one can change them. The owner or creator of NFT can also store specific information, such as including the artists' signature in an NFT’s metadata. Since these collectibles hold value, they can be bought or sold like other forms of art.

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.

NFTs are also generally one of a kind, or at least one of a very limited run, and have unique identifying codes. “Essentially, NFTs create digital scarcity,”

Anyone can view the individual images—or even the entire collage of images online for free. So why are people willing to spend millions on something they could easily screenshot or download?

Because an NFT allows the buyer to own the original item. Not only that, it contains built-in authentication, which serves as proof of ownership. Collectors value those “digital bragging rights” almost more than the item itself.

How Does an NFT Work?

NFTs exist on a blockchain, which is a distributed public ledger that records transactions. You’re probably most familiar with blockchain as the underlying process that makes cryptocurrencies possible.

Specifically, 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

Even tweets count.

Essentially, NFTs are like physical collector’s items, only digital. So instead of getting an actual oil painting to hang on the wall, the buyer gets a digital file instead.

They also get exclusive ownership rights. That’s right: NFTs can have only one owner at a time. NFTs’ unique data makes it easy to verify their ownership and transfer tokens between owners. The owner or creator can also store specific information inside them. For instance, artists can sign their artwork by including their signature in an NFT’s metadata.

How to Buy NFTs

If you’re keen to start your own NFT collection, you’ll need to acquire some key items:

First, you’ll need to get a digital wallet that allows you to store NFTs and cryptocurrencies. You’ll likely need to purchase some cryptocurrency, like Ether, depending on what currencies your NFT provider accepts. You can buy crypto using a credit card on platforms like Coinbase, Kraken, eToro and even PayPal and Robinhood now. You’ll then be able to move it from the exchange to your wallet of choice.

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 are “fungible,” meaning they 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 (hence, non-fungible).