NFTs : The Basics

What is an NFT (Non-Fungible Token)?

An NFT is a digital asset that represents a real life object that is deemed to be unique, for example an art piece. When tokenised, the underlying codes provide ownership over that particular NFT similar to a deed you’d receive for land in the physical realm. This record of ownership is then stored on a shared ledger using blockchain technology which can’t be forged as thousands of computers around the world maintain it.

In comparison, a fungible token is an asset that is interchangeable. This means you can send a fungible token such as Bitcoin out to someone and it wouldn’t be the same Bitcoin you’d receive if they were to send it back to you, although its value would be the same.

NFTs then, are digital tokens that are purchased and sold online, generally with cryptocurrencies. Because of the identifying codes each unique NFT has, this is the main reason why the digital token industry has amassed a staggering £123 million in sales according to Forbes, since 2017. The rare and scarce nature of NFTs is where its value comes from and so this figure is not a surprise.

What are NFTs used for?

The technology behind NFTs allows content creators to monetise and sell their works. A great advantage to monetising items in this way is that NFTs can also contain smart contracts. These smart contracts act the same way that royalties do within the music industry. If an item is sold onto someone else, the original content creator will receive a cut of any future sales of that token.

NFTs can also be used as a way of raising charitable funds, creating deeds of ownership for physical items such as a car, land or property, and also in monetising non-tangible items, for example, a tweet. Billionaire CEO and Co-Founder of Twitter, Jack Dorsey went ahead and tokenised his first ever tweet in May 2021 which was valued at $2.9 million.

How to buy NFTs

In case you’d like to experience the world of NFTs first-hand and start your own collection, here’s a quick guide on what you’d need to get started:

• You’ll need to purchase some cryptocurrencies i.e. Ether, dependent upon what your NFT provider accepts

• Keep fees in mind when looking at platform options. Most exchanges charge a percentage of your transaction to process it.

• You need a digital wallet that allows you to store your NFTs and cryptocurrencies

• Connect your wallet to an NFT marketplace and start shopping!

Fad Or Future?

For some, the concept of NFTs is still a mystery as you’re effectively purchasing something that doesn’t “exist”. For others though, NFTs represent digital communities. Most have heard of CryptoPunks and Bored Apes and wondered why they are so popular - it’s because of the community they come with, where people share their opinions on other NFTs and discuss ways of building up the community of content creators who receive the value they deserve for their products. With this being one of the main driving forces for the growth of the NFT community, the power of communities in general are unmatched and so NFTs may well be here to stay and thrive through the continuous development of the digital world.

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Liz. #FTWL