What is an NFT?

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What actually is an NFT?

NFT’s are booming at the moment, people are making hundreds of thousands selling these digital pieces of artwork. But what exactly is a NFT. 

Non-fungible tokens (NFTs) are digital assets that are unique and cannot be exchanged for other assets on a one-to-one basis. They are often used to represent ownership of digital assets, such as art, music, and videos. They can also represent physical assets, such as real estate or collectibles.

NFTs are stored on a blockchain, which is a decentralized and transparent ledger that records transactions. The use of a blockchain ensures that the ownership and authenticity of an NFT can be verified and cannot be easily replicated or counterfeited.

 

NFT stands for Non-fungible token. Which essentially means something that is not interchangeable with another thing. For example money is a fungible item because if you were to give someone $10 and they gave you two $5 bills back you would still have $10.  This is regardless of whether it was the same bill you had in the beginning; this is because both are worth $10. Something that is non-fungible just essentially means that it cannot be swapped for something else as there is no other item that is truly the same. Think of an autographed book or possibly something with sentimental value to you. 

 

  

So what's with all the hype? 

Collectibles have been around for a long time, since around the early 20th Century. Collectables of all kinds have always been popular, but they all share a common flaw, which is fakes. Trading cards are easily reproduced, sometimes identical to the original cards. NFTs are different. There are some people who assume you can take a photo or screenshot and you own a copy as well, however with the introduction of blockchain technology, you are unable to do this. 

 

This is because all information stored on a blockchain is publicly available to view and is unchangeable. This is where NFTs start to become valuable. 

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Why you might buy one.

 So let’s say you own an NFT, great… What do you do with it? Really you have two options and that is to sell it or hold on to it, the same as another piece of artwork. Why do either though. 

 

Re-selling NFTs; at the moment is a pretty good investment; although is very unstable. If you pick the right project, you might secure some profit when you sell. Always keep in mind, there is always risk involved in making an investment, especially when NFTs are undeniably volatile, so always make sure you do your own research and due diligence. Holding on to NFTs is also the other route you could take, obviously you can choose to sell at any point but you may want to hang on to your tiny piece of art that cost you $400. There are a few reasons why you would do this and that because you may genuinely like the artwork or enjoy being involved in the community or it could be for the utility. 

 

 

Some more key benefits:

One of the key benefits of NFTs is that they allow for the creation of a marketplace for digital assets that was previously not possible. Before the advent of NFTs, it was difficult to establish ownership and provenance of digital assets, as they could easily be copied and shared without permission. NFTs solve this problem by providing a way to uniquely identify and track the ownership of digital assets.

Another benefit of NFTs is that they can potentially increase the value of digital assets. For example, a digital artwork that is represented as an NFT may be worth more than the same artwork without the NFT because the NFT represents ownership and authenticity. This has led to the emergence of a vibrant market for NFTs, with some selling for millions of dollars.

 

 

There are a lot of projects out there that advertise what are called roadmaps. Plain and simple what the project designers aim to achieve in the future. Some benefits are really cool such as private parties exclusive to community members. 

A great example I have seen of a roadmap is a project called “The Metapreneuers

A cyber style image of a mcrochip with NFT displayed in the centre of the image.

The Drawbacks

However, there are also some drawbacks to NFTs. One concern is the potential for fraud and misinformation. Because NFTs are still a relatively new and largely unregulated market, there have been instances where NFTs have been sold as unique and original works, only for it to later be discovered that they were copies or were not created by the artist claiming to have created them.

Another concern is the environmental impact of NFTs. The process of creating and trading NFTs requires a significant amount of energy, and there are concerns about the carbon footprint of the NFT market. This has led to calls for more sustainable approaches to NFT creation and trading.

What next?

I think it is important to remember that the world of NFTs; and crypto for that matter is still very young and there is so much time to see where all this technology will go. There are a few ways to purchase an NFT. Before anything however you are going to need a crypto wallet and some crypto. The majority of projects use the crypto-currency called Ethereum. Again regardless of your interest in NFTs only invest money that you understand you may lose.

 

Once you have your wallet set up and have your crypto in there, you can start researching projects that interest you. Marketplaces like Opensea are great places to start. If you are looking for pre release NFTs however you will need to find the projects before they become available on the secondary marketplace. There are loads of blogs out there that show up and coming releases such as nftrealeses and nftcalendar 

When you find a project you like, join the community on twitter and discord. In my opinion it’s great to get a feel for the community. Things I like to look for when researching a project is a great community on discord and twitter, a roadmap, a list of project founders as well as actually liking the artwork. Enjoying the pieces you are picking up makes the process so much more fun. 

As always this is not financial advice, always do your own research! If you enjoyed this content, check out our post on What is a URI? 

  

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