If you’ve been following the news lately, you may have heard of a new form of digital asset called an NFT. But what is it and why should we care?
An NFT (non-fungible token) is a type of cryptocurrency that represents something unique or rare. And they come in many different forms – including: –
- Virtual clothing,
- Video game characters
- Or even crypto kitties!
Unlike other cryptocurrencies such as Bitcoin, which are all identical and interchangeable, each non-fungible token can be different from one another in some way — like how every individual snowflake has its pattern to distinguish it from others.
This makes them much more than just coins:
They provide people with the opportunity to collect, trade, and even create items based on their favorite characters and brands – whether animated gifs or physical.
Still don’t get it?
I know it sounds like something out of Harry Potter, but it’s just a way to describe tokens on blockchains that are not compatible with each other.
Again NFTs can be used in games or even as collectibles, but they have many uses outside of gaming as well – especially for art and music communities.
How Are NFTs Created?
These assets are created by developers using the ERC-721 standard for non-fungible tokens.
If you want to learn more about this new thing, then be sure to read this post to the end as there isn’t another online article that currently goes deeper into this topic than this.
How do NFTs work?
NFTs are created and stored on a blockchain, which is a digital ledger that keeps track of all transactions.
This makes them tamper-proof and secure, as any changes would be immediately visible.
The most popular blockchain for NFTs right now is Ethereum, which allows users to create their tokens using its built-in programming language, Solidity.
As an investor who wants to make money off NFTs, you can either mint NFTs, trade them after they go live, or be on the selling end to continue earning royalties off your NFTs even after you sell them.
How are NFTs traded?
Just like other cryptocurrencies, NFTs can be traded on online exchanges.
However, because they are unique and rare, their value can vary greatly depending on the supply and demand.
You can sell your NFT today for say $300 then after a week, you see the same piece of music, collectible, or whatever digital asset auctioned for $30,000.
To begin trading NFTs, you will need to take the steps outlined below.
Steps to follow to buy your first NFT.
- First, go to Google Chrome and download to install Metamask.io as a Chrome extension.
- Next, create an account on Metamask then pin the Metamask extension (optional)
- Done that? Now it’s time to fund Metamask with Ethereum. You can buy Ethereum from Coinbase or your preferred broker and send it to Metamask.
- Next, go to Opensea.io and create an account or link an existing account to Metamask.
- The final step, shop around on Open Sea and buy some awesome NFTs.
It’s that simple.
Which kind of NFT should you buy on OpenSea?
There are a few different types of NFTs available on OpenSea, but ERC-20 tokens are the most popular.
These are tokens that have been created using Ethereum’s standard for blockchain contracts and can be traded or used to represent digital assets.
You can find a list of all the ERC-20 tokens on OpenSea here.
What’s the point of NFTs?
In addition to being a new way for people to invest and speculate, NFTs bring forth the idea of digital collectibles.
Some use them as a form of art or expression while others view them as purely an investment opportunity.
Even though they’re still in their early stages, it is clear that these tokens will continue to grow in value as the market begins to embrace their potential.
What are the risks of NFTs?
At this point, NFTs are still a fairly new technology.
As such, there may be some risk involved in the way they’re created and used until they become more standardized.
What can I do now to prepare for when that happens?
NFTs don’t replace other forms of currency or digital assets; they simply provide a new way to own and use them.
So, if you’re not interested in acquiring or using NFTs just yet, there’s no need to panic!
However, it may be a good idea to start following some of the leading developers and companies working on this technology so that you stay up-to-date on the latest news and developments.
Did you learn something new about NFTs?
Let’s continue this interesting conversation in the comments section of this post.