In the past few months, we have seen a massive rise in cryptocurrency demand. While the crypto market was blowing up, we started hearing more about Non-Fungible Tokens.
You might have heard about NFTs or maybe not, but they are growing immensely right now. I know you are going through a lot of confusion and questions about Non-Fungible Tokens.
That is why I have made an easy-to-understand guide on non-fungible tokens. This guide includes everything you need to know about NFTs with examples.
It will include various topics.
What Is A Non-Fungible Token?
Non-fungible tokens are digital tokens that are unique and can’t be replaced with another. An NFT could be a code, a song, a painting, a picture, or anything unique and one-of-a-kind thing.
The non-fungible tokens work on a popular blockchain called Ethereum. Ethereum blockchain ledger attaches a unique digital token with digital art, which represents its real owner. We can easily buy and sell NFTs via various Ethereum NFT marketplaces.
Let’s understand NFT with an illustration.
Every singer writes, composes, and sings songs in a unique way. Each song he/she creates is different and can’t be substituted with another similar song.
A singer can also use his songs as NFTs because they are rare and can’t be replaced by other songs.
NFTs help artists to sell their art without the need of a middle man or a broker. Artists can sell their art online without even being physically present.
It makes the transaction faster and transparent.
Finally, we understood what non-fungible tokens are. Let’s move on to how NFT works.
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How Does NFT Work?
The working of NFT is quite simple. Non-fungible tokens are similar to cryptocurrency. The only difference is that the NFTs are non-fungible, whereas cryptocurrencies are fungible. It means that NFTs cannot be replaced by anything else even if something has equal value.
As I mentioned earlier, non-fungible tokens are stored in the Ethereum blockchain ledger. It attaches unique digital tokens to the collectibles or art every time they enter the Ethereum blockchain ledger.
Tokens contain some critical information about digital art. The information includes the history of the NFT. Such as who owns this asset, when it was sold, price, etc.
The digital tokens are also known as certification of ownership. If someone has these tokens, it means he /she owns that particular art or collectible.
To buy or sell NFTs, you must list them on Ethereum based NFT marketplaces.
Is NFT Different From Cryptocurrency?
The only factor which makes NFT different from cryptocurrency is its replaceability.
Fungible tokens are those tokens that are not only one and can be interchanged with another. But, non-fungible tokens are those which are unique and can’t be exchanged.
Let’s understand the difference between fungible and non-fungible tokens with the given table.
|Fungible Tokens||Non-Fungible Tokens|
|Interchangeability||These types of tokens are interchangeable because they can be replaced with another.||These types of tokens are not interchangeable. They can’t be replaced because they are unique.|
|Value Transfer||Its value depends on the number of tokens in the ownership of a person.||Its value depends on the unique asset stored in the blockchain.|
|Divisibility||These kinds of tokens can be divided into smaller parts.||NFTs can’t be divided into smaller parts because of the unique asset present in the ledger.|
|Token standards||It uses the ERC-20 standard.||It depends on the ERC-721 standard.|
Now, I hope the difference between NFTs and cryptocurrency is cleared.
To sum up, NFTs are non-fungible because they are unique and can’t be replaced with another. Besides, cryptocurrencies are fungible, which means we can mine multiple currencies without any such restrictions.
How to Make Money With NFT?
If you are an artist, then you can easily make money with NFT. There are several Ethereum based platforms that allow us to sell rare art online in one go.
The art could be a code, a video, a song, a picture, a painting, an in-video game item, and anything valuable. However, the item you’re planning to sell should possess something unique. It should lure more investors.
You will need to create an account and list your digital art on the platform. Besides, you will also have to set a price for the particular art. After that, the interested buyers will be able to place bids, and the highest bidder will get the NFT.
[You Should Also Read: 10 Ways to earn money using a Smartphone]
Popular NFT Marketplaces
Recently, popular Indian cryptocurrency exchange WazirX announced that it will become India’s first NFT marketplace.
I’m listing the popular marketplaces to buy and sell non-fungible tokens.
- Open SEA: It is a peer-to-peer platform that allows us to sell rare digital items and collectible antiques. To sell your digital art, you will need to create an account and list your collectibles or art.
- Rarible: Rarible is an open marketplace that offers artists and investors to buy and sell NFTs quickly.
- Foundation: It allows us to buy and sell NFTs online. It is one of the most popular NFT marketplaces. However, in order to sell unique digital items, artists must get upvotes or invite from fellow artists on the platform.
If you are planning to buy a digital asset from any platform. I will advise you to research before investing. These platforms host thousands of creators. So, make sure to check before investing your hard-earned money in NFTs on these platforms.
5 Popular And High Selling Non-Fungible Tokens
Now, let’s have a look at 5 popular and high-selling NFTs.
- Everydays: The First 5000 Days: This is the most expensive NFT artwork in the NFT market. An artist named Beeple has created this magnificent art. He combined nearly 5000 images of his life in a single frame. This was sold for $69.3 million.
- CryptoPunk #3100: CryptoPunk #3100 is the second most expensive digital art in the market. It was sold for around $7.58 million this year.
CryptoPunk #7804: It was auctioned for $7.57 million. The Punk #7804 is another Alien. One of the reasons behind his high value was his shades, pipe, and cap.
- Crossroads: Crossroads is another most expensive NFT. This is an artwork by a famous artist called Beeple. Beeple is also known for his Everydays: the First 5000 Days NFT. Crossroads was valued at $6.6 million.
- The First Tweet: The First Tweet NFT was sold for $2.9 million. The Twitter CEO and founder Jack Dorsey tweeted the first tweet after setting up Twitter back in 2006. That tweet is now a non-fungible token.
Sometimes I think about whether I should invest in Non Fungible Tokens and I know this question comes to your mind as well.
Should You Invest in Non-Fungible Tokens?
This question is quite common because of the rise in the demand for digital assets. One of the biggest risks associated with NFT is its volatility and unpredictable nature.
The NFT market came to light back in 2017. We got introduced to it in early 2021 on the sale of a popular digital art known as Everydays: The First 5000 Days. Before that, we didn’t know about the existence of this market.
Still, we don’t know whether this industry is going to rise or not. We can’t say anything about NFT because we haven’t seen its full potential yet.
Now, if you are thinking of investing in this market, then make sure to work on these points.
- Understand the market properly.
- You should have some prior knowledge about these unique and collectible items.
- Research about NFTs before buying.
- Make your goal clear. Either this will grow immensely or be in the same position after some years.
This is all about everything you need to know about non-fungible tokens. I hope you enjoyed this NFT guide and got a deeper understanding of this industry.
Also, share this guide with cryptocurrency enthusiasts.