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What is a non-fungible token (NFT)? Explaining the internet's latest craze

WION logo WION 16-12-2021 wionnewsweb@gmail.com (Wion Web Team)
a person in a dark room © Provided by WION

Experts estimate that within five years, digital art will have surpassed traditional art markets.

Both Coinbase and Sotheby's, an auction house that has been functioning since 1744, announced this month that they will be creating NFT marketplaces.

Nonfungible tokens, or NFTs, are one-of-a-kind assets that can't be replaced, and they're validated and stored using blockchain technology.

They can include everything from music to a website address, but digital artwork is the current craze. 

What exactly is a Non-Fungible Token (NFT)?

A Non-Fungible Token (NFT) is a one-of-a-kind digital token that is permanently linked to a piece and is encrypted with the artist's signature. It validates the piece's ownership and authenticity.

It's a form of digital asset that can be used to represent real-world artefacts like art, music, video, and in-game stuff.

They're frequently encoded with the same software as many other cryptos and are bought and sold online, often with cryptocurrency.

For example, money is fungible, which means that one rupee can be exchanged for another.

By definition, a non-fungible token is not comparable to another non-fungible token.

This means that each NFT is either one-of-a-kind or part of a very limited run, and each has its own unique code. 

What's the difference between a non-fungible token (NFT) and a cryptocurrency?

Fungible assets, such as currency notes, can be easily interchanged.

Cryptocurrencies designed to operate as currencies, such as bitcoin, are fungible, which means that any two bitcoins are similar and thus interchangeable.

Unlike bitcoin and other cryptocurrencies, NFT is a crypto asset that exists on blockchains (cryptographic digital ledgers), but each token is absolutely unique.

It's great for things like digital art certification.

Watch | What are non-fungible tokens?

What do non-fungible tokens (NFT) look like?

The majority of NFTs incorporate digital artwork in the form of images, videos, GIFs, and music.

In theory, anything digital can be converted to an NFT.

How to start buying NFTs? 

NFTs are now mostly traded via 'drops,' or timed online sales by blockchain-backed marketplaces such as Nifty Gateway, Opensea, and Rarible.

If you're interested in starting your own NFT collection, you'll need the following items:

To begin with, you'll need a digital wallet that can hold both NFTs and cryptocurrencies.

Depending on what currency your NFT provider takes, you'll probably need to buy some cryptocurrency, such as Ether.

With Coinbase, Kraken, eToro, and even PayPal and Robinhood, you can now buy cryptocurrency with a credit card.

After that, you'll be able to transfer it from the exchange to your preferred wallet.

When researching your alternatives, keep fees in mind.

When you acquire crypto, most exchanges charge at least a portion of your transaction. 

Why would I want to own one?

There are numerous reasons why someone might wish to purchase an NFT.

Because NFTs are considered collector's objects, emotional value may be a factor for some.

Others regard them as a potential investment opportunity, comparable to cryptocurrencies, because their value may rise.

Who was the first to invent the NFT?

On May 3rd, 2014, the history of NFTs and the guy who invented them, Kevin McCoy, began.

He created "Quantum," a non-fungible token, long before the crypto art market exploded.

Quantum is a pixelated image of an octagon filled with shapes that share the same centre, with larger shapes surrounding smaller ones and hypnotically pulsing in brilliant hues.

The one-of-a-kind "Quantum" art project (2014-2021) is currently for sale for $7 million. 

(With inputs from agencies)

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