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What is NFT and How does NFT work
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What is NFT and How does NFT work

Published On: March 16, 2022

The digital token is used to buy a digital artwork on the internet at a reasonable price and it provides your authority over the purchased artwork.

NFTs are the in-demand currency type like Bitcoin and they are the digital answer to collectibles of today’s world.

Here, you can explore what is NFT and how does it work through this blog.

What is NFT?

NFT stands for a Non-Fungible Token which means it can neither be replaced nor interchangeable as it has unique properties. Following are the general features of NFT

  • NFT is the digital asset: NFT is a digital asset that represents internet collectibles like art, music, and games with an authentic certificate created by blockchain technology that comes under cryptocurrency.
  • Unique Digital Token: NFT can’t be forged or manipulated
  • Exchange: NFT exchanges take place in cryptocurrencies like Bitcoin on special sites.

Cryptopunks is a good example of NFT and it enables you to buy or sell and store 10,000 collectibles with proof-of-ownership.

How does NFT work?

The majority of NFTs lie on the Ethereum cryptocurrency’s blockchain which is a distributed public ledger that records transactions.

They are individual tokens with valuable information stored in them. They will hold a value primarily set by the market and demand and they can be bought and sold like other physical types of art.

The unique data of NFT makes it easy to validate their ownership and the transfer of tokens between owners.

Examples of NFT

The NFT is the new term to people and the few examples are below

  • Domain Names
  • Games
  • A Digital Collectible
  • Sneakers in fashion line
  • Essays

What are the uses of NFT in the modern world?

NFT is useful for people who are interested in Crypto-trading and artwork collection. It is useful for the following purposes for the general people.

  • Digital Content: NFT is a significant factor in digital content creation. Content creators can see their profits enhanced by NFTs as the power a creator economy where creators have the ownership of their content over to the platforms, they use to publicize them.
  • Gaming Items: Game developers shows a lot of interest in NFTs as NFTs can offer benefits to the players. The buyer can buy items for the games and when done with it, they can recoup their money by selling them to others.
  • Investment and Collaterals: NFT and DeFi (Decentralized Finance) share the same infrastructure. DeFi allows you to borrow money by using collateral. NFT and DeFi works together to discover using NFTs as collateral.
  • Domain Names: NFTs are providing domain names with easy-to-remember names and it works similar to a website domain name to make the IP address more memorable and valuable according to the length and relevance.

Some of the popular celebrities namely, Snoop Dogg, Jack Dorsey, and Shawn Mende are showing their interest in NFTs by releasing unique memories and artwork and selling them as safe NFTs.

Use case of NFT in NBA Top Shot

NBA Top Shot is the most popular NFT in today’s era, NBA Top Shot is a partnership firm of Dapper Labs are the makers of the CryptoKitties game and the National Basketball Association (NBA).

The NBA licenses video reels with other content to Dapper Labs for digitizing the footage and making them available for sale to customers.

If they take a famous player’s basketball dunk to make a reel with different angles and digital artwork and make it unique.

If they make a perfect copy of the video, it will be recognizable as a counterfeit. It will generate $230 million in sales as the venture and the company will receive $305 million in funding from a group that includes Michael Jordan and Kevin Durant.

Following are the video reels that have been sold at high prices.

  • LeBron James “Cosmic” Dunk for $208,000
  • Zion Williamson “Holo MMXX” Block for $100,000
  • LeBron James “From the Top” Block for $100,000
  • Steph Curry “Deck the Hoops” Handles for $85,000
  • Giannis Antetokounmpo “Holo MMXX” Dunk for $85,000

The unique NBA memories are minted and released into the marketplace through “pack drops”. The most common sell for only nine dollars but more exclusive packs can sell for more.

Why NFTs are popular?

NFTs are in the era since 2015, but they are experiencing a resurgence thanks to several factors.

First, NFT is becoming normalization and excitement of cryptocurrencies and the underlying blockchain frameworks.

Consumers can take the opportunity to own unique digital content and hold them as a type of investment. Following are the reasons why NFT is becoming popular nowadays.

  • Bitcoin’s insane bull run to 3x all-time highs from 2017
  • The emergence of NBA Top Shot
  • The convoluted monetization structure of digital content (including music and video)
  • The growing digital collectibles market – even in the Covid pandemic
  • Metaverse and Web3 macro-trends.

What are the differences between NFT and other cryptocurrencies?

NFT is using the same kind of programming language as other cryptocurrencies, but it has differed from them in the following aspects.

What are the differences between NFT and other cryptocurrencies?
Other Cryptocurrency NFT
Cryptocurrencies are fungible and they can be traded or exchanged for one another. They are equal in value. NFT acts as a digital signature and makes it impossible for the owners to exchange for equal to one another.
For instance, Bitcoin is always equal to another Bitcoin or one Dollar is always is equal to another one dollar For instance, the last supper is a painting of a kind and it can’t be exchanged with another painting.

Ethernet and NFT

NFT takes advantage of Ethernet blockchain as it has the following reasons.

  • Trading NFTs, will not require peer-to-peer platforms and it has significant cuts as compensation.
  • All Ethereum products will share the same ‘backend’ and make NFTs portable to buy on one product and sell it on another effortlessly.
  • Once a transaction is verified, it’s impossible to manipulate the data to forge the ownership. Ethereum never goes fall which means your tokens will be always available to sell.

How to buy NFTs

NFTs are used for specific advantages among all cryptocurrencies and if you want to buy NFTs, the following things should be considered when purchasing them.

  • You must have a digital wallet that enables you to store your NFTs and cryptocurrencies.
  • Then purchase some cryptocurrency based on the best NFT provider accepts like Ether
  • Now, you can use the platforms like OpenSea, Coinbase, Kraken, PayPal, etc for purchasing cryptocurrencies.
  • Finally, you can move it from the exchange to your wallet of choice.
  • Most of the exchanges charge at least a percentage of your transaction fees when you buy crypto.

Popular NFT Marketplace

If you are ready with your wallet, you can buy NFTs from the popular marketplace as follows

  • Rarible: This is a democratic marketplace that enables artists and creators to issue and sell NFTs and it allows holders to weigh the features like fees and community rules.
  • OpenSea: To start with it, you have to create an account on their official website and browse NFT collections to explore various artists. OpenSea is a well-known platform for a vast collection of rare digital items and collectibles.
  • Foundation: In this platform, artists are required to receive from or send an invitation from fellow creators to post their art. It is exclusively boasting higher-caliber artwork and assuming the demand for NFTs remains at current levels or even increases over time.
The Future of NFT

NFT has improved media exposure and special features for aspiring artists on social media. Jack Dorsey, the CEO, and co-founder of Twitter is tweeted recently with the very first and popular tweet that “just setting up my twttr” and Vignesh Sundaresan, popularly known as “Metakovan” bought 69.3 million dollars of NFT art on Beeple.

With the increasing popularity of NFT, people are now interested to pay hundreds of thousands of dollars for NFT artworks. Here are the factors to prove that the NFT brings futuristic growth in 2022.

  • Crypto moves further into the mainstream
  • Creates new ownership opportunities and a remix of old ones
  • Bigger hacks and bigger ransoms
  • Increasing popularity of stable coins
  • New crypto rules are introduced on the horizon

NFT is representing a more important part of the digital economy in the future for sure.

Bottom Line

NFT (Non-Fungible Token) is the recent trend in the sectors like technology and economics.

It helps the growth of individuals by selling their skills in the global medium.

We hope these NFT factors along with their growth, processing steps, core concepts, uses, and ways to buy are helpful for you in understanding the global economic growth through cryptocurrencies.

NFTs are part of Blockchain technology and if you want to learn NFT processes, enroll in our Blockchain Training in Chennai.

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