In the past years, NFT has exploded out of the ether. But what is NFT crypto exactly? NFTs are digital assets that can sell anything from art and music to taco shells and toilet papers. NFT cryptos are currently taking the digital art and collectables world by storm.
However, whether NFT is worth the money or just a hype, is still a question for many. In this article, we will give you a rundown of what is NFT crypto and why NFTs are deemed so valuable. So, read on to find out the answer to your every question regarding this unique form of representation of digital assets.
What is NFT?
Before we talk about what is NFT crypto, let us look at what is NFT first. NFT is the abbreviated form for non-fungible tokens. It refers to the cryptographic assets on a blockchain with unique identification codes. Additionally, it has metadata that enables them with distinguishing characteristics. However, non-fungible tokens cannot be traded like cryptocurrency. Moreover, they can not be exchanged at equivalency either.
On the other hand, cryptocurrencies are identical to each other. And that makes it possible to use it as a medium for commercial transactions. Additionally, NFTs can be used to represent real-world items like artwork or real estate.
It can also be used to represent individuals’ identities, property rights and more. Tokenising the tangible real-world assets allows the assets to be bought, sold and traded more efficiently. And it also reduces the probability of doing any fraudulent activities
What is NFT Crypto?
Coming to the point of what is NFT crypto, while NFTs are non-fungible, cryptos are fungible. Just like physical money, cryptocurrencies can be traded or exchanged for one another. For instance, one bitcoin is always equal in value to another bitcoin. As such, the fungibility characteristic of cryptocurrency makes it suitable for use as a secure medium of transaction in the digital economy.
NFT, when linked with crypto, shifts the paradigm by making each token unique and irreplaceable. And that makes it almost impossible for non-fungibles to be equal to one another. NFT cryptos are digital representations of your assets, which are also extensible.
Also, NFT contains ownership details for easy identification and transfer between token holders. Most NFTs at a very high level are part of the Ethereum blockchain. While Ethereum is a type of cryptocurrency, its blockchain is able to support the NFTs.
What is NFT Used for?
Now that we know what is NFT crypto, let’s find out what is NFT used for. If you are interested in crypto trading or like to collect art, using NFT is the best way to go. NFT is also used in some other significant industries. Some of the uses of NFT are:
Digital Content
One of the most significant uses of NFT today is in digital content. NFTs power a creator economy where creators have ownership of the content even over different platforms. NFTs also enhance the profits of digital content creators.
Gaming Items
Game developers have been showing a lot of interest in NFTs recently. NFTs come with a lot of benefits for the gamer community. Gamers can buy their favourite items. And when they are done using it, they can recoup the money by selling the item.
Investment & Collaterals
Both decentralised finance and NFT share the same infrastructure. Decentralised finance applications let you borrow money by using collateral. However, NFT and decentralised finance work together to explore using NFT as collateral instead.
Name of Domains
You can get an easier to remember the name for your domain with the help of NFTs. Similar to how a website domain name works, NFTs make your IP address more memorable and valuable. NFTs can pick names based on length and relevance.
Fashion Industry
Many of the problematic issues in the fashion industry can be addressed through the use of NFTs. To begin with, having a digital record of authenticity helps with issues such as counterfeit goods. With NFTs, luxury items can have an attached token that would claim their authenticity.
Likewise, a non-fungible token could show crucial data about the origins of an item. For instance, you can check the materials used, where they were sourced from and how far the item has travelled. All in all, NFTs can help people make ethical decisions regarding the pressing issues of fashion and sustainability.
How does NFT Crypto Work?
Since we now know what is NFT crypto and what it’s used for, the question remains about how it works. As we know, most of the NFTs are created and stored on the Ethereum network. As anyone can review the blockchain, ownership of NFT can be easily traced and verified. However, the person that owns the token can remain anonymous.
Digital goods such as artwork, game items, videos from broadcasts etc., can be tokenised and minted. Usually, the copyrights of the NFT might not come with the purchase. It is kind of similar to how buying a limited edition print doesn’t necessarily grant you exclusive rights to the image. However, that is not always the case.
With the advancement of technology, NFTs can have many more potential applications that go beyond the digital world. For instance, in the near future, universities could issue NFTs to students for the degree they earn. This would make it easy for an employer to verify the applicant’s resume. Additionally, concerts and rock fests could use NFTs to sell and track event tickets. And it could potentially cut down on resale fraud.
Why NFTs are Valuable?
Knowing ‘what is NFT crypto’ can give us some idea as to why NFTs are valuable. Essentially, a non-fungible token is the certificate of ownership for a digital asset. The value of NFT comes from the collectability of the asset as well as its potential future sale value.
As we have mentioned already, NFTs can be sold and traded. Sometimes, NFT digital artwork has been sold for tens of millions of dollars. So to simply say they are popular could be an undersell. On top of that, in the first half of the year 2021, NFT sales hit around $2.5 billion.
But what exactly gives an NFT value? Simply put, it is the consumer interest that drives the value of an NFT, just like the pieces in our hypothetical art collection. Also, the rarity and base of interested consumers influence their worth, just like trading cards. However, an object or image being NFT doesn’t prevent it from being freely shared on the internet. Regardless, the ownership of the asset is clearly viable through blockchain.
Non-fungible tokens are the evolved concept of cryptocurrency. One of the most obvious benefits of NFTs is market efficiency. That is because the conversion of physical assets into digital ones streamlines the process.
And it also removes the need for intermediaries and allows the owner to connect directly with the audience. Not to mention, NFTs are excellent for identity management. And that can help individual passports to be converted into NFTs with unique characteristics. It will further streamline the entry and exit process for jurisdictions.
How much is the Average Cost of NFT?
Since NFTs are minted on different blockchains, their prices vary from one to another. In some cases, even when NFTs are on the same blockchain, the cost of the NFTs might still vary. The reason behind this could be a lot of factors, including the quality of project, data size, and transaction speed among other things. Likewise, the average cost of an NFT is further determined by rarity. It basically means the price of an NFT can scale up on the basis of the law of scarcity.
As such, the prices of minting an NFT could range from as low as £1 to as high as £900. Sometimes the prices can go even higher. An NFT themed “Every day- The First 5000 Days” was the highest priced NFT to be ever sold. It was priced at $69.3 million. In short, the average cost of NFT varies between different marketplaces.
Due to a lot of on-chain activities, the price of NFTs is usually on the high side during weekdays. That means the cost of minting an NFT is relatively cheaper during the weekend.
Moreover, it is important to consider some things before minting an NFT. Before minting an NFT, do diligent findings of computational process and base blockchain. It is crucial, as these factors determine the price and volatility of an NFT.
How to Mint NFTs?
Minting NFTs is a great way for artists to monetise their work. While selling digital files is nothing new, NFT ensures the ability to prove yourself as the original creator. NFTs being recorded on blockchain makes it possible for the creator to be recorded on the public ledger.
So, here is how you can mint NFT in different marketplaces. For instance, let’s say you took a picture of a French bulldog wearing sunglasses, and now you want to mint it on the OpenSea, the largest marketplace for NFTs.
1. Get Your Wallet Connected
Open a crypto account to get started and connect it to your desirable NFT marketplace. On the marketplace, you will see the wallet icon or similar prompt to connect your wallet and create a profile. You can also connect your wallet using a QR code scanner on your smartphone. Make sure to personalise your profile as much as possible by inserting links to your social media and web pages.
Also, specify which cryptos you will accept as payment if and when someone purchases your NFT.
2. Create Your First Item
On the homepage of the marketplace, you will find the prompt to upload your digital item and create your first NFT. You can also include a description of your work and any other external link for more information. After setting up your first item, you can see how much you will be paid in royalties if your NFT gets sold again later on.
3. Keep Your Wallet Funded
After you have minted your NFT, the network will have to do some computing to sell it. And this transaction will cost some money known as “gas fee”. So make sure to purchase some Ethereum and deposit it into your wallet to make your sales. Besides, there are some marketplaces that allow you to purchase crypto directly.
4. List NFTs for Sale
Click on the sell button after minting your NFT to sell it on the open market. You have to specify the details and type of the sale in the next stage. Also, the marketplace might disclose any fees for selling. After you have completed the listing, the marketplace will calculate the gas fee based on the activity of cryptocurrency at that time. And then, the marketplace will request payment from your crypto wallet.
Here’s a handy video to help you get started.
Pros & Cons of NFT Crypto
By now, you understand ‘what is NFT crypto’ and the reasons behind its popularity. However, with all good things, there are some downsides that come with it. Likewise, there are potential pros and cons with NFT crypto. Let’s look at some of it.
Pros of NFT Crypto
As discussed, the value of an NFT is based entirely on what someone else is willing to pay for it. However, the potential use of non-fungible tokens in different aspects of daily lives is manifold. Some prominent advantages of NFT include:
- Artists get ownership of their digital assets with NFT crypto. It has made a significant income stream possible for creators of memes and GIFs.
- Non-fungible tokens are unique and collectable. On top of that, NFTs provide an extra layer of legitimacy to collectable content.
- NFTs are immutable because they can never be altered, replaced or erased.
- Non-fungible tokens can include smart contracts. In essence, they can store instructions that are executed when certain conditions are met.
Cons of NFT Crypto
Much like the advantages, there are some drawbacks as to how NFT crypto works. However, if you know what is NFT crypto, then you know it is fairly a new technology. As such, with every new technology, some potential downsides are bound to appear. Some disadvantages of NFT include –
Speculative Market
Whether there’s any true underlying value of NFT or not is still a matter of question. Since it’s a fairly new market, there are several speculations about whether NFT can be a long term investment.
Digital Assets are Copiable
Owning an NFT as a digital asset doesn’t mean that there is no other copy of it. An art piece can be copied and pasted, while a video can be posted on several websites. It basically means NFT gives you the token of authenticity but not the entire control of the asset.
Environmental Cost
It is a matter of debate whether assets based on blockchains are sustainable. Blockchain-based cryptocurrencies take a lot of computing power to enter records into the blockchain. Hence, a lot has been said about the environmental impact of crypto-based NFT currency.
Conclusions
Now that you have an understanding of what NFT cryptos are, you can somewhat realise the potential applications of NFT in the real world. However, it’s difficult to say whether NFT will be widely used in the future. Because the technology is in its relative infancy.
However, the most exciting possibility for NFT lies in the creation of new markets and forms of investments. For instance, NFT can fractionise physical assets like real estate. And that makes it much easier to divide digital real estate assets among multiple owners. With the sophistication and integration of NFT into financial infrastructure, anything will be possible in the near future.
Are you interested in learning more about cryptocurrency and blockchain technology? Then enrol into our Cryptocurrency Trading and ICO Investment Masterclass today. The course will help you to be a skilled individual and be a part of the emerging crypto industries. Thus, understanding the key principles of NFT crypto could benefit your career.
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