What is a Non-fungible Token (NFT)?

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What is a Non-fungible Token (NFT)?

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What is a Non-fungible Token or NFT?

Created on a blockchain network, a non-fungible token or NFT essentially can represent the unique digital form of any digital or physical item like a music track, an artwork, or even a tweet.

NFTs are non-fungible, meaning that each token is unique in its own way and no NFT is similar to another NFT. In this way, NFTs are different from fungible items which are exchangeable with any other item in their group.

Regular currencies such as the US Dollar or Euro are tangible examples of fungible items. You can easily exchange your $10 bill with your friend as they hold the same value but you cannot exchange your monkey-profile NFT with your friend because each one of them has its own value based on its characteristics and rarity.

Just like conventional currencies, cryptocurrencies are fungible as well. Each unit of the total 21 million bitcoins has the same value and is exchangeable with any other unit.

The non-fungibility of NFTs is the main reason they are being used in different sectors such as entertainment, art, gaming, and real estate to name a few.

How does an NFT work?

NFTs are created or minted on a blockchain system with all their details and ownership information being recorded on the ledger. The transparent nature of blockchain technology allows everyone to be able to see the history of owners who ever owned a specific NFT and verify its validity.

Initially, NFTs were minted on the Ethereum blockchain but as they grew in popularity, various other platforms such as Solana and Cardano started supporting them as well.

A smart contract is usually used to create an NFT which is essentially a piece of code that defines the rules like how an NFT should be created, managed, or transferred. A specific standard called ERC 721 is utilized within the smart contract which “provides basic functionality to track and transfer NFTs”.

Each NFT has a token ID which ensures its uniqueness and non-fungibility which is created once the NFT is minted.

How to create an NFT?

The decentralized and open nature of blockchain technology makes it possible for anyone to be able to create an NFT. However, you may have to pay the transaction fees for the creation of your NFT.

As mentioned before, multiple platforms support NFTs and you can choose any of them as the chosen destination for your NFT. Ethereum, for instance, is the main and most popular blockchain with most NFT collections being created on it, however, the fees you have to pay may be higher than other chains such as Cardano or Solana.

Various NFT marketplaces will provide you with a user-friendly interface to create your own NFT in a few steps. You would need to connect your crypto wallet to be able to pay the fees and to be registered as the owner of the NFT. Read our “What is a Crypto Wallet?” article to learn more about crypto wallets.

You would also need to upload a media file of your NFT. It can be the original file of your soundtrack or the graphic file of your digital artwork or a picture of your physical painting.

After uploading your file and filling in the required information, you will be able to create your NFT by signing the transaction with your wallet and paying its fees.

What is an NFT game?

An NFT game is a blockchain-based video game that offers its in-game assets in the form of NFTs. As a player, you would enjoy a regular video game while keeping true ownership of all the assets you’ll earn or find within the game.

You will also be able to sell or trade your game NFTs with other players or buy NFTs from other players to boost your game.

The Sandbox (SAND) and My Neighbor Alice (ALICE) are two examples of NFT games that allow you to join the world of NFTs while enjoying interesting gameplay.

The 3 most expensive NFTs

Some NFTs, especially the ones falling under the art category, have been sold for whopping numbers. Let’s take a quick look at 3 of the most expensive NFTs ever sold.

1. The Merge

Created by Pak, a well-known digital artist, The Merge was sold for $91.8 million through an open auction on the digital marketplace Nifty Gateway. A total of 28,983 collectors participated in the auction by buying a piece of the artwork.

2. Everydays: The First 5000 Days

Beeple created this piece by collecting all the single pieces he created every day for 13 years non-stop. In 2021, “Everydays: The First 5000 Days” was sold for $69.3 million in a sale conducted by Christie’s.

3. Clock

Pak created Clock to help Julian Assange, the founder of WikiLeaks, a website that published leaked classified information provided by anonymous sources. Assange is sentenced to 175 years of jail time for publishing classified documents in 2010 and Clock was a way for raising the required money for his legal case.

Clock is an online timer and counts the number of days Assange has been in jail.

Where can you buy NFTs?

OpenSea is the largest marketplace where you can browse through a vast collection of NFTs, review their history of ownership and trades, and buy the ones you like.

As mentioned before, NFTs can be created on different blockchains and therefore, you may need to pay for your NFT with different cryptocurrencies based on the platform it was minted on.

Rarible is another NFT marketplace that you can go to for NFT shopping, however, most NFT collections are available on both marketplaces.

Aside from open marketplaces, there are some other platforms that allow you to buy NFTs using your credit or debit card.