What is NFT: Non-fungible Tokens and Their Purpose

The digital asset industry was able to begin with the introduction of bitcoin in the first decade of the 21st century. Bitcoin would inspire more creators like Beeple to step into the digital asset sector and present everything from digital art to new tokens and avatars.

Auction house firms like Christie’s would start to dive into the cryptopunk movement, and learn more about the ethereum blockchain as well as NFT art.

A digital file can have tremendous value depending on various factors and how it is presented in an NFT market.

But what is an NFT? What does NBA top shot and Nyan Cat and trading cards have to do with the NFT craze? How can you get your own NFT? When thinking about anything from Cryptokitties to digital collectibles, it is best to start with the fundamentals.

Whether it is a first tweet, understanding digital items, ERC, or the general digital work ecosystem and its relation to eth and NFT artwork, it helps to define the concept of NFT.

A non-fungible token (NFT) is a unique digital asset that is created through the blockchain technology. As its name suggests, an NFT remains irreplaceable and does not have another token that is identical to it.

This sets NFTs apart from cryptocurrency, which works as a 1:1 exchange of identical tokens of the same value. Instead, an NFT acts as an asset’s unique footprint on the blockchain and certifies that asset’s ownership for whoever holds the NFT.

This not only makes NFTs unique in their identity, but also gives them a distinction in their overall function. In order to be tied to an asset that may or may not be present on the blockchain, NFT’s have distinct coding and metadata on the backend. This signifies that asset’s representation in the form of an NFT.

To help you learn what is NFT and exactly what it does, here’s a lowdown on these non-fungible tokens and their overall functionality.

Key Points

  • NFTs are one of a kind digital tokens that are completely unique in their identity.
  • Typically, only one NFT is tied to a particular asset. But in some cases, multiple NFTs are created to signify the ownership of the same asset.
  • The most popular NFT meaning is tied to their representation of different external assets on the blockchain.
  • NFTs have metadata that outlines their relation to the asset that they are representing on the blockchain.
  • NFTs have unique value, with the price often being speculative and set by the seller.
  • NFTs can be bought, sold, and transferred in the same way that typical cryptocurrency is handled.

What is NFT: How Do Non-Fungible Tokens Work?

An NFT is a unique digital asset that can be created over multiple blockchain networks. In its simplest form, an NFT represents the ownership of a digital or physical asset through information encoded into its metadata. Whoever holds the NFT is recognized as the owner of the related asset.

The assets that can be tied to an NFT include but are not limited to:

  • Digital artwork
  • Physical artworks
  • Videos
  • Memes
  • Social media posts

While NFTs can be tied to assets such as real estate, transportation, and jewelry, the process for representing these physical assets on the blockchain is complicated and needs more work at the moment.

Since NFTs are based on the blockchain technology, they are usually created across popular blockchain networks. One of the most popular networks for creating NFTs is Ethereum, which has several blockchains built on top with different brand names.

If you want to tie your property to an NFT, you can visit one such blockchain network or a marketplace that is powered by them. From there, you can enter all the information that you need in order to tie your property to an NFT. Afterwards, you can sell the NFT to transfer the ownership of said asset to the new owner.

In layman’s terms, this makes NFT meaning to become proof of ownership. This simple perspective remains accurate in its definition and signifies the main purpose of holding NFTs, which is to represent someone’s proof of ownership for an asset.

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NFT Collectibles for Artworks

In the past few months, NFTs have evolved into the representation of collectibles that are tied to digital artworks, particularly in the form of the Bored Ape Yacht Club (BAYC) collection. These colorful ape characters are valued at hundreds of thousands of dollars at their peak, with each NFT representing a totally unique artwork of a fictional cartoon character.

But when you learn what is NFT really capable of doing on the blockchain, this becomes just one of the many use cases that these digital assets can deliver to different groups of audiences. With that being said, the use of NFTs to collect art has become the most popular application of these unique tokens of digital ownership.

Some marketplaces specialize in selling these digital artworks, which often also includes the BAYC collection that has become synonymous with NFTs. This has opened doors for a variety of digital artists to tie value to their works and sell them to people who want to hold ownership over them.

While the NFT of a digital artwork is often exclusive in its ownership rights, the extent of transferring these rights completely depends upon the seller. For instance, some sellers may only give you a part of the ownership or the license to distribute their artwork while they sell it to other collectors as well. Whereas, other sellers may transfer complete copyright privileges over to you.

This also applies to minting NFTs physical artwork such as paintings and statues. Before selling them online, some sellers may attribute their whole ownership to one NFT. On the other hand, some offerings may split their ownership into multiple shares and sell identical NFTs to interested buyers. There have been numerous attempts to turn real-world art into NFTs, but they have not caught on mainstream attention in the same way that digital artworks have.

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NFT Meaning For Social Media Posts

Some of the NFTs with the highest value are tied to social media posts, specifically those made by celebrities or public figures. While these NFTs don’t give the owner the rights to edit or delete the post in question, it does provide them with an NFT that is officially tied to the social media post, along with the digital signature of the creator in the metadata. This is just another depiction of what is NFT evolving to be in terms of serving different purposes to various groups of people.

Perhaps the biggest example of an NFT’s sale of a social media post is related to the first public tweet made on Twitter.com: When Twitter co-founder and former CEO Jack Dorsey decided to sell the tweet in question in March 2021, the tweet’s NFT sold for a mindblowing $2.9 million at the time.

But the viability of NFTs in turning public posts into a semblance of ownership was tested in April 2022. The tweet went on sale for $48 million by its new NFT holder, only to get its highest bid for a mere $280. This dropped Dorsey’s tweet NFT value by 99 percent.

While many classic memes also sold their NFTs, their value at the time had been purely speculative and doesn’t promise to hold its own for the future. This signifies that what is NFT able to do for its users is still a work in progress. At the time of writing, there is little to no interest in buying tweets or other social media posts as NFTs. Instead, the attention has largely turned to digital artworks.

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NFT for Visual Media: Videos and Music as Unique Blockchain Assets

Technically, the use of videos and music as NFTs is a use case that has a lot of promise behind it. But despite flagship NFT releases such as the recent Lord of the Rings NFT bundle by Warner Bros., the use of videos and music in NFT has not gained as much traction as digital artwork.

It is mostly because buying digital artwork often provides you with complete ownership rights of the asset in question, while going after a video or music often has you share the ownership with other people.

With that being said, NFTs in music are still picking up steam. There is no telling where they might end up. But given that NFTs are still in their infancy, this trial and error approach can work in favor of those who want to take an active part in developing this use case for the future.

This can be a beneficial approach for collectors that don’t mind paying for their association with an otherwise shareable asset. But if you want an NFT that is uniquely yours and stays in line with the original principles of NFT meaning, you may want to go with NFTs that share their sole ownership with the sale of the NFT itself.

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How to Buy and Sell NFTs?

After learning what is NFT, you might want to buy or sell your very own unique tokens over the blockchain. In order to do so, you can choose one of the popular NFT marketplaces to begin transforming your asset into an NFT.

These platforms include but are not limited to:

At the time of writing, the easiest asset to sell through NFT marketplaces comes in the form of digital artworks. By going to any of the marketplaces mentioned above, you can create your profile and sell any original artworks there.

When you are looking to buy NFTs, you can also go to one of these marketplaces or any other platforms that operate with the same approach. This allows you to browse through several NFTs, and choose one that holds your interest. In turn, you can grow your NFT collection according to your budget and preferences.

However, it is important to learn that most NFT exchanges happen via cryptocurrency. This means that in order to buy or sell your NFT, you might need a cryptocurrency wallet as well as a cryptocurrency exchange account. You can get both easily by signing up with a reliable exchange that legally operates within your country.

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NFTs Are Still Evolving, But They Still Offer a Modern Way to Collect Art and Valuables

Once you learn what is NFT and how it works, you can make an informed decision to buy or sell one in light of the information that surrounds these digital assets.

But while you do so, it is important to remember that NFTs are still evolving and carry the risk of loss with them. By keeping this in mind, you can protect your financial wellbeing and only invest those funds in NFT that you can afford to lose.