NFTs for Beginners
NFTs (non-fungible tokens) can be confusing for everyone, especially beginners. Non-fungible tokens are commodities that have been exploding in the past couple of years. Basically, an NFT is a digital asset that is encrypted on the blockchain, allowing for true ownership representation. But what does that mean, and why are so many people investing in NFTs?
First, you need to know that there are fungible and non-fungible assets.
Fungible assets are units that can be traded or exchanged against equal units. If you think about it, fiat money or cryptocurrencies are fungible assets. For instance, one Bitcoin is the same as any other Bitcoin. Same goes for a dollar bill a.
Non-fungible tokens (NFTs), on the other hand, are unique in their singularity. An NFT does not have another corresponding asset as an equal unit. Think of it as a virtual representation of an asset. Each token contains a one-of-a-kind, non-transferable identity to distinguish it from all other tokens.
For more information about NFTs for beginners, have a look at an in-depth read that’s easy to find on our blog – What are NFTs?
What are NFTs about?
NFTs are generally centered around collectibles. Examples include digital artwork, trading cards, in-game items, music, virtual land in metaverses, videos, legal documents, signatures, as well as tokenized real-world assets, which can literally be anything from cars to sneakers.
Some will say that you can freely copy or download anything digital, as many times as you like. That is true, but not the same can be said about ownership. NFTs grant you undisputed ownership.
How do NFTs Work?
To provide a brief yet comprehensive explanation – NFTs confirm an asset’s ownership by recording the details in a digital ledger blockchain network. As blockchain is public and the data is stored on computers across the web, it’s impossible to lose or destroy the details.
You may also want to know that most NFTs exist on the Ethereum blockchain.
How are NFTs Created?
NFTs are created as a result of the process called “minting”. The majority of NFT marketplaces allow you to mint NFTs, but there also are special NFT minting sites.
How do I mint an NFT? You simply upload a digital file, fill in some details, and then the platform will create the blockchain encryption for the file – ensuring true ownership. Interestingly, most digital files can be turned into NFTs, including images, videos, and GIFs.
What are the Pros?
NFTs are a wonderful showcase of what blockchain technology can achieve. Just think about it. Digital encryption of both physical and digital assets in the form of NFTs clearly reinvents the game for a number of reasons:
- Tokenized NFTs asset ownership can be easily and securely transferred between people all over the world.
- NFTs ownership benefits from high security and transparency due to blockchain encryption.
- Can be an effective way for organizations and individuals to manage sensitive data and records in a fast and secure way.
The technology for NFTs was created already in the mid-2010s. However, with recent advancements, nowadays NFTs are predicted to flood the mainstream and disrupt several industries in the process.
So, if you’re asking yourself why NFTs exist, we say that they’ll greatly improve market efficiency by blurring the lines. Let us explain: NFTs represent digital or physical assets encrypted on a blockchain, which removes the need for intermediaries from the equation, thus allowing artists and creators to connect directly with their audiences.
Another reason is that each NFT has unique properties, which is exactly what identity management needs. If we’re talking about tokenization of artwork, that’s one thing. But if we think about NFTs as digital passports, that opens a different side of the token.
Finally, NTFs have created new opportunities in the market. And there’s no growth without innovation.
What’s Next for the NFT Market?
The NFT market rose in 2020, exploded in 2021… and continues to break new ground in 2022. The top collections have been able to retain their high value despite the fact that we are currently having a bear crypto market. NFTs and crypto are connected as both are blockchain encrypted.
If you question the potential of NFTs, here is some food for thought: as the world is driven by innovation, NFTs have all the power to shift our view of artwork and collectible assets in general, as well as how we buy and store them.
Even the world famous museums have been wasting no time in embracing NFTs. Last summer, the State Hermitage Museum auctioned a limited collection of NFTs.
NFTs are a new art form and have all the potential to be included in the historical-philosophical context.
NFTs may not be for everyone. But they are already bringing a lot of opportunities to investors, artists, creators and businesses.
What is your favourite NFT collection from this year? Join the debate in our ever-growing Coinmetro community on Discord and Telegram and let us know what you think! To begin your trading and investing journey today, take action now and sign up to our platform in just a few steps.