NFT for Beginners (a breakdown). NFTs are the latest buzz right now. Look through the internet, and you’ll find hundreds of people trying to sell their art as one NFT or the other – and some of them even sell for pretty high prices.
It’s “NFT this,” “NFT that” wherever you look, and NFTs are an awesome invention that could make you money. A friend once tried creating an NFT, but he wanted to ask some questions about them. So, let’s take a minute to understand what NFTs are and how they work.
What Is An NFT?
An NFT stands for “non-fungible token.” NFTs can be digital representations of pretty much anything – art, your favorite artist’s new track, even a picture of yourself!
Yeah, I still don’t get what you mean.
Right, sorry. When something is “non-fungible,” it is unique, not divisible, and can’t be traded for something else directly. Here’s how the whole “fungible” thing works:
- Money is fungible. If I borrow $100 from you today, I could pay you back with five $20 notes – or ten notes of $10, or twenty notes of $5 each. Eventually, you get $100!
- Bitcoin is also fungible. You can trade one Bitcoin for another Bitcoin, and you’ll have the same value.
- However, an NFT isn’t fungible. If you trade one NFT for another, you’ll have something entirely different.
NFTs are unique and one-of-a-kind, so they each represent something that can’t be copied or divided. No two NFTs are ever the same. So, trading one NFT for another is impossible.
How do NFTs work exactly?
To begin with, all NFTs are minted and built on blockchains. We all know what a blockchain is – a network of computers that stores information and allows people to send value.
Fun Fact: Most NFTs are built on the Ethereum blockchain. But, other blockchains support them, too.
Here are some interesting things about NFTs:
- NFTs are created – or “minted” – from physical objects. So, you can have an NFT that shows art, a video, your favorite artist’s song, etc.
- Basically, NFTs are like physical items that we all collect. But, instead of getting an actual painting, you get a digital file instead with the painting’s details.
- Today, most NFTs are used to represent art. All over the world, artists are using NFTs to sell their work – and they’re making a boatload of money off this!
But Why Do I Need To Buy Art As An Nft When I Can Just Save It?
Well, this is the interesting part. When artists sell their NFTs online, they show you a picture of what they’re selling as well as a link for you to go buy it.
Now, you could decide to just save the image on your computer, frame it, then hang it on your wall. But, that image still doesn’t belong to you. Anyone can go online to find a picture of the Mona Lisa and frame it. But, they don’t own it.
This is what NFTs provide – rights of ownership. Like we said earlier, when you buy an NFT, you get a digital file. This file contains information about the NFT and a confirmation that you’re the new owner.
So, anyone can see a piece of art as an NFT and save it. But, none of them actually owns it. Only the person who buys the NFT is confirmed as its owner. This is what most people pay big bucks for – ownership rights.
How Do NFTs Differ From Regular Cryptocurrencies?
You might think that NFTs are a form of cryptocurrency. Well, they’re not. Cryptocurrencies and NFTs are built on blockchain, but that’s pretty much the only similarity they have.
Cryptocurrencies are fungible, meaning that they can be traded for each other. Hey, these days, you can even trade Bitcoin for Ethereum and still come out with the same value.
Once you buy an NFT, you can’t trade it for another and arrive at the same value. NFTs are unique, and you can only sell an NFT at a specific price if someone somewhere is willing to buy it.
Not bad. So…
What Are The Benefits of NFTs for Creators?
The biggest benefit of NFTs is that they allow creators to make money.
Today creators face a lot when they want to sell their work. Artists have to sell online, while musicians need to put their work on streaming platforms. If you make videos, you have to go to YouTube. And on, and on.
All of these platforms take pretty huge cuts of your profits. So, you only get a fraction of what you’re owed at the end of the day.
With NFTs, you can make much more money. Just turn your work into an NFT and sell it on a marketplace. These marketplaces charge a fee, but the fees are usually pretty small.
Other benefits of NFTs include:
- NFTs can pay royalties. So, when someone buys your NFT and sells it again, you get a cut.
- NFTs are convenient. All you have to do is put it up online, and you make a sale.
- NFTs also allow you to interact directly with your fans. No middlemen here.
And What DO The NFT Buyers Get?
As for the buyers, the biggest benefit of NFTs is ownership rights. When you buy an NFT, its file on the blockchain shows that you’re the new owner. So, anyone can go online and check to see that it’s yours.
Besides ownership rights, NFTs are also beneficial because:
- They’re transferable. You can sell NFTs that you buy pretty easily
- They’re safe. NFTs are stored on the blockchain, so they’re difficult to hack or steal
- NFTs can also be pretty cheap. The popular NFTs sell for huge figures, but many of them also sell for as low as $20.
- NFTs are open to anyone. As long as you’ve got the money to pay for it, you can own an NFT.
Whoa, that’s Awesome!
So, Just To Go Over Everything.
As a quick summary, remember these points:
- NFTs are unique. No two NFTs are the same, and they can’t be traded for each other.
- Most NFTs are tied to physical items – art, sneakers, even Jack Dorsey’s tweet!
- NFT buyers get benefits like improved revenues, better fan engagement, and royalties
- As an NFT buyer, you’re buying an item that is safe, verifiable, and transferrable.