What is NFT? How Does it Work?
NFT is the term that has created a storm in the whole crypto market space; from investors to techies, NFT has become the favorite topic of the whole community.
Civilians also showed interest in NFTs and tried earning money from NFT.
Some become a millionaire with the NFT opportunity, while others are still struggling to sell their NFTs and couldn’t figure out how they can earn money from NFTs.
I have been active in the crypto and NFT market space for the last three years and have learned so much about the NFT market space.
Here in this article, I will try to explain the term NFT in simple words so that anyone can understand what’s going on over here.
Firstly, we will understand the meaning of NFT and what it is all about. How does the concept of NFT take place in this crypto market space?
Meaning of NFT:
The full form of NFT is NON-FUNGIBLE TOKEN.
Firstly, let’s understand what the meaning of non-fungible is.
Non-fungible item means an irreplaceable item. Any item that can’t be replaceable for another item or that holds the same value is a non-fungible item.
For example, the art of Monalisa is a non-fungible item because it can’t be replaced by anything else; there is only one original piece of Monalisa.
On my 18th birthday, my brother gifted me a unique wristwatch that is very close to my heart, and I love that wristwatch more than anything, which is why that wristwatch became a non-fungible item for me.
Suppose one of my friends asks me to lend that wristwatch to him for a party, and then the next day he loses that wristwatch and gives me the same wristwatch with the same value and same looks/appearance, but it doesn’t have the special attachment and feelings I have for that old wristwatch which is why that old wristwatch becomes a non-fungible item for me.
That is what Non-fungible stands for in NFT.
Now, let’s comprehend what is the meaning of token in NFT
A token is something that proves your ownership of any artwork on the public ledger of the blockchain.
When you create and mint an NFT on any NFT marketplace, it generates the token id for your NFT artwork, proving the ownership of that artwork on the blockchain’s public ledger.
NFT Means the cryptographic token generated that exists on the blockchain, and it can not be duplicated; these tokens can be anything such as images, gifs, videos, write-ups, etc.
How does NFT Work?
Now, let’s understand how the term NFT works…
NFT works on Blockchain Technology to eliminate all the intermediaries and connect the audience directly to the Artist.
There are so many digital asset management platforms in the market, such as Opensea, Rarible, Looksrare, Superrare, Niftygateway, etc.
Understand this way when you prefer to shop online you go to the popular e-commerce platfroms such as Amazon and Flipkart, Right?
Opensea, Rarible, Looksrare, Superrare, Niftygateways, etc., are the same as e-commerce platforms. But these platforms are not used for physical assets. These platforms are used for digital assets called NFTs.
And these platforms are known as NFT Marketplaces.
The majority of the NFTs exist on the Ethereum blockchain, while few of the NFTs exist on another blockchain, such as Cardano, Polygon, Solana, Binance, etc.
The data contained in NFTs is unique to each token.
Since their value is based entirely on supply and demand market forces, they can be bought and sold just like any other tangible form of art.
The unique information stored by NFTs makes it simple to confirm the rightful owner of a token and its subsequent transfer.
NFTs are Used for:
In addition to those with interest in crypto-trading, art collectors are also common NFT users. Besides that, it can be used in a variety of other ways, including:
In today’s world, NFTs shine brightest in the realm of digital media. By fueling a creator economy in which creators transfer ownership of their material to the platforms they use for promotion, NFTs increase the income of content creators.
The NFT has been the focus of several game developers. There are many ways in which players might profit from NFTs. You can usually customize your avatar in an online game by purchasing accessories, but that’s usually where it ends. You can get your money back if you buy NFTs and then resell them when you’re done with them.
Investments and Collaterals:
The technology behind NFT and Defi (Decentralized Finance) is identical. Loans secured by digital currency (Defi) applications are possible. Together, NFT and Defi investigate the possibility of using NFTs as collateral.
Your domain can now have a shorter, more memorable name, thanks to NFTs. Like a domain name for a website, this makes the associated IP address easier to remember and more valuable.
Snoop Dogg, Shawn Mendes, and Jack Dorsey are just a few of the celebrities who have shown an interest in the NFT by publishing and selling their own personal experiences and pieces of artwork in the form of securitized NFTs.