The Ultimate Guide to Non-Fungible Tokens (NFTs): Understanding, Differences, Benefits, and Future

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NFTs recently have had a rise in popularity in the cryptocurrency world, for someone who is unfamiliar with NFTs I’ve prepared a comprehensive guide on what NFTs are all about, how it affects you and how you can get involved.

NFTs 101: Understanding Non-Fungible Tokens

Non-fungible tokens, also referred to as NFTs, are used to identify ownership and authenticity. They are a type of digital identifier that is one-of-a-kind and cannot be copied or replaced. NFTs, are typically produced using the same kind of coding as cryptocurrencies. These cryptographic assets are based on blockchain technology, to put it simply, they cannot be traded or exchanged in the same manner as other cryptographic assets. Similar to Bitcoin, the term “Non-Fungible Token” (NFT) represents that it cannot be changed or substituted. Both ‘paper money’ and cryptocurrencies can be traded or exchanged for one another because they are both fungible.

Cryptocurrencies vs. NFTs: What’s the Difference and Why Does It Matter?

Understanding NFTs in terms of cryptocurrency and the digital world, it is easier to compare them to “regular” currencies. Most currencies are fungible because you are able to trade or purchase with them. The majority of cryptocurrencies are also fungible, but this is where NFTs are different. The majority of the objects in the physical world, for example cars and houses are nonfungible, they can’t just be swapped out for things of the same kind. In terms of cryptocurrency, tokens are units of value kept on a blockchain. Tokens include digital assets like Bitcoin, Ether, and Dogecoin, but not all tokens are intended to be used as currency. Tokens can be used to represent both tangible and intangible goods.

NFTs have been around since 2014, but they are only now becoming well-known because they are a more and more common way to buy and sell digital art. Many NFTs, at least in the beginning, were digital works that already existed somewhere else in some shape or form, such as videos or securitized versions of digital artwork that was already popular on Instagram.

The Unique Value of NFTs

The individual images, as well as the entire collage of images, are available for free online viewing by anyone. So why do people want to spend millions on something they can just download or take a screenshot of? Since an NFT enables the buyer to retain ownership of the original item. Additionally, it has built-in authentication that serves as ownership proof. Collectors value those “digital bragging rights” almost more than the item itself.

The Rise of NFTs: A Brief History of Non-Fungible Tokens

Just like most cryptocurrencies, NFTs as well had a small start before gaining the popularity it has now. While several smaller projects continued to experiment with the idea of digital items on the blockchain, CryptoPunks is regarded as the first significant body of cryptographic artwork that closely resembles how we see NFTs now.

In October 2017, CryptoKitties was launched, this blockchain game, featured cats that could be adopted, raised, and traded based on their value. The excitement surrounding this game not only made it possible for players to trade them for significant gains, but it also fueled the growth of the NFT sector as a whole. As more people became aware of the crypto market during the COVID-19 pandemic, this resulted in new designers and businesses starting to produce their NFTs with fresh features. Future possibilities these digital files provide are limitless and only limited by our imagination.

Why NFTs Are Taking Over the Digital World: Exploring Their Significance

The majority of the news about non-fungible tokens (NFTs) is making headlines due to the large amounts of money that are being made by digital artists and those investing in their blockchain creations. Because NFTs convert digital art into real assets, digital artworks now resemble physical ones. Because of the blockchain in NFTs, when you purchase an NFT, you become the sole owner of the original artwork. Any duplicates of the original will not have the same value, as mentioned previously, the built-in authentication in purchasing an NFT serves as ownership proof whereas duplicates or screenshots of the original will not have this built-in authentication. But we are left questioning, what is the significance of NFTs?

NFTs can potentially transform multiple industries by replacing deeds, titles, and all documentation proving ownership of assets with NFTs. The most significant benefit of NFTs specifically for creators is the ability to earn a passive income long after a sale. An artist, for example, can create an NFT by using one of their artworks and earn a percentage of the sale price for each subsequent sale of the NFT.

NFTs as investments: The Pros and Cons You Need to Know

Just like any other investment, NFTs come with a risk, the value of an NFT is driven by the demand, but it could also be due to its price. As a result, an NFT can be resold for less than what it was paid for.

From Art to Anything: How NFTs Are Revolutionizing Digital Ownership

NFTs are widely known as a piece of art designed by an artist or creator, but NFTs have also revolutionized different art forms in the music, gaming and sports industries.

There are multiple types of NFTs that fall into various categories, here are a few notable types of NFTs to mention:

PFP (Profile Picture) or avatar NFTs

When most internet users outside the NFT realm think of NFTs, they think of this format. That’s by design, a quick search of ‘NFTs’ on Social Media will generate a wide variety of posts from users with avatars that include Bored Apes, CryptoPunks, Cool Cats, Doodles, and all their offshoots and spin-offs.

Generative Art

Exactly as it sounds, is art created in some way or form by a computer. While most works are generated by a generative algorithm or artificial intelligence (AI), some are created by physical robots as well.

Collectables

Going back to the nostalgia of things, the trading card and memorabilia market did not emerge overnight. Despite a project’s well-documented rise and fall, collectables remain a viable format for NFT projects, particularly when they’re related to already-popular IP.

Photography NFTs

Photography NFTs are becoming increasingly popular. This trend is expected to continue as more established photographers join the trend.

Music NFTs

Most people are aware of the music industry’s failure to provide sustainable ways for independent artists to make a living from their work. While streaming services take the majority of the revenue, musicians suffer. This is where music NFTs can come in handy.

With the various types of NFTs, the opportunities are endless in order to create your own, but you might be wondering, how does one create an NFT?

How to Create Your Own NFT: A Step-by-Step Guide

The concept of creating an NFT may be confusing at first but here’s a step-by-step guide on how to create and mint your very own NFT.

Decide what type of NFT you want to create: As we’ve established, there are plenty of different ways and types to go about creating an NFT. NFTs are often in the form of an image, audio or video file. If you decide to go the simple route, you won’t necessarily need a developer but if it is a more complicated format such as a game then you may need a developer.
Choose an NFT Marketplace: There are numerous NFT marketplaces to choose from when deciding where to mint your NFT. Each NFT marketplace has its own set of advantages and disadvantages for sellers, so do your homework before making a decision. OpenSea, Rarible, and SolSea are three of the most popular NFT marketplaces.
Create a cryptocurrency wallet: When selecting a digital wallet, it is important to consider whether it is compatible with the blockchain and NFT marketplace and the MetaMask browser extension wallet. This wallet is easy to set up and connects to most blockchains used to create and trade NFTs, such as Ethereum and Binance Smart Chain. Other common wallets include Enjin, AlphaWallet, and Trust Wallet.
Purchase cryptocurrency through an exchange: Creating a wallet allows you to purchase cryptocurrency using a reputable exchange, like Binance, Kraken, or Crypto.com. The process is easy and can be done on your smartphone.
Connect your wallet to the NFT platform to begin minting: After you’ve topped up your wallet, you’ll need to link it to the NFT platform where you’ll be creating your digital asset.

When you first hear about NFTs, it may appear overly complicated or impossible to break into the market. It is, however, more attainable than it appears, with some thorough research, diligence, and creativity.

Empowering Independent Artists: How NFTs Are Changing the Art Market

While digital content was essentially duplicable, NFTs enabled numbering and made each work unique. Because of NFTs, digital works can become rare and receive a certificate of authenticity. Digital work can now be sold as an original. NFTs brought a revolution in the art market on three different levels. First, to the digital artists who have finally found a way to be compensated for their efforts. Second, in the art world, art acquisition has become more democratic. Finally, and for the global market, a new parallel market for art collectors and resellers has opened its doors. The NFT art market, which had very little legitimacy until recently, has now grown tremendously.

The Future of NFTs: What to Expect and How to Get Involved

For most people, purchasing an NFT is the first step toward building a digital art collection. Not only that, but owning an NFT is a great way to support artists you admire and, as mentioned previously, can be a very profitable investment.
Discover the World of NFTs
Choosing which NFT to buy is entirely dependent on why you’re investing in an NFT collectible in the first place. If you are an art collector looking to expand your collection, buying an NFT by an artist you admire and want to support is a great way to start. However, if you’re looking to buy an NFT as an investment, keep an eye on which communities are growing the fastest by following major stakeholders on X Corp (formerly Twitter) and checking the stats on OpenSea.

When looking to purchase an NFT, it’s important to keep in mind of the following characteristics:

The Art
The Founders
The Overall Community

Ready to Invest in NFTs? Here’s Your Next Step

As mentioned before, OpenSea, Rarible, and SolSea are three of the most popular NFT marketplaces to buy and mint NFTs. But here are a few things to consider before you purchase that NFT:

Determine why you want to buy an NFT. Are you merely investing, or are you an aspiring collector?
Conduct research on the artist or team responsible for the NFT.
- Are they involved in their community?
- Examine their social media accounts.
- Do they have a large number of active followers?
- Is there a long-term strategy for giving back to their community?
On marketplaces, look for projects with verification badges.
Determine the project’s scarcity.
- Is it possible that your exclusive one-of-a-kind piece of art will be supplemented with hundreds of other comparable assets in the future?
- Investigate how the team ensures the scarcity of their project.
Most importantly, do you enjoy the artwork? Are you satisfied with the piece you purchased at the end of the day?

If you can fulfil the requirements above, you should be ready to buy/invest in your first NFT!