REXBOX – Beginner's Guide to NFTs
There are two ways to explain NFTs. The first is concise but lacks depth, while the second provides a more comprehensive understanding. Let's begin with the simpler explanation: NFT stands for non-fungible token. While this is a commonly used term, it doesn't shed much light on what NFTs truly are. Knowing the acronym isn't sufficient for understanding the concept. Hence, we need to elaborate on the hype surrounding these digital assets in a way that even your grandmother would find intriguing.
Isn't calling it a "digital craze" an exaggeration? Not at all. According to NonFungible, NFT sales increased by 131 times within a year of becoming mainstream. For instance, digital artist Mike "Beeple" Winklemann transformed his 5,000 drawings into NFTs, fetching an astonishing sum of $69.3 million when they were sold at Christie's. This isn't merely a trend; it's a genuine craze, a financial frenzy that stealthily infiltrated the crypto market in 2021, culminating in hundreds of millions of dollars in profits. NFTs also represent a unique and appreciative way to recognize the efforts of digital artists and creators.
Now, let's break down "non-fungible token" word by word.
Non-Fungible: This is a sophisticated term for "unique." Unlike bitcoins or US dollars, which can be exchanged for identical units, NFTs are distinct and cannot be interchanged with another NFT while maintaining the same value. They are like trading the Mona Lisa painting for Pink Floyd’s album cover art—both incredible, but entirely different. Most non-fungible tokens are one-of-a-kind or part of a limited edition, each having a unique identifying code. Other non-fungible objects include paintings, movies, signed baseball cards, family recipes, literary works, or even a handmade paper pterodactyl from your school art project. All of these possess unique value, be it sentimental or artistic.
Tokens: At its core, a token represents a virtual certificate of ownership, existing solely in digital form as a registered entry in the blockchain system. Most NFTs are built on the Ethereum blockchain, a popular choice for this purpose. Blockchain tokens are encrypted and can be stored on devices from any part of the world, making stealing NFTs nearly impossible. Tokens play a crucial role in proving ownership, and the unique encoded message stored online enables swift verification of your blockchain entry. This feature makes NFTs a quick way to showcase your financial acumen at social gatherings. Additionally, all transactions involving non-fungible tokens are reflected on the blockchain, providing a digital record accessible to the public. To verify an NFT's authenticity, one can simply check the ETH token ID and contract address in the NFT market database, akin to a digital signature.
What Are NFTs? (The "What is NFT for Dummies" Version): In essence, non-fungible tokens (NFTs) are exclusive digital assets, each being unique or part of a limited collection in the virtual art world. NFTs can encompass various forms like images, photos, songs, video clips, game items, tweets, and more. They can be created by anyone, from the NBA with their NBA Top Shot collection to an individual who made a funny video years ago. NFTs are stored in blockchain systems, allowing you to browse NFT collections and store them in crypto wallets that support their specific standard, similar to keeping physical assets in a vault or on a shelf.
NFT Art: Often labeled as "dumb and ugly," this perspective is subjective and varies from person to person. Some NFT artworks exhibit exceptional skill, resembling masterpieces, while others may lack finesse. Art appreciation is highly subjective, but owning an NFT provides more than just an image to set as a wallpaper. When you purchase an NFT, you acquire the rights to sell or use that artwork and witness its potential appreciation in value. NFTs serve as a means to appreciate and reward artists, and they also offer opportunities to earn revenue by creating and selling NFTs.
How Do NFT Tokens Work?: Similar to cryptocurrencies, NFT artworks reside on the blockchain, which ensures their authenticity and serves as a public ledger for transactions. Initially residing mainly on the Ethereum blockchain, NFT projects now exist on various popular networks, including Harmony ONE, Polygon, Solana, BNB Smart Chain, Near, Tron, Cardano, PolkaDot, and more.
How to Buy NFTs: Acquiring NFTs involves setting up a crypto wallet and purchasing the necessary coins. After obtaining Ethereum, transfer it to a compatible crypto wallet and connect the wallet to an NFT platform like OpenSea. From there, you can conduct NFT transactions, buying, selling, and trading NFTs. It's important to ensure you have sufficient funds in your wallet to cover the NFT's price and transaction fees.
Where Are NFTs Stored?: Most NFTs are stored in the InterPlanetary File System or the Filecoin Network storage. Hardware wallets like those provided by Trezor and Ledger, known as "cold storage," also offer secure options for storing crypto digital assets, including NFTs. Both storage options leverage blockchain technology for robust security.
How to Sell NFTs: To sell an NFT, utilize your crypto wallet and the token itself. Stick to well-known platforms like OpenSea for your initial transactions due to their user-friendly design and easy setup. On the sales page, set the price for your digital token and choose the sales model—either a fixed price or an auction. Determine the duration of the sale, and your NFT will be on the market for that specified time. Remember to have enough funds in your wallet to cover the NFT's price and any associated transaction fees.
In conclusion, NFTs represent a significant and evolving trend in the digital world, offering unique opportunities for artists, collectors, and enthusiasts to engage with and appreciate digital art in a novel way. Understanding the fundamentals of NFTs, including what they are, how they function, and how to buy and sell them, is essential for anyone looking to explore this exciting space.
