You will have no doubt heard the buzz recently around Non-Fungible Tokens (NFTs). If you are not aware of what an NFT is we will explain this in the article. We will also explain what NFTs are not as there is quite a lot of confusion about this.
NFTs are Digital Assets that are Unique An NFT is a digital representation of something in the real world which is unique. One of the most common types of NFTs is digital art. People create NFTs and trade them with collectors. Usually, NFT transactions are based on cryptocurrency such as Ether. NFTs are not entirely new and have been in existence since 2017. A lot of money has already been spent trading NFTs. An NFT may not be a one-off. It is fairly common to see limited editions of NFTs with a few copies available. The most valuable NFTs are only available as a single item. You cannot replace an NFT with another asset as you can with a cryptocurrency for example. This is why they have the "non-fungible" element to their name. A $1 bill is fungible because there are lots of them and it is easy to replace one with another. These bills all have the same value which is $1. NFTs are always on a Blockchain Network An NFT cannot exist without a blockchain network. The most popular blockchain for NFTs is the Ethereum network. Blockchain provides distributed ledger technology and every element of a blockchain is unique. This provides a very high level of security. As the name suggests, blockchain is a chain of data blocks. Each of these has unique identifiers which links all of the chains together. Users of a blockchain network must have a public key and a private key for identification and uniqueness of transactions. NFTs are not the same as Cryptocurrencies A lot of people think that NFTs are the same as cryptocurrencies but this is not the case. It is possible for you to hold a number of cryptocurrencies that have the same value. You cannot do this with NFTs. Many people hold more than one Bitcoin or Ether unit for example. It is easy to see where the confusion comes with this. Both cryptocurrencies and NFTs rely on blockchain technology for their existence. But NFTs are unique assets and cryptocurrencies are not. It's that simple. There are different types of NFTs You could be forgiven for thinking that NFTs are just about digital art because this is what makes the headlines the most often. The truth is that an NFT can be something else that is considered of value. Other examples of NFTs include: * Video * Audio (usually music) * In-game resources * Images and avatars * Designer items There is a classic NFT story where the founder of Twitter created an NFT from his first tweet on the platform and sold this for nearly $3 million. Think about an NFT as a digital item that a collector is interested in. An NFT has only one owner There can only be one owner of an NFT at a time. Anyone that purchases an NFT has the exclusive rights of ownership. Every NFT has totally unique data associated with it. This is ideal for verification and identification purposes.
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As you venture into the world of NFTs it is essential that you understand the benefits that they provide. This will provide you with the inspiration and motivation to continue with your NFT projects so that you can make a profit with them.
NFTs operate in a Decentralized Market Creating and selling your own NFTs means that there is no requirement for a middleman. If you think about the art world, creators need to secure the services of galleries or agents to showcase and sell their work. This is not the case with NFTs. When you create an NFT on a marketplace you will be able to interact directly with potential buyers. If people are interested in your NFTs you will be able to directly answer any questions that they may have. If a buyer is ready to purchase your NFTs then they can do this easily using the secure decentralized network. Another advantage of the decentralized market is that NFT creators can build in royalties. A lot of NFTs will change hands from the original owner to a new owner and the creator can set a percentage commission that they will receive on the sale price. Proving Ownership and Authenticity is easy with NFTs It is easy to prove ownership of an NFT. This is due to their association with blockchain technology. You cannot have an NFT with multiple owners because they are indivisible. Both creators and owners of NFTs can rely on the technology to prove ownership. All NFTs are unique on a blockchain network. This makes it easy for authenticity of a token to be established. Even of the NFT creator decides to create a limited edition of the same item, each one will have unique characteristics which prove their authenticity. You cannot change NFT Records Once an NFT is created it immediately becomes immutable. This means that all of the data pertaining to the NFT cannot be changed. You cannot remove or delete an NFT from a blockchain network. After an NFT is created on a blockchain then it will stay there for good. Trading NFTs is Simple You can easily trade an NFT on the same blockchain network. This means that free trade of NFTs is available which is another great advantage. NFT creators and owners can list them for sale on NFT marketplaces. Usually, an auction takes place and the NFT goes to the highest bidder. There can also be a fixed price set with an NFT trade. NFT Owners can retain Copyright This is a really significant benefit for NFT creators. If you create an NFT you are able to retain full copyright in it. It does not matter who currently owns the NFT, as the creator the copyright will belong to you. Copyright retention allows NFT creators to claim royalties when a token changes ownership. The New NFT Economic Opportunity With other methods of showcasing and selling items, the creator has to forego some of their profits to the platform or person that is doing the selling for them. This is not the case with NFTs and a lot of creators see this as an excellent way to maximize their profits. There is now a new digital economy with NFTs. Creators can sell their work directly to collectors and other buyers and not have to share their revenue with anyone else. |
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