According to CNBC, the trading of NFTs increased to more than USD $17 billion in 2021. NFTs have grabbed people’s attention, with more headlines in the mainstream media and celebrities and large companies endorsing them. In this article, brought to you by TokenMason, we uncover what NFTs are, how they work and how to access this unique digital asset.
What are NFTs?
NFTs, abbreviated from “non-fungible tokens” are essentially cryptographic assets that use blockchain technology, including unique identification codes. Similar to cryptocurrencies, NFTs contain transaction and ownership details on the blockchain and cannot be replicated or altered.
NFTs exist on a blockchain, which is a distributed public ledger that records transactions, allowing NFTs to be sold and traded. NFTs are analogous to having a digital and secured form of certificate of authenticity or proof of ownership that can be publicly validated on the blockchain.
The distinguishing factor with NFTs is that they are not fungible. In other words, they are unique and not interchangeable. NFTs are digital representations of assets and have been likened to digital certificates because each token contains a unique, non-transferable identity to distinguish it from other tokens.
Tokenizing digital assets allows these assets to be efficiently bought, sold and traded while reducing the possibility of fraud. NFTs can be bought and sold using cryptocurrencies using popular NFT marketplaces like OpenSea and be offered on more decentralized and customized NFT marketplaces to avoid transaction fees.
Practical examples
NFTs can be used as a store of value to represent the property rights of a digital asset based on its utility. Digital art is the most common use case of NFTs. You may have read about high-profile auctions or celebrities and influencers purchasing NFT collections like Bored Apes and CryptoPunks.
NFTs can also represent other digital asset such as music, movies photography and even licensed digital collectibles like NBA’s Top Shot. NFTs are also becoming popular in gaming to represent in-game assets such as digital plots of land or accessories for avatar characters in games.
How to Buy NFTs?
Different token standards support different blockchain uses such as NFTs. Ethereum was the first blockchain to support NFTs with its ERC-721 standard that uses the solidity smart contract standard and currently is the most widely used in the NFT marketplace.
Many NFTs can be purchased with Ether and the first step to purchasing NFTs is to open a digital wallet and hold some Ethereum. You can then purchase NFTs via any of the online NFT marketplaces, including OpenSea, Rarible, and SuperRare to start your very own NFT collection.
How TokenMason Can Assist
We hope you have found this blog useful and learned more about NFTs and how they work. Please visit our Blog page for more blockchain related news and articles.
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