What is an NFT?

By Anycoin Direct

The NFT has experienced a lot of hype and is still very popular. You've probably heard about some of this, but many people don't know exactly what it is. That's why we wrote this lesson.

Key indicators

✔️ NFT is short for non-fungible tokens, or a unique and non-exchangeable token.

✔️ NFTs are used for houses, paintings, other works of art and collectibles.

✔️ Een NFT is a smart contract recorded on a blockchain.

✔️ NFTs are sold through the blockchain without middlemen.

About NFTs?

NFT is an abbreviation for non fungible token. So what does that mean?

Everyone knows Bitcoin. This is fungible or redeemable, that is, a fungible token. If you've seen one, you've seen them all. It's not that you have pretty Bitcoins, ugly ones, more expensive or cheaper ones, they are all exactly the same.

For example, an NFT is an image of a painting of which there is only one. This is a unique NFT and such a thing can be or become worth a lot. An NFT is a smart contract that is recorded on a blockchain, so the blockchain knows that you are the owner of this NFT.

The first NFT was a moving digital artwork called Quantum by Kevin McCoy in 2014.

In 2015, Cyrus Adkisson created the first virtual world with NFTs: Etheria, where you could buy individual tiles as land NFTs. A temporary craze followed in 2017 with KryptoKitties, CyberPunks and Bored Ape Yacht Club. NFT finally broke through during the 2021 NFT hype.

How does NFT work?

Because a blockchain is decentralized, you can sell your NFT without middlemen. This frees up additional opportunities in the NFT world. If you go to sell a house, real estate agents charge a lot of money for it. If you turn your house into an NFT, then buyers and sellers only pay transaction fees to the blockchain.

Did you create a painting and want a lot of money for it? Make it an NFT. If you have it sold by an expensive safe house, a lot will stick there. If you sell it yourself on the blockchain, you're much cheaper.

If you want to sell an NFT, you first have to create it. To do that you create a digital object, put it on a blockchain platform like Ethereum, for example, and turn it into a tradable token and put it up for sale on OpenSea, for example (a form of a DeFi platform).

What is an NFT used for? 

Most commonly, an NFT is used for unique things, such as houses, paintings and other works of art and collections of collectibles like CryptoPunks.

Unique NFTs are worth the most, generally. For example, you can create an NFT of the first train that ran, the first airplane that took to the skies or the first tweet ever, which sold for three million dollars. If you happen to own something really unique, you can get a substantial amount of money for it if you make an NFT of it.

You name it, it can be worth money. A simple NFT of a child biting another child, "Charlie Bit My Finger," netted 650,000 euros. Disaster Girl, a little girl grinning into the camera as a building burns down behind her in 2005 sold for only half a million in 2021. Good marketing, it seems, is important. Is your meme popular, make an NFT and voila, big cash!

Beeple, an artist whose real name is Mike Winkelmann, sold his digital collectible "Everydays: The First 5000 Days" for about $70 million.

The in-game NFT is now well established on the market. These are tokens that represent a special item that you can only use in the game. These include land, avatars, weapons or tools.

For example, in Decentraland you can buy all kinds of items as NFTs, some being unique, such as land or your name, others rare and the next common or common. The unique ones are usually worth a lot or can become so. Land in a popular area is expensive, but if you have a special name you can ask a lot of money for that too.

The possibilities in terms of metaverse in-game NFTs are endless and there are already many games that work with this. They are known as play to earn games, such as Axie Infinity or The Sandbox. The NFTs in these games range from a few cents to thousands of dollars for just one item.

Musicians release albums as NFTs, sell concert tickets that way or release fanware on which they collect royalties.

Disadvantages of NFT

Since an NFT is digital and on a blockchain you will need to store it in a wallet. Keeping an expensive item on a browser wallet like MetaMask would obviously be absurd. It's far too insecure for that and besides, the software is owned by others.

So you'll probably have to keep it on a hardware wallet. That is relatively cheap, but where you are going to leave this device and secure it against water damage and fire is one thing. You should also never lose the wallet and it should not be stolen. In addition, you have to know how such a thing works well and insuring it can be a problem. With a physical painting, all this is much more obvious.

The NFT market is also unregulated. Who knows, maybe the seller of that Mona Lisa or whatever that thing was called from some Leonardo didn't have the rights to sell it as an NFT at all. Did you pay quite a lot of money for that!

If you want to go after the person who ripped you off, you have little legal recourse. You don't even know who sold it to you, because it's not on the blockchain.

Another risk is that what you bought may suddenly be worth nothing. For example, some Axies were hugely expensive, but if no one plays the game anymore it has become a worthless NFT. It is also possible that the NFT hype is over and no one is willing to give a penny for it anymore.

Test your knowledge

Question: 1/5How does blockchain know you own an NFT?
CSmart contract