What Is an NFT? Everything You Need To Know
Many people are perplexed, but also captivated, by the blockchain and NFTs. Over the last couple of years, it has been blowing up as a subject and investment vehicle. As tne thing that comes up constantly in conversations, NFTs are still the talk of the town. According to news reports, people are selling their NFTs for millions of dollars, no wonder these assets are so compelling.
So, what is an NFT? And how does it all work? This guide will be all about what an NFT is. For this we will take a deep dive into the nitty-gritty of it all. Let’s get started.
What Are NFTs?
NFT is an abbreviation. It stands for non-fungible tokens. But that does not tell you much. The non-fungible part means that it cannot be duplicated. So, a single NFT is unique.
They exist on the blockchain and have unique metadata that makes each one uniquely definable. Thats a lot of terms that need further elaboration, but first: what gives it value? Well, there is a huge conversation that can be had just on that topic alone.
But in a more general sense, since they are non-fungible, NFTs are a great way of protecting digital assets in a censorship-resistent and immutable way. An NFT can be anything digital. It can be a piece of artwork or even a tweet. Yes, a tweet!
Jack Dorsey, the founder of Twitter, sold his very first tweet as an NFT. For how much, you ask? A cool $2.9 million.
The more popular form of NFTs in recent times has been more digital art than anything else. Artists are earning millions by creating NFTs and then selling them. Now let’s dive a bit deeper.
How Does It All Work?
Well, you already know the basics. It is on the blockchain. To be more precise, NFTs are most often on the Ethereum blockchain. However, other blockchains use their own version of NFTs.
The blockchain will keep track of who is holding a particular NFT and who is selling it to whom. Digital marketplaces like OpenSea facilitate the buying and selling of NFTs. You pay a gas fee for transactions, which basically means you need a crypto token to pay a small fee to buy and sell. And the platform will often charge as well.
Where Does The Value Come From?
As we mentioned before, this topic is a whole other can of worms. In essence, the value comes from the collectability and scarcity aspect of a particular digital asset. A digital asset such as an NFT can be anything really, it does not have to be an image (audio and video can be NFTs too!). Often they are collections, meaning a range of different pieces that together fall under one name, while each individual piece has a serial number.
As long as it exists in a digital world, it can be an NFT. Popular NFTs like CryptoPunks and Bored Ape Yacht Club are desirable because they are seen as collectible. There is also the fact of ownership and exclusivity.
Since NFTs by nature are non-fungible, it is unique and nobody can completely copy the NFT you own, making it scarce. Some of the value also comes from opportunities for a future sale, as the NFT markets are much more liquid than the original art markets buying and selling is often very quick.
Some NFT prices can be quite out there. Here is a jaw-dropping example, Everyday – The First 5000 Days artwork sold for $69.3 million through an auction house in 2021. It was created by the artist named Beeple.
You might argue that the value is inflated. Since you can create multiple copies of NFTs. There is a catch to it. Those copies are not technically the real deal, due to the serial number and smart contract address stored on the blockchain that make it non-fungible. This makes it differ from the art market as well.
There will only be one definitive version. You can ‘right click and save’ an NFT. But that does not make it the original thing. So, the person that owns an NFT does own it themselves. And they and only they can choose to sell it or not.
Why Do NFTs Exist?
There are a lot of angles from which you can look at this. For an artist, it gives them a way of monetizing their digital artwork. NFTs can open up opportunities for creatives to earn a living from them, similar to the art market but with fewer middle-man and a more global audience due to the social nature.
On the other hand, for buyers, it can mean multiple things. One reason could be that they just want to support their favorite artists and they love their work. So, they would buy an NFT. Often this NFT is an access card to a forum or group chat of fellow fans, adding extra utility to owning it.
Not to mention, it does come with some bragging rights as well. And they would be able to use it as a profile picture on social media for instance. Twitter allows users to verify that their NFT is original and shows your followers this. It can also become a collectible. The future value of a particular NFT can rise quite a lot, and the buyer can sell it on the open market without any risk of theft or counterfits.
Here is another interesting one – video games. Yep, those good old video games. Many video games will let you own digital assets. Digital game items like character and gun skins can be NFTs. Which will give ownership rights to a single player and allow that player to even trade outside of the game.
In the next few decades with the rise of the metaverse, this will most likely be big. And since the video game industry is on the rise constantly, you do not want to miss the boom on this front. Cutting-edge video game studios like us at Metaverse Games Studios *wink wink* are already creating games for the metaverse.
And the possibilities are endless there. NFTs can be sold and bought in a video game in the metaverse. Take a look at a popular tactical FPS shooter like CounterStrike: Global Offensive. Also known as CS: GO. Skins are a massive money generator for the game. And people have made a career out of buying and selling in-game skins. The market is huge for this collectibles economy model. So is the potential for NFTs in the same fashion.
What Do You Need to Create NFTs?
If you want to create an NFT for yourself, you can. But there is something you will need though. NFTs are supported on a specific blockchain. And the Ethereum blockchain is the most popular.
Marketplaces like OpenSea are a very popular hub where people can buy and sell NFTS. Here are the things you need to create your own NFTs:
- A cryptocurrency wallet that has cryptocurrency in it. And since Ethereum is the most popular, you need to have Ethereum tokens.
- You can list and create your NFTs on sites like OpenSea to sell your collection. The first sale is called a “mint”, which OpenSea supports. Simply connect your wallet there, click on profile, then on My Collections and lastly on the Create button.
Wrapping Up
Well, there you have it. This guide answers the question of what an NFT is. NFTs are not just hype. And when the metaverse is all up and running, game studios like Metaverse Games Studio, are the ones that will stay ahead of the competition. Making games for the metaverse with its own NFT collections have the potential to be the big next thing.
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