There has been a lot of talk about non-fungible tokens (NFT) over the past couple of years. Some have become highly valuable, but many people still don’t understand what they are. Jason Simon, an expert in cryptocurrency, explains NFTs and why they are now in such high demand.
An NFT can be described as a digital asset or token. These can be compared to digital trading cards, digital paintings, or digital trading cards. You are buying the rights to an asset when you purchase an NFT.
Non-fungible means it cannot be modified after it has been created. It can’t be split up, and must be distinct from other things. With NFTs, unlike one Bitcoin, which is identical to another, there are never two NFTs. They are always unique and each token is different. This is just a small amount of data you have together.
An NFT is a token you have that doesn’t alter over time. Says Simon, “An NFT is a piece or data that is owned by an address. The password to that address will grant access to the data. This piece of data can be sold or bought to other addresses and is verified by a blockchain. The owner can be checked online.”
An NFT allows you to track the history of your pet. A cryptokitty, for example, was sold for $600,000. It is basically a URL that an address owns. It is only a small piece of data that the person owns. That data points to a server that hosts images.
Technically, the server owner could alter the image. It is important to understand what you are purchasing when you purchase an NFT. You are purchasing a piece of data that points to a server hosting either an image or a gift. It is possible for the server to change, or the GIF and image could be changed. It is the actual piece of data you own on the blockchain. Not the access to the servers or the image and gif. But the tiny bit of data that points at the server.
In a sense, buying an NFT is like buying stock. You’re purchasing a small amount of data that represents something larger. The company is not yours, and you won’t actually get anything unless it’s dividend stock. NFTs can be bought for many reasons, but the most common reason people buy them is that they are considered collectibles within the investment category.
NFTs are valuable for four reasons. First, because they were created by specific creators. Pokemon cards, for example, are rapidly gaining in popularity. The most expensive cards are those produced in the first edition.
Utility, or the real-world benefits, is what makes an NFT worth its weight. Imagine Elvis Presley were still alive and had sold 50 NFTs. You could now have lifetime access to all the shows he was a part of by owning one. Because of their real-world benefits, these NFTs would quickly become very popular and expensive.
A third factor that makes an NFT valuable is its rarity or uniqueness. Think about the Mona Lisa as an example. While anyone can keep a copy of the Mona Lisa in their room, only one person or museum can display the original Leonardo Davinci painting for all to see.
Last but not least, ownership history is what I believe makes an NFT valuable. An image of a duck Barack Obama owned might attract someone willing to pay $1 million. “If the NFT is unique, it will be valued if it offers a real benefit. These are the questions you should ask when valuing an NFT,” adds Simon.
Some people assert that NFTs can be copied easily. An NFT can be copied by anyone, just as any other artwork. However, the original NFT address can still be traced back to the creator.
It is important to note that all NFTS keep a log of transactions. This means that someone could create a new NFT pointing to the exact same address as the original NFT. Different addresses can result in the same image or gif, and the value for an NFT isn’t the image. It’s the particular piece of data.
It is easy to purchase an NFT. In fact, it is not as difficult as buying stock in a company. NFTs can be purchased on online marketplaces such as Amazon, eBay and Facebook Marketplace that are specialized in NFTs. The downside to buying NFTs is the fact that they can only be purchased with Ethereum. This means that you will need Ethereum from the owners before you buy a cryptokitty, or an NBA top shot.
In order to buy and sell NFTs, an NFT wallet is needed. These wallets look very similar to other cryptocurrency wallets. These wallets usually have both a public key and a private one, and they can be used for either. Many are based upon the ERC721 protocols. A hardware wallet is the best way to keep your NFTs safe and secure.