What is NFT? How does it work?

Digital art goes the reverse of unique. As it is indefinitely reproducible, it’s not possible to identify an original among millions of iterations. Now that has always been a major concern for artists, musicians, and other creatives. Additionally, we shouldn’t forget the collectors and investors who want to build a digital assets market. Hold on, that’s a whole lot of problems. What’s the answer? NFT. But what is NFT? Let’s dive in…

NFTs turn digital art economically valuable by making it unique. In a more concise way, we do so by associating digital arts with something that is unique: a non-fungible token. Further, it allows digital creators to sell the unique ownership of digital assets. There is no doubt that online creativity rules our lives, but if not with NFTs, an original digitized Mona Lisa was impossible. Now, we hope that you are getting a crux of NFTs. However, keep reading as Idea Usher has more exciting NFT insights for you in the upcoming sections!

Want an easier explanation of what is NFT? Still, wondering what are nonfungible tokens? Watch this NFT video

What is NFT?

• NFT or a non-fungible token refers that each token is unique, one-of-one. 
• It cannot be exchanged and is exclusive to the asset buyer. (We are aware of the follow-up confusion that’s already in your mind). The non-fungible token isn’t a physical entity but a digital asset. 
• In more grasping terms, each NFT is made up of unique lines of code stored on a blockchain. 
• Blockchain is essentially an online database that has a variety of uses but is popularly utilized as a ledger for cryptocurrency transactions.

So by far, you know that NFT is nothing but a digital token that’s a type of cryptocurrency. Moreover, it’s very much like Bitcoin or Ethereum. But there’s this catch- it is dissimilar to a normal coin in the Bitcoin blockchain. An NFT is entirely unique and cannot be exchanged one for another (hence, non-fungible). 

How are NFTs acquired?

If you’re still trekking along on this journey, NFTs can be purchased using cash(indirectly) or Ethereum: cryptocurrency. You can post for auction and sell art, collectibles, video, gif, music, and many such digital artworks through online marketplaces. There already have been some unimaginable NFT auctions of original tweets, gifs, memes, gaming assets, and video games that were sold for huge amounts and these domains are still holding it tight in the NFT world.

Read More: How Much Does NFT Marketplace Development Costs? | Idea Usher

How can I create my own NFT?

You don’t create an NFT, you turn an existing art or a collectible into an NFT. The way towards converting is simple: mint your artwork (the way your unique creation will now be live at the Ethereum blockchain), and choose to sell your NFT at digital marketplaces after registration. Moreover, a cost is associated with the NFT minting and selling operation that can rise or drop depending on the platform user is accessing. Additionally, one can even frame clauses and incorporate them into their NFTs, consisting of but not bound to royalties if the copies are being marketed.

What impact do NFTs have on the finance sector?

Technology definitely has enormous benefits in the modern era, where we are constantly assisted in solving real-life problems. For instance, consider luxury footwear. Now, there exist numerous businesses that directly clone a design and the replica is sold for a lower price, which is legally not allowed. However, many of these businesses try to deceive potential customers into believing that they are shopping for an original version of the product.

In the world with NFTs, nothing except one original piece of digital art/collectible can exist. Moreover, Blockchain technology serves as a ledger maintenance system that incorporates unique lines of code. Now, in this case with NFT, one can sell the ‘replicas’ but can’t own the unique NFT (nor its capital value) as there is only one original token. This promotes uniqueness and exclusiveness and ultimately eliminates the issue of investing without being entirely sure about the authenticity of the asset without it being a physical or tangible thing. While everyone on the internet can do a quick google search and view an NFT – only the buyer would have the ownership and rights of a digital asset (hence an opportunity to generate more income)

Are NFTs really worth the hype? Why are they highly valued?

There’s no straight answer here – it honestly depends on your comfort level and long-term investment goals. Similar to other interests, this is truly a hobby or a topic of interest that may or might be a bit expensive for the common man. However, it should be understood that investing at any scale is a risk, no matter whether it’s crypto, equity, stocks, or mutual funds. Undoubtedly, these have been here for a considerable amount of time and hence are reliable, but still, anything can happen in the investing world. Since the pandemic, we all may be reluctant to admit that there’s a massive influx of time spent online. We had already been used to scrolling entire social media, extensive internet surfing, and binge-watching Netflix into our routines, however, the amount of time put in has now increased enormously because of our extended holidays.

On the other hand, the fluid mobility that we were entitled to (and obviously took for granted) went restricted at the beginning of the pandemic as travel allowances were limited. Additionally, there didn’t exist any chances to attend live auctions, exhibitions, or museums. Now, with NFTs, it’s never about where you’re located in the world. You don’t need to go out to buy what you want, thanks to the internet. The online marketplaces serve us a huge advantage within the NFT realm. Now everyone has the equal opportunity to attend auctions and bid for whatever’s out there for sale as long as you have enough cryptocurrency with yourself.

Related Read: NFT Art And NFT Explained In Five Minutes | Idea Usher

What are NFT Marketplaces?

NFT is a (unique) digital asset or, an artwork, or a product essentially having a digital certification that can direct upwards to digital asset ownership. Additionally, unlike fungible tokens, it is not possible to buy or sell NFTs directly. It requires a dedicated platform called the marketplace.

Buyers can always browse through marketplaces like OpenSea and look for buying virtual assets using cryptocurrencies (such as Ethereum and Bitcoin). Marketplaces charge a fixed percentage on the total transaction amount related to the acquired NFT.

How Does an NFT Marketplace Work?

NFT platform user flow:

NFT runs on smart contracts: When a Non-fungible token development company launches a token, it includes a unique piece of code recorded in blockchain for providing immutability.

Usually, there is a fixed user flow of all NFT marketplaces:

Step 1: User signs up/registers their profile on the NFT marketplace platform.

Step 2: The user then needs to set up a crypto wallet.

Step 3: Now, it is the first NFT creation step. The user is supposed to post a digital collectible (any artwork/asset that they aspire to tokenize) to pitch/showcase their work.

Step 4: Now, while listing the sale ad for the asset, a user can choose between asking for a certain amount, or auctioning the asset and ultimately selecting a bid winner as the next owner of NFT.

Step 5: Assets come over the moderation.

Step 6: Once the fresh NFTs get approved, platform users can browse for them in the sales listings.

Step 7: The NFT poster can start accepting and analyzing bids.

Step 8: Once the auction gets over, a notification is sent by the platform to token owners about the highest value bids.

Step 9: The NFT Marketplace platform verifies and avails the transfer of NFT ownership of the digital asset.

Once you become the rightful owner of any NFT product, you can keep checking its prices on the platform. If the prices rise, you can resell them and gain profit out of them. There are so many NFT platforms like OpenSea, MakersPlace, etc. You can invest in one to profit from this rising crypto market or even make a platform if you want!

What’s the Payoff of NFT?

NFT is a huge investment opportunity for many crypto investors, and an opportunity for artists to earn. Online auction platforms allow the right place and right price for authentic art lovers and creators. And the good thing is that the owner can put their bought art pieces on online display without any worries. Many rising musicians, painters, graphic artists, etc are getting their share of fame and money. Meanwhile, the investors are also getting a safe way to invest their money in. NFT trading is a win-win situation for artists, investors, and platform owners as well.

And, now that you know all about the Non Fungible Tokens(NFTs), feel free to contact us and get free consultation for any NFT marketplace project that you want to build.