What are NFTs?

In this guide, you'll clearly understand plenty of NFT-related information like what NFTs are, how they work and are traded, and much more.

GDGTME Team  •  February 04, 2022

What are NFTs?

Since 2014, NFTs have been a part of the market but became phenomenally popular in 2021. For the first time in history, cryptocurrency exploded into the realm of art, gaming, music, and many other areas and will continue to thrive this following year.

In this guide, you’ll clearly understand plenty of NFT-related information like what NFTs are, how they work and are traded, and much more.

What exactly are they?

The word NFT stands for Non-fungible token – a unique and non-interchangeable unit of data stored on the blockchain. Each NFT has a unique identification code that provides a means to trace and verify the provenance of a digital asset.

NFT can be associated with any digital file that holds value and is one of its kind, such as art, music, videos, audio, tweets, and even memes.

How are NFTs different from Cryptocurrencies?

Both NFTs and Cryptocurrencies are digital assets stored on the blockchain. As the name indicates, cryptocurrency is a type of currency that is fungible, which means it can be traded for another crypto and holds the same value. For example, 1 Ethereum = 1 Ethereum, just like a dollar is worth another dollar.

On the other hand, NFTs are non-fungible, which means a particular NFT cannot be traded for another NFT as every NFT holds its worth, based on how much a seller is willing to pay. Hence, an NFT is one-of-its-kind and can never be worth another NFT.

How do NFTs work?

Traditional ark works such as sculptures and paintings are valuable because they can’t be duplicated easily and are unique, whereas digital artwork can be easily replicated.

With NFTs, digital artworks can be tokenized to generate digital certificates of ownership that can be traded. The ownership of an NFT is certifiable through the distributed public ledger, the blockchain. The first NFT was launched on the Ethereum blockchain in 2015, but now other blockchains support it as well, including Bitcoin Cash and Flow.

NFTs can be created from any digital object, such as:

  • Artworks
  • GIFs
  • Video Clips
  • Music
  • Collectibles
  • Video game skins
  • Tweets
  • Memes

Any type of NFT that verifies its ownership can be sold and bought and its cost is determined by the market demand.

How to buy NFTs?

You cannot just save a digital file and sell it for millions. To have a collection of NFTs and sell them for millions of dollars, you’ll have to buy one first to attain the certificate of ownership.

To be an official owner of NFT, you need to acquire the following prerequisites:

  1. First, you’ll need to have a digital wallet to store your NFTs and cryptocurrencies.
  2. Then, you’ll need to fill your digital wallet with the specific crypto your NFT provider accepts.

Some of the reliable platforms that sell NFTs include:

How to sell NFTs?

Like for buying NFTs, you’ll require a digital wallet to sell them. To get started, you’ll need to upload your digital work on a marketplace and follow the instructions to transform it into an NFT. You’ll be required to list details such as a description of the artwork and desired pricing. Usually, NFTs are bought using Ethereum but can be purchased with other cryptos as well, such as Flow, Cardano, and Bitcoin.

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