An NFT, also known as a Non-Fungible Token, is a digital asset that represents real-world objects like art, music, in-game items, and videos. They are usually bought and sold online alongside cryptocurrency, and they are generally encoded with the same underlying software as many other crypto.
NFTs have unique identifying codes and also create digital scarcity, which stands in stark contrast to most digital creations, which are almost always infinite in supply.
The following are essential things you need to know about NFTs.
1. The solution they provide: NFTs offer proof of ownership that is missing in digital economies today and have also created the ability to combine the benefits of a global audience, scale, and distribution together with the benefits of the physical world, which involves its originality and ownership. However, prior to the increase of NFTs, it was difficult for digital assets to accrue and capture value, which made them extremely cheap for a user. NFTs enable users to trace and attribute real ownership on the internet. It also gives creators the privilege of being accurately rewarded for their work and enables them to extract a larger proportion of the value that they create. Users benefit by being able to gain ownership over digital assets and having the ability to easily trade and value them. Potential consumers of NFTs are rewarded for doing the things that they already do on a daily basis.
2. What it is used for: NFTs can be used as collectable art pieces and have given artists a way to easily sell their art to a global audience while maintaining ownership rights. Art NFTs can be categorized into Non-Generative Art and Generative Art.
- Non-generative art is created manually without the aid of an autonomous computer system. It also gives digital artists the opportunity to list their work on NFT marketplaces, and anyone from anywhere in the world can view and purchase their work. In the traditional market today, artists are only able to earn from the initial sale of their work.
- Generative Art: Generative art is an art that is created via the use of an algorithmic computer program.
3. Used as Music: Music NFTs are an emerging use case for NFTs. Similarly, NFTs in Arts and Music NFTs are vital for artists to capture a larger portion of the value that they create. Artists receive around 12% of the revenue that they create for the music industry and are also able to support and own a copy of the work that their favorite music artist has created. However, this creates new ways for artists to engage their fans and also own original copies of an artist’s work. On NFT, the artist gets rewarded more equitably, and as a fan you get to participate in the upside of supporting an artist during their early days.
4. Creating an NFT: There are several methods to create an NFT, which can be done manually or automatically. Beyond creating a NFT, it is important to consider the block chain that you want to build your NFT on, which could be Ethereum, Solana, Avalanche, Polygon and lots more. Block chains vary from one to the other and they have different trade-offs and communities, which can have a large impact on the success of your project.
5. Buying an NFT: To buy an NFT, you will need to set up a crypto wallet that is compatible with the block chain that the NFT project is built on in order to interact with the marketplaces. Basically, the wallets used are MetaMask for Ethereum, Phantom for Solana, and Terra Station for Terra. Once you’ve gotten a wallet set up, you can transfer funds to the wallet from a centralized exchange of your choice.
In addition, NFTs provide physical and digital benefits in order to create new distribution channels and monetization models for creators. It also provides users with new ways to engage with a community of similar-minded people , to ascertain the value of digital assets and for the creators involved to get a larger share of the value that they create.