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What is NFT (Non-Fungible Token)?

Want to know about NFTs but have no clarity of its usage? Read this blog to know more about it.

June 1, 2022
min read

Non-fungible tokens (NFTs) are a form of art and music that are considered digital assets. These digital assets are bought and sold for millions of dollars.

The popularity of these tokens has risen enormously over the past few months. Those who had realized the potential of NFTs have made some profitable investments in virtual space. For those who didn't, this is the right time to explore NFTs.

But are these NFTs worth the money? Let's give light to this question and explore this digital asset.

What is an NFT?

An NFT represents real-world objects like art, music, and videos, and is termed as a digital asset. They are encoded with the same underlying software as other cryptocurrencies and are bought and sold online.

NFTs have a unique identifying code that makes them one of a kind in the digital universe. "NFTs may create digital scarcity" is the term coined by Arry yu, chair of the Washington Technology Industry Association.

Cryptocurrencies using digital public records for transactions called blockchain are fungible.

NFTs are digital items that you can buy and sell using this blockchain technology. But they are not fungible, making them a different type of digital asset.

Some of these digital assets have been sold for millions including an NFT by a digital artist Beeple which went for $69.3 million.

Some of the NFTs are released by collections of unique individual cartoons like the Bored Ape Yacht Club. They are seen as a cool asset by their owners who display them as their social media avatar.

These tokens can be in any form and it's not necessarily in the form of images. For Example, Decentraland and Sandbox are digital assets where you can buy virtual land in the form of NFT. 

Some supporters say that NFTs are much more than digital trinkets. Some insist that using the blockchain to record the ownership of an item will become much more widespread and will change the mindset of how we think about property.

How are NFTs traded?

NFTs are bought and sold on specialized platforms like cryptocurrencies. One of the best marketplaces for NFT is OpenSea.

In this virtual world, a sale might not involve the transfer of the object depicted by the token. For Example, NFTs of famous paintings are sold but the buyer has not received the painting.

So, the only thing that changes is the certificate of ownership of the NFT that is registered on the blockchain. But you need to keep the certificate safe in a digital wallet, as it may take various forms.

You can access this wallet via Metamask, a free internet browser extension, or on a secure physical device. It may also take the form of a code written on a piece of paper.

To purchase an NFT, your wallet must contain enough relevant cryptocurrency. Ultimately, NFTs are mere digital contracts with certain rules embedded and are available for sale.

How Does an NFT Work?

Like other cryptocurrencies, NFT exist on a blockchain. Specifically, they are held on the Ethereum blockchain, while other blockchains support them as well.

When an NFT is created or minted from digital objects, it represents both tangible and intangible items, such as:

  1. Art
  2. GIFs
  3. Collectibles
  4. Videos and sports highlights
  5. Virtual avatars and video game skins
  6. Music
  7. Designer sneakers

Even tweets may count in these NFTs. For Example, Twitter co-founder Jack Dorsey sold a form of NFT containing his first-ever tweet for $2.9 million. 

The interesting part is NFTs can have only one owner at a time. Its unique data makes it easier to verify the ownership of tokens and also the data for the transfer of tokens to different owners. 

The creator of the NFT can also store some specific information inside them. For instance, artists can put their signatures in the NFT metadata by singing their artwork.

What are the risks?

Trading NFTs requires technical processes that are sometimes misunderstood by the investors. You should be aware of these processes before you invest in digital assets.

Each time you interact with the blockchain, it requires a fee to pay for the "mining". Mining is the intensive computer calculations that are needed to verify each transaction.

Thousands of users might rush to buy an NFT after it's minted but they have to pay the fees even if they don't purchase the NFT.

Some buyers might use bots to ensure they get their hands on a token, it makes the market even less accessible for new investors.


The value of the NFTs is entirely based on what someone is willing to pay, so an NFT may have a less resale value or less than what you paid.

NFTs are to stay for long and if you want to invest in this, you must do your research and understand the risks. 

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