NFT officially took over the internet all throughout 2021 and still continues to do so in 2022. When you hear news of someone like Grimes, an artist, getting millions of dollars for NFTs, you obviously want a part of it. But what is an NFT? How does it work? How to create, buy or sell an NFT?
So, here is your complete guide on what an NFT is and answers to all the above questions.
What Is NFT?
NFT stands for Non-Fungible Tokens. Didn’t help a lot right? Well Non-Fungible token means that it’s unique and you cannot trade one for another. Bitcoin and other cryptocurrencies are fungible tokens, which means you can trade one for another and there won’t be any difference.
When you buy or sell an NFT, you are owning that unique token. Now, you have obviously seen memes about downloading or screen shotting an NFT, which likely has confused you on how this works. I will get back to that later in the article, but for now remember that NFTs are unique and cannot be traded with another.
You can obviously trade it for something else, but not the same thing because only one exists.
What Can Be An NFT?
Now we are coming to the tricky question, what can be an NFT? Basically anything digital can be made an NFT. From digital art, music, signature, photos, just about anything. It’s most widely used as a way to sell digital art at the moment, but we are already seeing it expanding in possibilities with how the Twitter founder Jack Dorsey sold his first tweet as NFT for millions.
Selling your Tweets! Would anyone believe this 2 few years ago? And this doesn’t end here, popular and controversial YouTuber Logan Paul literally sold clips from his publicly available videos on his YouTube channel as NFTs for up to 20k dollars!
Yes, you can simply open his channel and watch those clips in his videos. They are still available publicly for everyone to watch and enjoy. Logan Paul also sold NFTs of a “Logan Paul” Pokémon card and people bought it!
So, what about real life objects? Let’s say your house, or your boots? Can they be made into NFTs? There have been attempts of doing this and Nike actually patented a method where they use an NFT system called CryptoKicks to verify the authenticity of their sneakers. So yeah it’s definitely possible and you will probably find some if you look!
How NFTs Work
NFTs are part of crypto-blockchains and most of them are part of the Ethereum blockchain. The Ethereum blockchain that supports NFTs, store extra information which makes them work differently and as non-fungible.
Other than Ethereum, other blockchains can also create their own version of NFTs, like TRON blockchain has already done. But for the majority, NFTs are part of the Ethereum blockchain.
How To Buy NFTs And Should You Buy It?
With NFTs selling for millions, you are likely thinking what’s so special about this and whether you should be a part of it. So, what are you going to achieve from buying NFTs?
Why Should You Buy NFTs?
One of the key things about NFTs is that it’s a great way to support artists. You may want to support your favorite artists and buying their digital art as NFTs is a great way to do that. You also get the rights to use the art, which you can use as profile pictures or something similar.
You also get the bragging rights of owning that NFT. Yes, someone can simply download the art and use it without ever own it, but you will have the actual NFT and not a copy. Well there is basically no difference in terms of quality as its digital art, but you still retain the bragging rights I guess.
Now, the third reason why you may want to buy an NFT is basically as an investment. You can earn profit by buying and selling an NFT after its price increases. That’s not guaranteed, but others are doing it and getting a profit.
There are certain NFTs that provides buyers access to certain specific communities. You may have heard of Penguin communities, which allow buyers of certain NFTs, called Pudgy Penguins, access to their community. Other examples like CryptoPunks and Bored Ape Yacht Club are also have a community around it. So, you may want to buy these NFTs as a “membership card”.
NFTs are even used as concert tickets or membership rights for viewing web series. Stoner Cats is one such show that used NFTs as a ticket.
Where And How To Buy NFTs?
Like everything, NFTs also have dedicated market places where you have to go “shopping” in order to buy them. And as most NFT market places use Ethereum network to power their transactions, you will need Ether to buy any.
If you don’t have any Ether tokens, you will first have to open an account and setup a wallet for the Ethereum tokens.
Next, you will have to convert your currency to Ether (purchase ether tokens).
Once you have the tokens ready, head to the marketplaces for NFTs. OpenSea, Rarible, SuperRare, and Foundation are some of the most known NFT marketplaces.
You will have to choose the marketplace you want to purchase from and register your crypto-wallet there for transaction. After you have done this, browse through the market and look for the NFT you want to purchase.
Now, you will have to bid for the NFT that you want to buy. After your bid is successful, your transaction will be complete and the amount will be debited from your wallet. You may have to pay a transaction fee to the Marketplace you are purchasing from on top of the NFT price. This depends on the Marketplace and differs for each one.
How Ownership Works For NFTs?
So, you have purchased this NFT but where is the proof it’s owned by you or how to make sure the NFT you are purchasing is not simply a copy of what you are looking for?
To understand this, you need to first learn how the transactions in NFTs work. Each transaction on an NFT are stored in the blockchain as separate values right up to the creator. This way even after the NFT is sold, the original rights of the artist remains in the blockchain.
Also, when you are purchasing an NFT you are actually not “buying” the art or the intellectual property but getting an access to the storage link of the NFT. This is why it’s easy to scam by counterfeiting the NFTs and selling a copy.
You can basically track the blockchain of an NFT to find its authenticity and see the transactions made on it over the years. So, how to do it?
Check the Smart Record
The first thing you need to do is check the smart record of the NFT, which stores the unique ID and metadata of the NFT. Using this information you can verify the owner and check its transaction history.
First, open the smart contract of the NFT and look for the Details option. Here you will find the Meta Data of the NFT. You should find the following data:
1) Token ID of NFTs
2) Contract address of the collection
3) Metadata Status: Centralized or Editable, Frozen
4) Encoding standard
5) Host Blockchain
Using the Token ID of the NFT, you can check the associated owner address in the archives of the marketplace and blockchains. You can also check the transaction history of the NFT for any suspicious activity.
Next, check if the NFT’s Metadata status is “editable”, “centralized” or “Frozen”. Centralized NFTs have a fixed source location that the creator cannot change. Editable NFTs allow the creator to alter the storage link on the blockchain.
If the metadata status shows Frozen, then the NFT was flagged for suspicious activity and cannot be sold or transferred.
Verify Through NFT Verification Services
After you have found the NFT ID, you can verify them using the associated marketplace. You will need the help of various NFT verifications services to do that. Make sure the verification service is compatible with the NFT’s coding standard.
Most verification services work with any legitimate NFTs, so that’s not going to be much of an issue. So, make sure you use a verifying service to check the NFT before you buy it.
Check The Digital Certificate
Many NFTs come with digital certificates that verify their authenticity. It shows the name of the manufacturer and owner, its date of production, programming info and along with the NFT’s status, Token ID and serial number.
You should find the digital certificate of the NFT in the blockchain metadata, if it’s provided.
Check The Social Media Profiles And NFT Platforms of the Owner
If you are looking for an NFT from a particular artist, then the best way to check its authenticity is through asking the owner. This can be done through social media or you can simply check their social media page for reroutes to the NFT’s purchasable marketplace.
How To Create And Sell NFTs?
Creating an NFT or basically selling your artwork can be easily done with a few steps. Follow the steps as mentioned to do it:
First you will have to create your artwork or the media you want to sell as NFT. You can do this on various software as you see fit. Once you have created the piece you want to sell, save or export it.
Now, choose the NFT marketplace you want to sell your NFT on. Most marketplace will charge a fee to assign the NFT in a blockchain. OpenSea however only charges one starter fee and after that all your NFT can be put up for sale without any charges. Once a purchase is made, the charge for minting the NFT into the blockchain will be added to the value of the NFT.
Once, you have chosen the NFT marketplace, you will have to create a crypto wallet. Then you will have to connect that wallet to the NFT marketplace you want sell your NFT at.
Next, you will have to create you profile, add a picture and other details.
Finally, click on the create design option and upload the artwork or media you want to sell as NFT from your PC. Add all the details properly and finish it.
Now, you will see a Sell option on your screen. Click on it and select the item you want to sell. Add the prices and other details. Click on Complete the listings to finish it.
So, there you have it. That’s everything you need to know about NFTs. If you have any queries related to this topic, ask them in the comment section below.