NFTs everywhere, everywhere indeed! Literally, they can be anywhere. I used to think they were restricted to the digital world in my crypto-naivety, but as with most things blockchain-related, it’s a bit more complicated than it seems.

That doesn’t mean that NFTs are in any way beyond human comprehension! I prefer to think of it as a new type of ownership. A new way of deciding who owns what that’s come about with new technologies - namely blockchain.

So let’s go over some of the most commonly asked questions about NFTs.

What is an NFT?

NFTs, or non-fungible tokens, are digital tokens that represent ownership of an asset. They utilize blockchain technology, meaning that when you buy an NFT, your ownership of the token is recorded on the cryptographic ledger. This ledger serves as a kind of “proof of purchase.”

They are “non-fungible” because different NFTs have different values, unlike cryptocurrencies or fiat currencies. Where one Ethereum token has the same value as another, NFTs are not currency and do not have standardized value in the same way. After all, one painting isn’t equal in value to another painting, is it?

How do NFTs work?

NFTs rely on blockchain technology to prove authenticity. Because of blockchain’s peer-to-peer and distributed ledger technology, blockchain is a reliable technology for ensuring that you maintain ownership of your NFTs. We’ll have a separate blog on blockchain in the future, but for now, what’s really important about this technology is that it’s perfect for showing who owns which NFTs and is very secure and reliable.

Another key point is that NFTs ensure scarcity. You’re probably thinking “how can an NFT show ownership when I can copy anything online? I’ll screenshot your NFT and cheat the system!!” Well, it’s true, you can screenshot NFT art, but you’ll be getting just that - a copy. You can buy a copy of The Starry Night too.

Are all NFTs art?

It’s true that NFTs are very popular in the digital art community, but, NFTs aren’t art themselves. Remember, that NFTs are really just pieces of data that show ownership and, in a way, limit supply.

This means they’re quite useful in terms of art, especially digital art. The combination of guaranteed ownership and scarcity means that digital art can easily be given value.

How do NFTs have Value?

There isn’t a catch-all formula for determining the value of an NFT because NFTs can represent ownership of just about anything. But, to simplify things, I’ll propose one anyway:

NFT value = Scarcity + Utility + Tangibility + Liquidity

Scarcity - The laws of supply and demand continue to hold sway even outside of the physical world. If there’s only one of something, its value goes up dramatically.

Utility - If an NFT can be used for something, it’s inherently more valuable than one that can’t.

Tangibility - Some NFTs exist in the physical world, this adds value.

Liquidity - The easier it is for an NFT to be exchanged for currency, the better for the NFT owner.

Great, so where can I buy an NFT?

Well, it depends on the type of NFT that you want. But first, you’re going to need a crypto wallet. You can sign up for a number of crypto exchange platforms, like Binance or Gemini. Keep in mind that a lot of NFT marketplaces use the Ethereum blockchain. Once you’ve done that, you can choose an NFT marketplace that has the types of NFTs that you want to buy. Essentially, different marketplaces specialize in different types of NFTs.

Concluding thoughts

Whether or not you believe in the financial stability of NFTs, it seems like they are here to stay. As digital assets like land in the Metaverse grow in popularity, so will NFTs. But NFTs are still new and can be just about anywhere, so it’s important to have a good understanding of what NFTs are before you start investing in them.

Hopefully, this blog did just that! We’ll have more detailed information on NFTs in very near future, especially on some of our own NFT-related projects, so follow us on our socials and keep an eye out.

Until next time...