The total value of all NFT transactions worldwide jumped to 21,350%. which is nearly $17 billion in 2021 from $82.5 million in 2020. As a general spectator sometimes we assume that this particular product or idea looks really off nobody would buy this stuff. But people are still buying that stuff because they are deriving some value from it. The CEO of Twitter, Jack Dorsey sold an NFT of his first tweet for $2.9 million. The Bollywood superstar Amitabh Bachchan has sold his collection of NFTS for $9,6600. Sultan Gustaf Al Ghozali, an Indonesian student sold his selfie compilation of five years as NFT, and his collection made a volume of more than $1 million. Now you are getting confused and surprised why are those digital assets sold for such a million dollars. So that is why we are going to discuss how rich people are getting richer by trading NFTs. We are going to decode the entire concept of NFT to help you understand it.
What is NFT
NFT means Non-Fungible Token. Firstly we have to understand what fungible means. It means an item that can be replaced and Non-Fungible simply means irreplaceable which can’t be interchangeable. For example, there are millions of copies of a book (like Da Vinci Code) because this book has been mass-produced so every copy is the same. So the copy you buy from Amazon is exactly the same copy that is available in any offline bookshop. That makes the book a replaceable item. You can replace this book with any other book at any point in time.
But the same book on my shelf is unique because this was gifted by my father, I have read this and highlighted so many things in it. You can’t buy this particular copy from anywhere else because it has my notes, my highlights, my marks, and that makes it irreplicable and irreplaceable. So anything that is unique and Irreplacabe is said to be Non-Fungible.
What is a Token
If we buy a property then we have an agreement paper or deed which proves our ownership. Similarly token is the proof of our ownership of any digital asset.
The distinction between Fungible and Non-fungible token
Fungible tokens are interchangeable like fiat currencies. $1 in Washington DC has the same value as $1 dollar in Florida that is why it can be exchanged. Cryptocurrencies like Bitcoin, and Ethereum are also fungible tokens. But non-fungible token represents a type of unique ownership of any digital assets. It can be intellectual property, music composition, gaming, Artwork etc. And Blockchain is the underlying technology that maintains ownership of any digital asset. Now we have to acquaint ourselves with Blockchain technology.
What is Blockchain
Blockchain works as a public ledger that records every transaction. If someone wants to send money to anyone that can be happened in a few seconds. But all the transaction records are happening and approved under the monitoring of a centralized authority called the banking system. So this is a central ledger system but in blockchain technology, there is no intermediary, no central authority because everyone can see every transaction that existed in this blockchain network.
Cryptocurrencies like Bitcoin, Ethereum and others are also based on this blockchain technology. If any changes are happening in the Bitcoin network, everyone on this network can see it. Therefore it is a decentralized and more transparent ledger system that can record your proof of ownership.
How to Buy NFT
Buying NFT is the simplest process of two actual steps. Firstly you have to create a NFT wallet which is a cryptocurrency wallet, based on blockchain technology. See our list of best Cryptocurrency wallet suggestions. The dominant cryptocurrency used in NFT market is Ethereum. Then you have to add money to the wallet.
After that, your second step should be to find out the NFT Marketplace where you can buy or sell NFTs. There are dozens of NFT marketplace or exchange platforms that exist. The most dominant and largest among them are the open sea, Axie Marketplace, Rarible etc. See our recommendations for the NFT marketplaces.
How to earn money from NFT
You can make money by creating a digital piece of art. You can also earn money through Renting and staking NFT. The trading of NFT can make you a huge profit for Instance if now you go and buy the digital version of a painting of a new Salvador Dali or Picasso when that person is not famous and if that person becomes famous it will definitely give you a great value. Then you can sell that NFT or ownership to someone else. So all you need to find out is a good project to invest in to earn handsome money from NFT.
Hope this beginners guide to NFT was useful in understanding what this is all about!