What are NFTs?Jan 02, 2023
You've probably heard about Bitcoin and other cryptocurrencies, but what you may not know is that blockchain technology goes far beyond just digital currencies. In fact, the blockchain can be used to store information about any digital item. This includes things like images, music, art, and even videos. One of the most interesting applications of the blockchain is in the area of non-fungible tokens.
Let's take a closer look at what this means and how it is changing the way we think about digital possessions.
So let's start with the first question...
What is a non-fungible token or NFT?
In the simplest terms, an NFT is a digital token that represents a unique item. This could be something like a virtual painting or even a piece of digital real estate. Unlike traditional cryptocurrencies, each NFT is completely unique and cannot be replaced by another. This means that they are not interchangeable like Bitcoin or Ethereum. Each NFT has its own individual value.
One of the key benefits of using NFTs is that they provide a way to securely transfer ownership of digital assets. Let's say, for example, you wanted to sell your virtual painting. With an NFT, you can add it to a blockchain-based marketplace and put it up for sale. The buyer can then use cryptocurrency to purchase the NFT from you. The NFT itself acts as a certificate of ownership and can be stored securely on the blockchain.
Another important benefit of NFTs is that they are tamper-proof. This means that once you add an NFT to the blockchain, it cannot be changed or deleted. This provides a high level of security and peace of mind for both buyers and sellers.
Why are NFTs interesting?
NFTs provide a new way to think about digital ownership. In the past, we've always thought of digital items as being intangible and without value. However, NFTs are changing this by giving us a way to own and trade digital assets.
In the art world, NFTs are being used to sell digital artworks. One of the most popular platforms, SuperRare, which allows artists to upload their work and put it up for sale as an NFT have seen a number of high-profile sales, including Jim Careys first NFT selling for 69 ETH which is over $100k USD at todays price.
What are some applications for NFTs?
NFTs have a wide range of potential applications. Here are just a few examples:
- Virtual Reality: NFTs could be used to sell virtual reality experiences or environments. This could include things like VR games, movies, or even virtual tours of real-world locations.
- In-game items: NFTs could be used to represent in-game items such as weapons, armor, or even virtual property. This would allow players to own and trade these items in a secure and tamper-proof way.
- Digital Identity: NFTs could be used to store information about your online identity. This could include your name, email address, social media profiles, and even your biometric data.
-Access to Spaces: NFTs could be used to grant access to digital or physical spaces. This could include things like office buildings, parking spots, or even event tickets (this would solve a lot of issues like piracy and forgery).
As you can see, NFTs have the potential to revolutionise the way we interact with both the physical and digital world.
How do you buy an NFT?
If you're interested in purchasing an NFT, there are a few things you need to know. First of all, you'll need to have a cryptocurrency wallet that supports NFTs. For example, the popular wallet MetaMask recently added support for NFTs. Once you have a wallet you can either purchase cryptocurrency using your bank card directly through Metamask or transfer it from something like Coinbase.
Once you have a compatible wallet and funds loaded, you can then purchase NFTs from online marketplaces like OpenSea or LooksRare. These platforms allow you to browse and buy NFTs using cryptocurrency across various networks. Additionally, some collection allow you to buy NFTs directly with a bank card saving you a step.
After you have bought your NFT you should be able to see it in your wallet provided it is NFT compatible.
How do I keep my NFTs safe? Can they be stolen?
Since NFTs are stored on the blockchain, they are very secure. In fact, it's nearly impossible to steal an NFT as they are encrypted and can only be accessed with a private key. However, like all digital assets, NFTs are susceptible to hacking and social engineering if you don't take proper precautions. For example, if you store your NFTs in a centralised exchange like Coinbase they could be stolen if the you lose your password to your account, lose access to your email and get your password reset or the exchange gets hacked.
The best way to keep your NFTs safe is to store them in a self-hosted wallet that supports NFTs such as MetaMask or Gnosis Safe. These wallets allow you to store your NFTs offline in what's known as "cold storage." This means that even if your computer is hacked, your NFTs will be safe as they are not connected to the internet.
Additionally, you should always make sure to keep your private keys safe and never share them with anyone. If you do, they could use them to access your NFTs and steal them.
What's the difference between an NFT and a cryptocurrency?
NFTs and cryptocurrencies are both digital assets that are stored on the blockchain. However, there are a few key differences between them. First of all, NFTs are non-fungible, which means each one is provably unique. On the other hand, cryptocurrencies like Bitcoin or Ethereum are fungible, which means each one is interchangeable with another.
Finally, NFTs are still a relatively new technology and there is a lot of excitement around their potential. Also make sure that before investing in NFTs make sure to do your research and always store them securely.
What is the future of NFTs?
The future of NFTs is very exciting and as we see more and more brands explore how they can integrate them the number of applications will explode.
One example is we're starting to see physical items being tied to digital ones - buy the digital one and redeem it to claim a physical one. A collaboration we saw recently between RTKFT and Rimowa allowed 888 people to mint a Digital Rimowa Suitcase for 2ETH which they could then 'forge' into a physical item.
Also we saw a house sold as an NFT that was tied to the physical house itself, kudos to Origin (and Tom + Jon from Shiny) for making it happen. You can read about it here.
As NFT technology continues to develop, we will likely see more and more use cases for them. So far, they have been mostly used for art and collectibles but there is no limit to what they can be used for. It will be interesting to see how the technology develops.
So there you have it! This is just a brief introduction to the world of NFTs. I'm sure we'll be hearing much more about them in the future as they continue to gain popularity.
Thanks for reading!
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