NFT 101
Last updated
Last updated
To get started with your NFT experience, here are some main concepts to understand!
Blockchains are simply a new method of storing data. It's an extremely secure and decentralized solution that leverages many modern technologies such as digital signatures, proof of work, and cryptographic hash functions. Do not fret if you do not recognize some of these technologies, just know that these are some of the core concepts that power your emails and the internet as well!
Every action on the blockchain is stored as a transaction(TX). This includes creating NFTs, sending NFTs, and everything in between. These TXs are all publicly viewable and trackable online on website such as Etherscan and BSCscan, and include important information such as who, what, and where the TX took place. Each TX will have an ID, and you can always refer back to this TX ID to track the status of your NFT actions.
This is one example of a random transaction on Etheruem:
Every transaction must specify the people involved (from who, and to whom). In blockchain, people/parties are represented by blockchain addresses (very similar to an email address), which are contained within wallets. Providing someone with your public address or public key will allow others to send assets to you, similar to an email address
A non-fungible token (NFT) is a type of digital asset with blockchain-managed ownership. Examples of NFTs include digital art, collectibles, virtual reality items, crypto domain names, ownership records for physical assets, and more. They function as verifiable proofs of authenticity and ownership within a blockchain network. NFTs are not interchangeable with each other and introduce scarcity to the digital world.
Don't get overwhelmed by the idea of fungibility. Fungibility is a fancy way of describing trade between goods or assets of the same type. For example, all fiat currencies are fungible. To act as a medium of exchange, each individual unit must be interchangeable with any other equivalent individual unit. A one-dollar bill is interchangeable with any other genuine one-dollar bill.
The increasing demand of NFTs allows a higher degree of interoperability, meaning that digital assets can be easily transferred between marketplaces. This allows NFTs to have versatile functions. For example, a CryptoKitty NFT created on the Ethereum blockchain can be used to fight other CryptoKitties in another Ethereum application, Kotowars. NFTs can also have revenue sharing conditions so that the original artist is rewarded every time the NFT is sold in the secondary market. Through this, artists can have a steady revenue stream and are incentivized to continue creating more NFTs.
NFTs have the potential to be one of the driving forces of a blockchain-powered digital economy. They could be used in many different industries, such as video games, digital identity, licensing, certificates, or fine art - and even allow fractional ownership of assets. We have only scratched the surface of the possible use cases for NFTs. What are you waiting for!
