What Is NFT? How Does It Work? Should We Be Careful?

NFTs are the talk of the town Nowadays. Everybody is talking about how profitable NFTs are.  What is NFT? How do they even work? Who sets the prices? How do you make and buy them? There are many questions that might come to mind when thinking about NFTs. Don’t worry, we are here to answer all your questions once and for all. 

What is NFT? 

Before delving into the question – What is NFT? we need to know the full form of this abbreviation.  

NFT stands for non-fungible token. These are digital assets that represent real-world things like music, art, painting, video etc. Cryptocurrencies are used to sell and buy NFTs. NFTs have been around for 8 years, since 2014, but gained popularity in the past few years as the market of Cryptocurrency is growing exponentially. They are unique and have a special identifying code which means that only the owner can access those NFTs. If you have NFTs of any artwork that means that you now own the copyright to that artwork and you can claim it as your own. 

How does NFT differ from CryptoCurrency?

Now as you know what NFT is, the main difference between cryptocurrency and NFTs is that NFTs are not exchangeable. What does that mean? See, in cryptocurrency, you can exchange a bitcoin for another bitcoin because they are equal, but you can’t do the same with NFT as NFTs are non-fungible, meaning they cannot be exchanged with other NFTs because two NFTs are not equal or the same.  NFT is a digital representation of physical things, which means two NFTs cannot be of the same thing, making them unexchangeable. One can only either buy or sell NFTs. 

How Do They Work

NFTs work on the same framework that cryptocurrency works on, that is blockchain. Blockchain is nothing but a public ledger that writes down the transaction on its own and doesn’t involve anyone controlling it, making it the only non-centralised framework in the world. There are a few blockchains in the world but NFTs work on Ethereum and bitcoin blockchains, though many other blockchains are also compatible. 

NFTs can represent many things such as music, art, GIFs, Videos and other collectibles along with Tweets.  Yes, tweets, Former CEO of Twitter Jack Dorsey has turned his first tweet into NFT and sold it for around $2.9 million. Basically, NFTs are the digital representation of physical collectables. 

How Do You Make Your Asset Into An NFT

After knowing what is NFT and how it works, a question arises, How do you turn your assets into NFTs and how do you sell them? In order to sell your NFTs you just have to follow a few simple steps. 

Step 1 – Pick the image, music, video, GIFs or any other collectable that you want to convert in NFT. Don’t go on the internet and download a random picture. The buyers in the NFT world want something that is unique, something that cannot be found elsewhere. 

Step 2 – Choose the blockchain platform on which you want to store your NFT. As we mentioned above there are a lot of blockchain platforms for you to save your NFTs. Some of the most prominent ones are Bitcoin, Ethereum, Solana and Flow. There are a few factors that determine which blockchain platform you should use.  When you convert an image in NFT on a blockchain platform,  there is a fee called the ‘gas fee’ which differs as per different blockchain platforms. That being said, Ethereum is the most used blockchain platform when it comes to storing NFTs because its structure is safe and it is less likely to crash.  However, it has a high gas price compared to other blockchain platforms. 

Step 3 – To store your NFT you will need a crypto wallet. There are a lot of crypto wallets but Meta Mask is the best out of the bunch. All you have to do is type your username and create a password, and your wallet will be ready to use. 

Step 4 – The next step is choosing the NFT platform. There are a few sites that will convert your physical assets into NFT. The most promising website is Open Sea which allows you to convert your physical assets to NFT for free. 

Step 5 – Now you have to create the NFT.  To do that you first have to connect your crypto wallet to Open Sea, then upload your media file. After that, you have to fill in the details of your NFT, like the description of what it is and what it signifies. Then you have to select the blockchain and click on ‘Create NFT’. It will take some time and after that, your NFT will be ready to trade. 

Step 6 – Now you have to list your NFT on Open Sea’s sales platform. To list your NFT you have to go to your linked wallet and click on ‘list NFT’. Now your NFT will be listed and whenever there is a buyer you will get a notification. 

The website Open Sea takes 2.5% of the sale amount as commission and you can also apply for royalty for an extra 1%. If you apply for royalty then every time someone else sells your  NFT, you will receive a 10% share of the selling amount. 

Is It Safe To Buy Or Sell NFT? 

If you are planning to sell an NFT, there isn’t anything that can go wrong but if you’re planning on buying an NFT then it’s a different story altogether. You see, NFTs are very risky because their future is uncertain. There are many countries who are planning on reinstating their ban on cryptocurrency and if that happens, your NFT will be of no use. On top of that, the prices of NFTs are not certain, sometimes people buy NFTs for a handsome amount but cannot sell them any further for even close to that amount. So buying NFTs is a risky business, but you can always try your luck in selling. 

Final Thoughts

Now you know what is NFT and how to sell or buy it, but while buying or selling your NFTs you have to keep in mind all the risks that are involved in the business of NFT and Cryptocurrency. 

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