NFTs are the latest digital trend, especially after they managed an extraordinary comeback with some impressive figures this year demonstrating the power these digital tokens hold. But for starters, what exactly are NFTs and what’s the concept behind these? Let’s find out!
- NFTs are Non-Fungible Tokens that are singular and unique, and cannot be interchangeable like cryptocurrencies.
- When an NFT is created or “minted”, it is recorded in the blockchain and its encryption cannot be modified.
- NFTs could be any precious and unique item ranging from photos, videos, audio files, or any other digital format.
- Statistics reveal sales of NFTs topped $946m in January 2023, marking the largest market-wide total since June 2022.
- Follow these steps to know how you can purchase an NFT.
What Are NFTs?
NFT stands for “Non-Fungible Token.” Similar to cryptocurrencies, they are also digital tokens that are basically called digital assets. But in contrast, cryptocurrencies are fungible tokens which means they are interchangeable while NFTs are singular and unique. However, both cryptocurrencies and NFTs exist on blockchain technology as cryptographic assets.
The Underlying Fundamentals
We mentioned before how cryptocurrencies and NFTs both sit on a blockchain, which basically is a distributed public ledger that records transactions. The difference here is that each NFT contains a digital signature which makes each one unique. This information makes the transfer of tokens between owners easier, and is also useful when verifying the ownership.
Just like physical cash, a cryptocurrency that one owns can be replaced by another cryptocurrency without the change in either of its value. This means that if you hold a Bitcoin in your digital wallet, its value would be equivalent to the value of another Bitcoin in someone else’s crypto wallet. But this isn’t the case for NFTs.
How Do They Work?
NFTs could be any precious and unique item ranging from photos, videos, audio files, or any other digital format. Some examples of NFTs include comic books, artwork, sports collectibles, trading games, and much more.
Keeping these in mind, let’s think of something unique that you own. It could be a historic cricket bat signed by the player, or a first-edition of your favourite book signed by the author. These are the things that are non-fungible.
Now, if today an e-book is launched with a unique digital signature certified by its author, of which let’s take for instance that only 20 official copies exist on the blockchain, then that’s when you’ve got yourself an NFT. In short, NFTs are digital receipts representing the existence of something unique.
Similar to any digital asset, NFTs hold a value that is set by a market, which is the demand and supply count, and they can be bought and sold in the same way as physical assets. When an NFT is created or “minted,” it is recorded in the blockchain and its encryption cannot be modified. This means that the owner of the NFT can keep it in their digital wallet for life, or eventually transfer the ownership to someone else, which will also be recorded in the blockchain as proof.
The Rise of the Non-Fungible Tokens
After going through a rather rough crypto winter in 2022, NFTs seem to be making a grand comeback this year. As per statistics by DappRadar, sales of NFTs topped $946m in January 2023, according to data across multiple blockchain networks and marketplaces. That marks the largest market-wide total since June 2022.
NFTs have proven to be disruptive in several industries, launching a chain of new digital trends such as music, gaming, arts, artificial Intelligence, and many more.
Determining The Future
NFTs have the potential to continue to rise in value and trading volume as long as crypto continues the bullish trend it had established in January.
This means that it is safe to determine that the future of NFT indicates that the market will grow and expand, along with the adaptation of the support of collectors. Experts predict that tokens will assist with document transfers, and soon enough debit and credit cards may be introduced by the NFT sector to help with the facilitation of the purchase of non-fungible products and services.
In one of our previous blogs, we also talked about how experts have predicted a silver lining to the future of NFTs, with digital artists and major brands promoting and leveraging the inherent transparency and accessibility, shaping 2023 to see NFTs as a building block to create a stronger foundation for Web3 to be built upon.
How to Purchase NFTs?
Buying NFTs requires a crypto wallet and an account on an NFT marketplace. Follow the below steps to get started with your purchase of an NFT:
- Select and Fund a Crypto Wallet
Before you can buy NFTs, you’ll need the tools to transact on NFT marketplaces. For this, you require a crypto wallet, which will essentially help you facilitate any transactions that you like. We recommend LYOWALLET, which is a non-custodial cryptocurrency wallet that allows users to access decentralized services and have complete control of their digital assets.
With a wallet, you may need to go to a crypto exchange to purchase Ether (ETH). With this, you can now trade your USD or fiat currency for ETH, and you’ll be ready to choose an NFT marketplace.
- Choose a Marketplace and Create an Account
Next step is deciding which NFT exchange or marketplace is best suitable to use. As per our research, we recommend OpenSea, which is also a noncustodial platform, allowing users full control and access to their cryptocurrency wallets.
- Connect Your Wallet to the Exchange
You’ll now have to connect your LYOWALLET to OpenSea, which will connect your profile to the exchange and allow you to interact with the marketplace. Once your wallet is connected to your account on the marketplace and your information is uploaded correctly, you’ll be able to start browsing the market for your preferred NFTs.
- Choose and Buy an NFT
Once you have funded your wallet and connected it to an NFT marketplace, you’re all set to start browsing and purchasing NFTs, which feels similar to online shopping in general. You can browse through your options of NFTs, check the prices, and then decide whether you’d like to go ahead with your transaction or not. From there, you need to hit the “buy” button. You should then see the NFT in your wallet, and the corresponding amount of ETH should have been transferred out of it.
Note: It’s mandatory for users to do their own research before purchasing an NFT.
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