You’ve heard about it online, possibly heard the term in passing, and you still might be wondering, What is an NFT?

First, an NFT stands for non-fungible token. This term, non-fungible, means that an object, in this case an NFT, can’t be turned into anything else.

If you’re still thinking, “Cool… but what is an NFT?”

I get it. NFTs aren’t an easy concept to grasp unless you’re a 12-year-old millionaire, of course.

So, let’s break NFTs down like this…

Think about a piece of gold.

Gold will be gold whether it’s melted down, in a block, in jewelry, etc…

However, gold is considered a fungible item.

Why?

Gold can be “interchanged with other individual goods or assets of the same type” in the same way a $1 bill can be turned into four quarters.

That makes those items fungible.

So, yes, again, “what is an NFT,” and what makes them “non-fungible”?

Well…

An NFT doesn’t work that way. If you trade an NFT for something else, you will not get the same thing simply because there is no other “thing” that can compare to the original NFT.

Have you ever heard about how no two snowflakes are the same because of their unique make-up? That’s exactly the case for NFTs. Each NFT is unique due to its digital signature, which doesn’t allow for one to be traded for another because there is no valid value comparison.

Therefore, an NFT is basically a digital representations of things. It’s a digital asset that represents objects like art, music or even tweets. NFTs are bought online with cryptocurrency on the blockchain.

Anything can be turned into an NFT on a blockchain distributed database. Even toilet papers, like the ones from Charmin, have been turned into NFTs. The possibilities for an NFT are endless.

How Are NFTs Created?

 NFTs are created through a process called minting. For reference, this minting process is similar to the one that currency coins go through when they are created. Once you mint an NFT, proof of its existence will be recorded. This record can then be used to follow and track the path of the NFT. You cannot tamper this record.

 Here’s the process of creating an NFT:

The first step is to choose a platform. Most NFTs use the Ethereum blockchain. Ethereum is basically a cryptocurrency like Bitcoin. Other blockchains can also implement its own versions of an NFT as well. There also isn’t a rule that prevents you from using other platforms.

 One thing you need to take into consideration when choosing a platform are the transaction fees, which happen every time you make a transaction. Everything you do on the blockchain network requires a transaction fee whether it is minting and selling an NFT, transferring it to someone, or purchasing an NFT.

 The next step is to choose a wallet that is compatible with the blockchain you will be using. Wallets are places where you store your cryptocurrencies as well as NFTs. Once your wallet is set up, connect it to the NFT marketplace you plan on using like Rarible, Nifty Gateway, or OpenSea.

Once you’ve connected your wallet to an NFT marketplace, you will see a page where you can create your NFT. You will be asked to upload the file that you want turned into an NFT. Fill in all the fields required such as “title name,” “description,” etc. Then, the page will prompt you to choose your blockchain. (Example: Ethereum). Make sure to choose a blockchain that is right for you!

Finally, click on “create” and voila! Your NFT has been created in a matter of minutes! However, your token does not go up for sale automatically. You will have to redirect to the NFT page and create a listing to put it up for sale.

What Happens When I Buy An NFT?

Let’s talk about the process of buying an NFT. Let’s say you bought the following NFT by Depthcore.

Now, you might think that purchasing this piece means that you own the above artwork, right? Wrong. Owning an NFT is not the same as owning the actual goods themselves. You only own the token that says that you own the only original copy of the digital file you bought.

Basically, you can think of owning an NFT like owning a digital collector’s item. Although, by owning an NFT, you do get exclusive ownership rights. You just need to keep in mind that, just like physical artworks, the original artist still retains copyright and reproduction rights for their artwork.

How Do You Sell An NFT?

There are two ways to sell an NFT. The first is by attaching a fixed price to your NFT. This method means that the creator attaches a fixed price to their NFT and, in turn, buyers pay to purchase it.

Now, the second way to sell your NFT is through an NFT auction.

The creator sets an initial price, and interested buyers keep bidding until it is purchased. Some marketplaces allow creators to set a “royalty price.” This is the price the original creator will receive if their NFT is resold.

What Is An NFT Drop?

An NFT drop is the exact date and time that a non-fungible token will be released (or dropped). This drop also includes the minting price of the NFTs. Drops usually operate on a first come, first serve basis. Additionally, drops also contain information on how to get your NFT before the price skyrockets.

 So, auctions can be a great way to save money on NFTs especially if you are a collector. You can find information on NFT drops on social media, podcasts, word of mouth, or anywhere in the crypto world.

Should You Buy NFTs?

If you can afford to buy an NFT, should you purchase one?

You need to weigh your options. Unlike investing in the stock market, where you have history to judge past performance, that information isn’t available for NFTs.

There is no guarantee that you will be able to resell the NFT let alone for a price high enough to make a profit. They also do not give you any returns on their own, unlike stocks. The only thing that determines the value of an NFT is buyer demand.

If you find a piece that has a lot of meaning to you, it might be work considering purchasing an NFT. However, as with any investment, you need to make sure that you do your research and understand the risks behind your investment.

Will NFTs Replace Art?

It is unlikely that NFTs will replace art because the people who trade in NFTs are a tiny part of the population. It is safe to say that these tokens won’t replace any type of art whether physical or digital.