Non-fungible tokens or NFTs are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can be used as a medium for commercial transactions.
A "non-fungible" item cannot be exchanged for something of equal value. A parcel of land is non-fungible, since each piece of land has its own characteristics, and finding another parcel of land that is strictly the same value is difficult, if not impossible. Art is another example of a non-fungible asset, since its value is very subjective. This is where NFTs come in.
An NFT secures exclusive ownership of a digital asset (for example, of a piece of art, a purchase in a video game, or a tweet - yes, a tweet!). You can buy an NFT at a certain price, but the fact that it is non-fungible allows its market value to fluctuate.
How do NFTs work? Are they a cryptocurrency?
Although NFT transactions are mostly in cryptocurrencies (bitcoin, Ethereum, etc.), they are not themselves cryptocurrencies. Like dollars and other currencies, cryptocurrencies are fungible. If you exchange one bitcoin for another bitcoin, both will have the same value. And you will always have a bitcoin of the same value in your wallet. Since NFTs are unique, they do not have an equivalent value and are subject to market volatility.
Why would you want to buy an NFT?
The more you look into the strange and fascinating world of non-fungible tokens, the more you might try to understand the value of owning them. There are several reasons to invest in them.
There is nothing like rarity to increase the excitement around an object. Indeed, an NFT can only have one owner. This means that potential buyers will set their sights on a particular item and buy it before someone else becomes the sole owner.
The Art of Collecting
In the same way that baseball cards are traded at recess, NFTs are trading cards for the very wealthy. While there is no inherent value to these cards other than what the market assigns to them, their fluctuating value makes owning and trading them a high-risk gamble.
Is it a good deal to invest in non-fungible tokens?
Primarily aimed at risk-taking investors, NFTs offer a unique opportunity to make considerable profits.
If you want to take the plunge and enter the world of non-fungible tokens, you will need to start by opening a digital wallet. This will be used to store your cryptocurrencies and NFTs. Then you'll need to search for NFTs on OpenSea.io or Rarible, find one you like, purchase the cryptocurrency that will allow you to buy it and make your purchase.
Other confusing facts about NFTs
Want to know a little more about NFTs? With NFT sales amounting to $2 billion in the first quarter of 2021, there has to be an explanation for the hype!