What is an "NFT"?
An NFT or "non-fungible token" is a cryptographic asset on the blockchain with unique identifiers and metadata that distinguish NFTs from each other. They are bought and sold online using cryptocurrency and are generally encoded with the same underlying software as other cryptocurrencies. In other words, an NFT represents a unique digital certificate that is stored on the blockchain and provides ownership rights to a digital item. It is important to understand that NFT is a technology and it is not the actual work that we see. In other words, the visual part is attached to the NFT. Much of the current NFT market is centred around collectibles such as digital artwork, GIFs, videos, and even music tracks.
What is a "blockchain"?
A blockchain is a distributed and decentralized digital ledger that holds a chronological, ever-expanding chain of data that is connected on a peer-to-peer basis. This technology cryptographically verifies and records transactions. Data stored on the blockchain is publicly accessible and immutable. The entire chain of transactions is stored on the computers of many independent users. Even if one or more computers fail, the information is not lost. Each block in the chain contains a certain number of transactions, and each time a new transaction occurs on the blockchain, a record of the transfer is added to the database of each participant in the network. Each block contains a unique code and each subsequent block contains information from the previous block. Therefore, blockchain technology allows us to clearly and quickly determine the owner. However, it is not only a database of owners but also a method of encryption and data transmission.
What makes NFT technology so revolutionary?
They are used for digital assets that need to be distinguished from each other to prove their value and rarity. Before the creation of NFTs, it was not possible to simply prove that you owned the original digital item or sell, for example, a photograph in digital form or digital artwork. It is NFT and Blockchain that have made it possible to establish and prove ownership in the digital world. In other words, NFT and blockchain provide artists and creators of digital work with a unique opportunity to offer their works in the art market.
What is the difference between Bitcoin and NFT?
NFT and Bitcoin are tokens, but the difference is that Bitcoin is referred to as "fungible”. NFT, on the other hand, is referred to as "non-fungible." “Fungible” means that, for example, if you decide to exchange a £1000 note with someone for two £500 notes, even though the notes are different, they have the same monetary value. In contrast, “non-fungible” means that an item is unique and cannot be exchanged for another item. The proof of uniqueness and ownership is on the blockchain.
Why do people buy digital works that they can simply download?
Because NFT allows you to own the original item that has all the value. The data confirming ownership and the original work is stored on the blockchain. This is very similar to physical art: for example, a fine art or print copy of a painting of the famous Mona Lisa does not make you the owner of the original work.
What is "minting"?
Minting, or minting, is the process of creating non-fungible tokens (NFTs) on the blockchain. Minting is done through a smart contract, which is computer code stored on the blockchain on which it is managed. Contracts are automatically filled once the terms of the contract between the buyer and seller, which have been previously written into the code on the blockchain, are met. Therefore, an NFT can have only one owner at any time.
What does an NFT contain?
An NFT contains several different pieces of data, such as the blockchain wallet address of the current owner, a unique set of numbers and letters referred to as the TokenID, and metadata that is the core of the NFT. The metadata contains the name of the NFT, a description, and other information deemed necessary by its creator. In many cases, the NFT metadata also includes links to images and other "primary" digital assets that give the NFT its value. Because blockchain transactions are fully transparent, anyone can view all the movements of a given NFT and its underlying information, including the blockchain address of the current owner and the blockchain address of each owner since the minting of a particular NFT.
Where is the NFT stored?
To buy NFTs, one must have a crypto wallet. This will be used to buy, sell, transfer and store NFTs. It is important to understand that blockchains are not necessarily compatible with each other. This means that NFTs that have been purchased or minted on a particular blockchain may not be portable to another blockchain. The best known and most widely used blockchain is "Ethereum". You can view all relevant data about your NFT in your crypto wallets.
What are the advantages of NFTs?
Security - Blockchain ensures that NFTs are immune to deletion and theft (if basic security conditions are followed). Since NFTs operate on the blockchain, all transactions are secure and anonymous.
Transparency - They are easily transferable and not subject to fraud. All NFT transactions are easily traceable on the blockchain. Anyone can verify who is the current owner of a given NFT and who was before them; when it was sold and for how much. Transaction history cannot be deleted or changed.
Anonymity - for any transaction, only the wallet number from which the action was taken is displayed in the blockchain. The crypto wallet is not publicly linked to the true identity of the person who created it.
Uniqueness - Each NFT has different data, meaning that it is unique and cannot be exchanged for another item, even though they may be visually the same.
Accessibility - Unlike physical art, you always have your purchased work with you. You can easily view your collection on your smartphone after installing a crypto wallet.