What is an NFT and How does it Work?

A Non-Fungible Token is a cryptographically unique asset that can be traded within a standard Ethereum transaction. A fungible token, however, is interchangeable with other units of the same type. This means every single Bitcoin is exactly the same as any other Bitcoin. The fact they are all simultaneously considered one singular unit also means they are all the same in value.

For instance, if you were to purchase one BTC which is valued at $11,000 Dollars and chose to exchange it for two ETH valued at $1,100 per Ether, this would mean that an NFT ( Non-Fungible Token ) is worth exactly double of what its fungible counter part is. In this scenario, the two ETH would be worth $2,200 in total.

This example also showcases how an NFT can be more divisible than a fungible asset. As each Ether is individually worth $1,100 there is no need to break them up into smaller denominations. However, if you were to try and change one BTC into two ETH, you would need to break this transaction up to accommodate the price difference.

The NFT Difference:

The biggest difference between an NFT and a fungible token is that each unit is unique and has its very own ownership. If someone were to send another person’s NFT it would not be possible as it would be like sending currency that is not associated with anyone’s account. This makes the security of NFTs incredibly important as any breach could result in a massive amount of lost assets.

Another key difference is that fungible tokens can be divided into any number of parts, while NFTs cannot. This means that if you hold an NFT, you are the only person who can own that particular unit. This is what allows them to be used as unique digital assets and opens up a range of possibilities for their use cases.

How do I Get an NFT?

There are a few different ways you can get your hands on an NFT. The first is by mining them. This is the process of verifying transactions on the blockchain and is how new Bitcoin, Ethereum and other tokens are created. The second way is by purchasing them from an exchange. Finally, you can also receive them as a reward for participating in certain activities or holding a specific cryptocurrency.

Once you have obtained an NFT, you can store them in a variety of different ways. The most common way is through the use of an ERC-721 compatible wallet such as Trust Wallet or MyEtherWallet. Alternatively, you could also purchase a hardware wallet like the Ledger Nano S and transfer your funds to it for further protection.

What are Some Popular NFTs?

CryptoKitties are by far the most popular NFT to date. These unique digital cats are collectible tokens that can be bought, sold and traded on the Ethereum blockchain. To make things even better they can also be bred together to create new kitties with rare traits. According to DappRadar, CryptoKitties has been the most popular decentralized application (dapp) for the past two years.

Another popular NFT is Decentraland. This virtual world allows users to purchase and own parcels of land which can then be used to create anything they desire. These lands can be sold, traded or even rented out to others.

Other notable mentions include CryptoCelebrities, CryptoPunks and Gods Unchained. All of these are based on the same concept but offer different incentives.

How to Trade NFTs?

There are several ways you can go about trading NFTs with other users. The first is through an exchange or market place. This is a service that allows you to buy and sell NFTs for other cryptocurrencies. The second is through a direct transaction. This is where two users agree on a price and then conduct the trade between themselves. Finally, you could also use a relay service. This is a third-party service that helps to match buyers and sellers of NFTs.

Whichever method you choose, it is important to make sure you are dealing with a reputable and trustworthy source. There have been cases of fraud and scamming in the NFT space, so it is always best to do your research before parting with your funds.

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