Discover the basics of NFTs. Find out: what is the purpose of an NFT? Why should you invest in an NFT? What to know about NFT marketplaces and more
NFT Easy Explanation Guide
It is 2023 and NFTs are not exactly as much of a buzzword as they were two years ago. A lot has happened since they became mainstream and there’s a lot more expected to happen. If you’re just joining the party, don’t worry you’re not too late.
NFTs will definitely be here for a while, and even though you’re not one of the early adopters, you could still get in on the action.
NFT Simple Explanation Guide
In this short article, we will explain all the basic stuff you need to know about NFTs. See it as a crash course to get you started on your journey. No high-sounding jargon or lengthy explanations, just the basics. Let’s get into it.
What is an NFT?
The words NFT are an acronym for Non-Fungible Token. The word fungible is an adjective used to describe things that can be exchanged for each other with equal value.
Prime examples of something fungible are dollar bills. I could give you a dollar bill printed in 2020 and take a freshly printed one from you and they’d be of the same value. That’s fungibility.
Now the opposite of that is “non-fungibility”, the inability to exchange items of value with each other. Think of it this way, you wouldn’t be able to exchange a painting by Leonardo da Vinci for one by Basquiat.
Why? Because even though they are both items of high value you cannot exchange them directly with one another due to different perspectives on their value. NFTs are like the works of da Vinci and Basquiat, they all carry value but can’t be directly exchanged.
Another important feature that NFTs have is the fact that they are hosted on the blockchain. This means they have a unique digital signature that makes them impossible to copy or replicate on the blockchain. This digital signature is actually what is sold when NFTs are traded.
What Can Be An NFT?
Anytime most of us think about NFTs we think of a picture of an unconcerned ape on a pastel-colored background.
Well, that’s not entirely wrong, the similar-looking pictures of apes we see are from an extremely popular NFT project called BAYC (Bored Ape Yacht Club). We’ll drop a picture below for you just in case you haven’t seen one of them.
Back to the question. What can be an NFT? If you ask us, it could be almost anything. As far as it can be represented digitally.
Even though at the moment the most popular NFTs are usually digital art, things like videos, audio, digital perfumes (trust us, it’d take a while to explain that), fart (yes digitally recorded fart sounds) and even tweets (well if you’re popular) can be sold as NFTs.
As long as the item can be represented digitally and has its own unique signature on the blockchain, it can be an NFT. It isn’t that simple though as collectors look out for other things when buying NFTs. The longevity of the project, and the utility (what the NFT can be used for in real life) amongst others.
BAYC NFT— Source: BAYC Gallery
What Can’t Be An NFT?
If we get to it, there isn’t much stuff that can’t be made into an NFT. We have already mentioned some criteria that an item needs for it to be considered an NFT. Here’s a reminder:
- Should be digitally representable
- A unique digital signature (you get that when you register the digital item on a blockchain a process called minting)
- Original. An NFT shouldn’t violate any intellectual property or copyright laws.
If your item doesn’t pass these criteria, you’re not in the “NFT zone” yet.
What is the Purpose of An NFT?
The best way to define the purpose of an NFT is to find out what the project is all about.
NFTs are not just a bunch of recycled, lookalike pfp pictures that sell for thousands of dollars. They always have a backstory and try to connect with the needs of a particular audience.
There are NFT projects that are focused on ecology and protecting our planet. Some are focused on creating opportunities in the Metaverse and others are based more on aesthetics like traditional art. Whatever your interests are, there’s an NFT project waiting for you to explore.
What To Know About NFT Marketplaces?
An NFT marketplace is, well, a market for NFTs. You could go there, browse around for NFTs and make a purchase. You could also see them as auction houses for digital art, as well as a middleman for artists and collectors. Here are a few noteworthy ones you should know:
- OpenSea— Kind of like the Ebay of NFTs
- Rarible— Similar to an art Exhibition
- NiftyGateway— High-end NFTs, curated by experts
- Magic Eden
- Crypto Punks/Larva Labs
If you strip away all the high-brow details usually associated with NFTs, they can be pretty easy to understand. This is why NFTs are also favorites with crypto newbies just as well as they are with longtime enthusiasts.
More information about markets and utilities for web 3.0 here