What is an NFT? What are NFTs for?

The acronym NFT stands for Non-fungible tokens . So, the literal translation is: “irreplaceable tokens”. It is a unique identification of any work in the digital world. So you pair a record in the blockchain with the work.

This record contains a unique identifier and metadata. Its owner can thus unequivocally prove ownership of the work and trade with it as in the real world. But nothing prevents the work from being copied, moved or modified in the digital world. This fact creates considerable differences between people. Some are able to pay millions for NFT, others say it’s useless.

A bit of NFT history

The idea itself appeared about ten years ago. Quantum generative artwork is on record as the first NFT. This was created by Jennifer and Kevin McCoy and released as an NFT in 2014. They were helped by Anil Dash, a technology entrepreneur. As part of the presentation, McCoy sold Quantum for $4 to Dash, laying the foundation for today’s multi-billion dollar market. The Quantum itself sold at Sotheby’s in 2021 for over a million dollars. And as is often the case, they immediately contested the sale with a lawsuit.

How do NFTs work?

For example, when you own a real image, it is by nature an NFT. It cannot be easily copied , it cannot be divided into pieces and assembled again, and you can usually prove ownership easily. In the digital world, your work can easily be copied and the original author is poorly proven. And this is where blockchain technology is used .

Coins such as Bitcoin or Ethereum themselves have a fungible function . Bitcoin can be exchanged for another Bitcoin, divided into Satoshi and so on. What is not interchangeable are transactions. And those are exactly what NFT technology uses. Most NFTs today are minted in the Ethereum blockchain. Records are stored in a public distributed ledger. You have your record stored in your wallet, and thanks to the blockchain, its authenticity and uniqueness can always be determined. Or sale and transfer to another wallet .

Why is NFT on the Ethereum blockchain?

NFTs can also be minted on other blockchains supporting the ERC-721 standard. In addition to Ethereum (ETH), we have, for example, Solana (SOL), Cardano (ADA), Tezos (XTZ), BNB Chain (BNB) or Tron (TRX). However, because Ethereum stood by the rise of NFTs and supported their creators from the beginning, most of the NFTs are now there. Of course, the NFT mining fee is always paid in the blockchain’s cryptocurrency .

Can NFTs also be in the Bitcoin blockchain?

Recently, the possibility of creating NFTs also appeared in the Bitcoin blockchain . They are called Ordinals and have a significant difference from the ERC-721 standard . This is because these NFTs are directly inserted into the blockchain. Your image, video or text will be inserted into the smallest unit (Satoshi) and confirmed with it as part of the transaction. Your data thus becomes part of the network forever. This technology is new and has its supporters and detractors . The data size of the block thus increased significantly. Unfortunately, there is not yet a sufficiently developed ecosystem around Ordinals.

Where is the work stored?

As already mentioned, within Ordinals, your work is stored directly on the blockchain. It is different in the ERC-721 standard. During the minting of an NFT, a record is created to prove the ownership of the given work. You save this record in your cryptocurrency wallet or leave it stored in the marketplace. The image, video or other digital work itself is not saved. Most marketplaces will save you a preview of the work you own, but it’s more of a visualization for you and for easier selling. You don’t have to worry so much when you send your photo (stamped as NFT) to someone afterwards. Proof of ownership is still in your wallet.

How to create your own NFT?

People often think that an NFT must be a work of art or some sort of exhibit. The truth is that it can be absolutely anything that exists in the digital world. You can have this article stamped as an NFT, your photo or thesis can be stamped as an NFT. There are also extremes where people issue their resignations from work as NFTs. A number of tools work for coinage. For example, the Rarible portal allows you to create such NFTs in the Ethereum, Polygon, Solana or Tezos blockchain. You can also create your NFT directly on the Binance market.

Examples of existing NFTs include, for example, digital photographs, fashion designs, game elements, articles, publications, digital collections, domain names, tickets or vouchers. Vitalik Buterin, the creator of Ethereum, came up with a plan for soulbound tokens in May of last year. These are to form a digital identity and can serve as a fitness card or a medical card.

Where to buy NFT?

While shopping, you’ll come across terms like primary and secondary marketplace . Primary is actually a platform for artists, where an unmistakable token confirms your ownership goes to your created work. It is then resold on secondary markets at market value.

An example of such a digital marketplace can be, for example, the Binance exchange , which allows trading of NFTs on the Ethereum blockchain and its own Binance Smart Chain. Other popular marketplaces include OpenSea (Arbitrum, Ethereum, Klatyn, Optimism, Polygon, Solana), Magic Eden (Ethereum, Solana) or the already mentioned Rarible (Ethereum, Flow, ImmutableX, Polygon, Solana, Tezos).

How to save your NFT?

The storage of your token always depends on the blockchain on which it is created. It can always be saved in a wallet that supports the given network type. Even considering that most NFTs are on the Ethereum blockchain, the Metamask wallet is very popular. A good alternative is also Math Wallet, which supports more than 70 kinds of blockchains. Of course, most secondary markets where you buy NFT will also offer you the option to keep the token with them. In case you only plan to hold for short term for the purpose of speculation, it is of course easier.