An NFT is a digital asset that represents real-world objects like art, music, in-game items and videos. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.
Although they’ve been around since 2014, NFTs are gaining notoriety now because they are becoming an increasingly popular way to buy and sell digital artwork. A staggering $174 million dollar has been spent on NFTs since November 2017.
NFTs are also generally one of a kind, or at least one of a very limited run, and have unique identifying codes. “Essentially, NFTs create digital scarcity,” says Arry Yu, chair of the Washington Technology Industry Association Cascadia Blockchain Council and managing director of Yellow Umbrella Ventures.
This stands in stark contrast to most digital creations, which are almost always infinite in supply. Hypothetically, cutting off the supply should raise the value of a given asset, assuming it’s in demand.
But many NFTs, at least in these early days, have been digital creations that already exist in some form elsewhere, like iconic video clips from NBA games or securitized versions of digital art that’s already floating around on Instagram.
For instance, famous digital artist Mike Winklemann, better known as “Beeple” crafted a composite of 5,000 daily drawings to create perhaps the most famous NFT of the moment, “EVERYDAYS: The First 5000 Days,” which sold at Christie’s for a record breaking 6.3mil
Anyone can view the individual images—or even the entire collage of images online for free. So why are people willing to spend millions on something they could easily screenshot or download?
Because an NFT allows the buyer to own the original item. Not only that, it contains built-in authentication, which serves as proof of ownership. Collectors value those “digital bragging rights” almost more than the item itself.
Introduction to Non-Fungible Tokens
NFTs are a digital asset class that have recently gained significant interest within blockchain communities. Non-fungible tokens (NFTs) are unique and non-divisible, meaning that each token represents an individual unit of value. The vast majority of tokens in circulation today are fungible — most cryptoassets like Bitcoin or Ether can be divided into smaller units without changing their underlying value. In contrast, NFTs represent a single item or person, so each token has its own identity and uniqueness can make them extremely useful for managing ownership, transactions, authenticity and reputation. A good example of an NFT is a rare baseball card.
How to Trade NFTs on ERC-721 Platforms
To get started, it’s important to understand how you can trade your NFTs on an ERC-721 platform. These platforms generally work by creating a marketplace for users to buy and sell their digital assets. Each new transaction then generates a small commission, usually paid in cryptocurrency, which will be collected by both parties involved in that transaction. If you choose to use DEXes (Decentralized Exchanges), make sure they support your preferred cryptocurrency before registering. For example, if you want to exchange BAT (Basic Attention Token) for SWT (Status Network Token), using a DEX such as Bancor may not be ideal because of its lack of Ethereum support.