What are NFTs and how do they work? First, let’s define what an NFT is in a bit more detail and how these tokens differ from other cryptocurrency tokens (like ERC-20 or QRC-20). NFT stands for Non-Fungible Token and refers to the fact that each token is unique or non-fungible. In simple terms, this means that no two NFTs are exactly alike; they all have differences between them (or lack of differences) which make them unique from one another.
What are NFTs?
Non-Fungible Tokens (NFTs) are a type of crypto token that is unique, meaning it is not divisible into different parts. In other words, an individual NFT cannot be separated into smaller parts—only to be brought back together again.
This stands in contrast to fungible tokens, which can be broken down into individual parts for later use or trade. For example, Bitcoin (BTC) is a fungible token because its units can be split into smaller units and traded individually. While it may not seem like a big deal now, as blockchains continue to mature there will likely be more applications for these kinds of non-fungibility tokens.
How do NFTs work?
A Non-Fungible Token (NFT) is an ERC-721 token that possesses some characteristic that differentiates it from other assets, such as fungibility. There are many possible examples of non-fungible tokens, but one very well-known example is CryptoKitties: these cryptocollectibles can be bred to create new types of cats.
Another possible example would be digital real estate: every single house in a neighborhood would have its specific history/features that distinguish it from every other house on Earth; while a city can have thousands of houses with identical features, if any two houses have unique features then they’re non-fungible.
Why People Invest in NFTs
Collectible tokens are some of the biggest reasons why people invest in non-fungible tokens. The best example is Cryptokitties, which was a hit during its prime time. Investing in crypto kitties was like buying a one-of-kind, collector’s item that someone else could also have. This made every single kitty, no matter how rare or common it seemed, worth investing in.
The same concept applies to everything from Beanie Babies to Pogs to Magic: The Gathering cards; if there’s something you can collect, you should consider adding it to your portfolio as an investment opportunity. Even outside of collecting (for fun or profit), there are a few more good reasons for people to invest in NFTs
How to Buy NFTs
If you’re looking to buy NFTs, all you need is an internet connection. There are two ways to obtain non-fungible tokens: exchanges (and relayers), which we’ll discuss in more detail below, or dApps like OpenSea, CryptoCatnip, or RareBits that provide a marketplace for buying, selling, and trading them.
Exchanges allow users to trade between different assets that function as cryptocurrencies, such as Ether (ETH) or Bitcoin (BTC). A relayer site simplifies buying, selling, and transferring NFTs by connecting buyers with sellers. On a relayer site like OpenSea — with just a few clicks — users can easily exchange goods from one person to another.
The value of unique digital items
There’s already some hype surrounding what people can do with non-fungible tokens. Like any other type of token, NFTs can be used to keep track of ownership or facilitate transactions. For example, someone could create an ICO to fund a new video game that uses NFTs as its in-game currency. If successful, these tokens could prove extremely valuable, especially if players want additional resources or want to invest in rare creatures or items.
The same is true for trading cards: If there’s a demand for a specific card, collectors will pay out big time if it becomes rarer than normal. In short, each of these assets has value because it is unique. The more people that want something, or need it, or think it is cool, then that thing is likely to be considered valuable by a lot of people. You see an item like CryptoKitties being worth $100k because there are few of them and many buyers who want them.
It may not make sense to you why someone would pay so much for something digital but if you’re buying an asset with no resale value then you better make sure there isn’t another buyer who would pay more.
What is Blockchain Technology
The term blockchain was coined in 2008 by a person (or group) using the pseudonym Satoshi Nakamoto. Since then, it has become mainstream — but what is blockchain technology? It’s essentially a shared database with transactions between two parties recorded on blocks (that contain data such as transaction details and time). The blocks are chained together cryptographically so that if you tamper with one block, all subsequent blocks will also be altered.
When a transaction occurs, all participants can see it instantly because all of their computers have access to a single version of the truth. This means there is no need for third-party verification or central authority.
The potential uses for NFTs
Buying crypto-collectibles using crypto is easy, but if you want to own some non-fungible tokens, you’ll need to buy them with a credit card. So before we begin, here’s what you need to know: * There are two ways to buy NFTs: either with real money via a traditional payment processor like Coinbase or PayPal; or with other cryptocurrencies through an exchange such as OpenSea.
Most exchanges only support Bitcoin and Ethereum, so if you don’t have any of those currencies in your wallet yet, head over to our guide on How To Buy Bitcoin & Other Cryptocurrencies.
The blockchain technology used in gaming
There has been a lot of buzz around blockchain technology in gaming. But what is it, exactly? Cryptocurrencies like Bitcoin operate on blockchain technology. Essentially, blockchains track all transactions made on them in an immutable manner, making it possible to easily verify ownership of virtual items. Some companies have used blockchain technology for video games by creating a cryptocurrency that players can earn through playing or buying with real-world money.
Players then use these in-game tokens to buy new characters or skins for existing ones. One such game is CryptoKitties, which allows players to purchase different breeds of virtual cats using Ethereum—the currency that operates on its blockchain network—and then breed their cats to create even more furry creatures.
What is NFT Art?
Non-fungible tokens have to be unique (like digital artwork) whereas fungible tokens like Bitcoin can be used as interchangeable assets with similar value (for example, gold bars). The real magic of NFTs is what they allow us to do: make purchases of unique goods with cryptocurrencies.
Why has no one done it before? A large part of why no one has tried to sell art using crypto until now has been because of its price volatility. What if you bought $10 worth of Bitcoin just to buy an ERC721 CryptoKitty today only for that Bitcoin’s value to crash by 50% tomorrow?
Is it safe to buy NFTs from unofficial sites?
After a recent string of malware attacks against CryptoKitties, some may be wondering if it’s safe to buy collectibles from unofficial sites. Keep in mind that even though CryptoKitties is based on Ethereum, different projects operate differently. For example, according to Polygon, you can also buy NFTs from unofficial sites for CryptoKitties but you need to beware that these transactions aren’t secure — since there’s no official support from Cryptokitties themselves.
It’s always a good idea to double-check any platform you want to purchase collectibles from before actually sending any funds (or personal information). If an official site has been compromised or hacked it should be reported as soon as possible.
Many users see NFTs as something that could help revolutionize gaming in some ways. However, it’s not exactly clear how these items will change things for gamers and game developers alike.
For now, it looks like developers have a lot of choices when creating new tokens, but once users get their hands on them, we might start to see patterns forming. Only time will tell what impact non-fungible tokens will have in games; perhaps one day we’ll all be walking around with a house deed in our pocket! It’ll be interesting to keep an eye on NFT development over time.