What are NFTs? – Decoding Non-Fungible Token from basics
With each day passing, you can’t help but notice the increase in the hype about the NFT space. You can find people tweeting or sharing stories about the new NFT they just purchased or the profit they just made by selling the NFT they bought. When we look at these NFTs or Non-Fungible Token for the first time, we wonder what is so obsessive about these images or videos. Before decoding the hype behind all these jpeg files, let us brief ourselves on what Non-Fungible Tokens are.
Difference between Fungible and Non-Fungible
Before understanding NFTs, let’s make ourselves familiar with the word fungible. Fungible means anything which is replaceable. The pen you use to write is fungible, and you can replace that with another pen. The jacket you are wearing is fungible, as it can be replaced with a similar jacket for the same value. On the other hand, non-fungible means something which cannot be replaced or is unique.
Now imagine the jacket which we talked about before. Will the value of a similar jacket be the same if I told you that it was used and signed by Robert Downy Jr.? How do these two jackets differ? We can call the jacket owned by you Fungible or replaceable and the one signed by Robert Downy Jr. as Non-Fungible, unique or irreplaceable. It will make more sense why the Non-Fungible jacket will have a higher value than the regular one.
NFTs: A Digital Asset
Non-Fungible Tokens are digital assets that we can sell on the blockchain, and they follow a similar concept that we discussed before. Behind those bizarre articles or digital files, each NFT has its own unique and non-interchangeable digital signature. These non-fungible units of data make NFTs unique.
Working principle of NFTs
One might question whether anyone can copy digital files like images or audio files and claim it as their property. In reality, this is not true. Even after downloading the same image and saying you own it, it doesn’t make you the owner of the original NFT. The downloaded image won’t hold the same digital signature as the original NFT.
Let’s take an example of the painting of Mona Lisa by Leonardo da Vinci. If I print the same painting and frame it, will I own it? That’s not possible.
In other words, there exists only one Mona Lisa painting, drawn by Leonardo da Vinci, making it unique and non-fungible.
If we compare it to NFTs, they are present on the blockchain, which is a public ledger. Since blockchain is distributed and decentralised, it helps in verifying the ownership of an NFT by simply going through the records. These transactions cannot be altered or destroyed, making them safe for everyone. Whenever you are purchasing an NFT or creating one, its ownership is get’s recorded in this public ledger. Hence, the ownership of the NFT can be easily verified.
How to purchase NFTs?
If you are interested in purchasing NFTs, you might need to fulfil some pre-requisites.
Consider NFTs as collectable and cryptocurrency as money. To store your cryptocurrency and NFT, you will need a digital wallet. MetaMask and Coinbase Wallet are examples of digital wallets where you can store your collectables and cryptocurrency.
To purchase these NFTs, you will require some cryptocurrencies in your wallet. The cryptocurrency required will depend on what is accepted by the NFT distributor.
These NFTs are hosted on multiple marketplaces, where you can purchase, sell and auction them. Opensea.io and Rarible are some of the most famous NFT marketplaces.
Now that you are empowered with the basic knowledge of NFTs, you are one step ahead of most people who haven’t even shown their interest in Web3. Make sure to keep learning about the space and do your research before taking any action.