The hype surrounding cryptocurrency and the development of ever more innovative crypto technologies seems to only be gathering pace.
And more people than ever are curious about these products and how they work, as well as what their benefits are.
It’s not surprising that more people are curious either, as many people are making huge amounts of money trading these products.
And people don’t want to miss the potential opportunities that are available through leveraging these opportunities.
It’s important to walk before you can run, however, and getting some foundational understanding of these products is key before venturing into the crypto world, as there are many teething problems, issues, bugs.
And scams that can cause you to lose money much more quickly than you make it, and many beginners in the NFT space can find themselves easy prey for these pitfalls.
In this guide, we’re going to explain what NFT’s are, how they work as well as their potential uses, as well as some other common questions people have about NFT’s, to help you decide whether they may be something you’d like to invest in.
What Does NFT Actually Stand For?
NFT is one of the most discussed and least understood acronyms that have entered common use, and it’s amazing how few people understand what the acronym stands for as well as what it actually means.
NFT is short for non-fungible tokens.
Which, on the face of it, may not exactly answer many questions. It sounds more like something an IT guy would say to you down the phone rather than a popular new crypto product.
Ok… So, What Does Non-Fungible Token Actually Mean?
Well, first let’s look at what fungible means.
If something is fungible, it’s something that can be replaced by an alternative yet identical item. So if something is fungible, it’s easily replaceable.
The best example of this would be a 1 dollar note. A one-dollar note is fungible because you could replace it with any other 1 dollar note and still be able to use it for what you intend.
In a sense, the humble 1 dollar note is a fungible token!
So, if something is non-fungible, it means that it cannot be replaced by a copy or counterfeit version of itself. A non-fungible token is a token for a particular item that cannot be replaced.
It’s unique, and this uniqueness is verified by the blockchain, which means that it’s impossible to counterfeit or otherwise fake that token.
If you own an NFT, you are the only person that can verifiably own the object that the token pertains to.
While it becomes something of a meme for people to copy, paste and download artworks and other projects which are technically NFT’s to criticize the usefulness of NFT’s.
This is founded on a total lack of understanding about how useful NFT’s are.
If someone owns an NFT artwork, and another person downloads that image and uses it as their profile picture or wallpaper.
That doesn’t change the fact that the person who bought the NFT owns it and has the prestige, as well as all the legal rights, that come with that ownership.
Imagine a squatter in a house or a building. They don’t have the deed to the house, so while they can squat there, they don’t really own the building and the person who owns the deed has the prestige and benefits.
That come with owning that property. The person with the deed also has the right to sell it on. This is essentially what owning an NFT is. It’s the proof that you actually own the particular property or product it’s attached to.
This is an example of what NFT’s really are. They are simply a verifiable token or contract of ownership over something.
There are many memes and criticisms around NFT’s, and these often totally ignore the power and importance of the underlying technology.
Which in turn creates opportunities for early adopters interested in the power of this technology to get in and reap the huge potential rewards that are to be gained in this space.
While mainly used for trading artworks and similar projects, this technology will undoubtedly be put to many amazing uses in the future, from ending the scalping and scamming of concert tickets.
To verifying all sorts of important transactions in various different industries, baseball cards, and trading cards among them.
In short, NFT’s are undoubtedly the future, and as they develop their uses and importance will only accelerate.
How Do NFT’s Work?
The simple version is that NFT’s are essentially a contract of ownership over a particular product, and this is verified by the blockchain.
Most NFT’s are traded and verified on the Ethereum blockchain. For those of you who have been living under a rock, Ethereum is one of the most popular cryptocurrencies similar to Bitcoin.
However, the blockchain of Ethereum is designed to store the extra information that allows NFT’s to work using this network.
It is possible for other NFT’s to be traded on different networks with different cryptocurrencies, and there are a few budding alternatives, however most NFT’s are traded on the Ethereum network.
If you’re not sure what a blockchain is, allow us to explain. The blockchain is essentially a constantly monitored record of the transactions that occur on that particular blockchain.
And miners use their computers to verify these transactions for a small fee, which is why mining is also a popular way for people to make money in crypto.
So think of the blockchain as a constantly updated and monitored record of transactions that allows the currency to be monitored without centralization.
Which is one of the big perks of cryptocurrency as this provides both privacy and constant community monitoring.
What Is The Point Of NFT’s?
This really depends on the type of project!
Some NFT’s are simply a way for artists to sell their artwork and for collectors to verify ownership in a secure and convenient fashion.
However, this is just the beginning.
NFT’s can be used to crowdfund projects, and have many other potential uses, from being able to be used as concert tickets that can’t be forged or counterfeited, to a host of other potential uses that haven’t even been thought up yet.
This is why there’s so much opportunity in this space right now for both developers, investors, and innovators.
What Are The Potential Future Benefits Of NFT’s?
The main and central selling point of an NFT is that it can’t be counterfeited.
This seems like a very simple and superficial benefit, but the importance and utility of this simple fact are potentially revolutionary and will potentially have a huge impact on everything in the future.
Will NFT’s Become More Popular?
It’s impossible to say for certain, but right now NFT’s are still quite a niche product and idea, and mass adoption is still a very long way off.
The tools and systems for using cryptocurrency are still in their adolescence, but there is a ton of opportunity for things to improve, which may lead to mass adoption and huge popularity in the future.
Can You Make Money Trading NFT’s?
Like any form of trading, it is possible to make money with NFT’s, however, it’s also possible to lose money, and many people lose a lot of money, especially as beginners.
If you’re interested in making money through trading NFT’s, it’s best to read and research them widely and ensure you’re confident and comfortable with the risks before diving in.