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Non-Fungible Tokens (NFT) are digital assets that can be bought and sold online for a profit, stored on the blockchain guaranteeing their complete uniqueness and sole ownership to the purchaser.
NFT transactions are stored using blockchain technology. The blockchain is vital for ensuring the NFT’s uniqueness and proving the purchaser’s sole ownership of the NFT.
An item is described as non-fungible if its properties are unique and one of a kind. Think collectable Pokémon cards, antiques, and vintage comics. They are also non-divisible. You can’t cut a 1st edition Charizard in half, a baseball card into thirds, or split the Mona Lisa into quarters!
Nothing is stopping you from downloading or taking screenshots of an NFT, but you still would not be the official owner of the NFT. You would own a fake that is neither original nor unique and not tradable.
The real truth is, to trade successfully in NFTs you don’t need to fully understand the ins and outs of blockchain technology! But if you do want to learn about it, check out our dedicated Articles page on our website.
NFTs use blockchain technology. The blockchain is a kind of database. Like all databases, the blockchain stores data. More specifically, it stores the transactions made when you buy and sell using Cryptocurrency. Sort of like a bank statement!
When you purchase an NFT, the transaction is stored in the blockchain database.
Most commonly the phrase “NFT” is used to describe digital art, but NFT technology itself actually extends far beyond this and has many other uses.
At the heart of NFT tech is its ability to unquestionably confirm the ownership of an entirely unique digital item, and to allow for it to be exchanged between parties securely. Once the information is stored and the NFT is owned it is also incredibly difficult to illegally tamper with. These qualities in tandem make it highly applicable to:
NFT technology is still in the early stages of development and it’s uses maintain to be explored to a fullest extent. Only time will tell whether the technology will permeate into every day society and use.
NFT trading takes place on an NFT Marketplace, such as OpenSea. NFTs can be bought just for fun, like collectables, or they can be used as an investment (e.g. to make money). Those who want to make a profit will buy an NFT, wait for the value to increase over time and sell it at a higher price.
In the NFT world, the options are many and diverse, which leads you to wonder: What NFT should I buy?
The best advice is to stay up to date. Follow NFT information accounts on Twitter, Instagram, Facebook, Discord, Reddit and TicToc to see what is popular and stay ahead of the curve. Check regularly on the major crypto and NFT news websites to remain in the know. This will help you to spot trends quickly and make smart choices.
Technically, anytime!
It is always advisable to do your research and to ensure that you are largely financially stable before investing.
If you are buying to turn a profit, invest in NFTs that you expect to become popular, sell it when the NFT has increase in value.
(It is also worth bearing in mind that certain sites, like Coinbase, have a minimum age limit of 18, but this is not the case for all websites)
A digital asset is anything that exists solely in digital form, holds monetary value and has exclusive ownership rights (e.g. is owned by an individual or organization).
Examples of digital assets include websites, videos, data, cryptocurrencies and, of course, NFTs!
Predominantly perception. If an NFT is perceived to hold value by a large number of people, then its value will increase, and vice versa.
Simply put, if you are buying to turn a profit, invest in NFTs that you expect to become popular and sell them when their value has increased.
We know that we can use crypto to trade other crypto and NFT’s, but what can you actually buy with crypto in the “real world”?
The list of what you can buy with crypto is growing, but as it stands it is somewhat limited compared to fiat currency (e.g. dollars, euro’s, pounds).
Right now you can spend crypto on:
NFTs use blockchain technology. The blockchain is a kind of database. Like all databases, the blockchain stores data. More specifically, it stores the transactions made when you buy and sell using Cryptocurrency. Sort of like a bank statement!
A crypto wallet is a software program that stores your public and private keys, which give you access to your digital assets (e.g. NFTs, cryptocurrency). Your keys interact with the blockchain to prove your ownership of your digital assets and allow you to buy, sell, and trade crypto and NFTs.
When you use a crypto wallet, you will receive a public key for each blockchain you wish to use. Crypto users can share the public key with others to receive money – similar to the account number and sort code on your debit card.
Share your public key (NOT YOUR PRIVATE KEY), found in your crypto wallet, to anyone you wish to receive a payment.
When you own any NFT or crypto, your private key proves your ownership. Therefore, if anyone were to discover your private key, they could use this to access and steal your crypto or NFTs. Make sure that you never share your private key WITH ANYONE! You can find your private key in your crypto wallet.
The purpose of the public key is to allow you to trade with others, like the sort code and account number on your bank card. A private key simply proves your ownership of your NFTs and crypto. To access and trade your digital assets, you need both the public and private key. Remember, you must never share your public key!
Your crypto wallet doesn’t store your NFTs and crypto like a typical wallet. Instead, it holds your public and private keys allowing you to trade and prove your ownership of crypto and NFTS.
Each crypto wallet software (e.g. MetaMask, Coinbase Wallet) will have different safety features to keep your keys safe, like simple passwords or seed phrases.
A Mona Lisa poster is not exclusive. I can buy one online. However, there is only one original Leonardo da Vinci painting. Owning the original is more exclusive than a copy. The same principal applies to NFTs.
Every purchase on the blockchain requires computational power, which has a cost. Gas price is the cost required to perform said transactions on the blockchain network. Gas prices fluctuate based on supply and demand.
When you buy an NFT, you will partly be paying for the gas price so that your transaction can be processed and inscribed onto the blockchain.
The U.S dollar, British Pound and Europe’s Euro are all examples of fiat currency. Central banks and governments control fiat currency.
On the other hand, cryptocurrency is not controlled by any central organisation. Cryptocurrency is described as decentralised as all data and transactions are not controlled by a single entity and is public.
Some crypto wallet software requires you to have a “seed phrase” as an extra security measure.
A seed phrase, also known as a “recovery phrase”, is a list of random words that allow you to recover your wallet in an emergency. Like a master password!
A seed phrase is used to access your whole wallet, which can hold multiple public and private keys, so you must keep it secure. Under no circumstances should you share your seed phrase.
Many suggest writing it down on a piece of paper, keeping it off the internet entirely!
“Decentralised”, in terms of digital assets, is referring to the way in which they are not controlled by any single (central) organisation i.e. Banks.
Instead, the control of digital assets, like crypto and NFTs, is monitored by all who invest.
In blockchain, a “block” refers to a set of NFT or crypto transactions that are grouped together. These blocks are then connected forming a chain (blockchain…get it?).
To learn about blockchain read our article Blockchain for Noobs.
Blockchain is incredibly secure in a variety of ways. One such way lies in the fact that blockchain is entirely public. All transactions stored on the blockchain are shared with all blockchain users, forming a network.
If someone attempted to hack or change the data on the blockchain, their corrupt block will not match the blocks in the rest of the network, proving it invalid. This is often described as a “consensus mechanism”.