Whether through word-of-mouth, on the news, or on an influencer’s YouTube or social media account, NFTs have become a pop culture and tech phenomena. Ranging from those producing their own NFTs to those trading, purchasing, and selling NFTs, there is a broad market that has left some invested, some interested, and some unsure.

Let’s say you’ve heard about NFTs, but you’re still asking the question: what’s an NFT? Maybe you’ve got an idea but don’t understand the appeal. Or maybe you’re interested in purchasing and trading NFTs but just don’t know where to start. In this short guide we’ll take a look at everything from the basic questions, to how to get involved in the NFT economy.

What’s an NFT?

What’s an NFT? Even amongst the amassed popularity of NFTs over the last few years, many of us have still been left asking the question, “what’s an NFT?” You might see images of NFTs, or hear about trades and purchases, but still be a little bit unclear on what NFTs actually are.

Luckily, NFTs are easier to understand than your basic mortgage or rental contract.

So, what’s an NFT?

NFT stands for Non-Fungible Token. Before we get hung up on the Non-Fungible, let’s clarify what token means. Technically, a dollar, a coin, or a cryptocurrency (such as Bitcoin, or Litecoin) are all examples of tokens. Essentially, a token is anything that can be traded for a specified value.

What does Non-Fungible mean then? Non-Fungible refers to the ability of your token to be copied, cloned, or, well, funged. Your common currency is all considered fungible currency. The reason for this is in exchange. If you trade one dollar to your friend for another dollar, the value of those dollars is exactly the same. Aside from any potential tears or stains, you have essentially traded one thing for exactly the same thing, of the exact same value.

The same applies to cryptocurrencies such as Bitcoin. A trade of one Bitcoin for one Bitcoin leaves each party with the same value, in essence, the same thing.

For something to be Non-Fungible, like an NFT, it has to be unique. Trading one token for another leaves each party with a different product that is potentially worth more or less than the other.

This may still seem a bit confusing, but as we begin to delve into applications, it will begin to make more sense.

Are NFTs a New Economy?

While NFTs are a new technology, they are a concept older than currency. In a trading or barter-based market, everything becomes synonymous with an NFT. One person may grow food, while another makes clothes. Those two people can trade clothing for food and each leaves with their own ‘wealth’ based on the worth of the other to them.

Alternatively, one of the parties could ask to exchange currency of some kind at a value decided by the other person.

This is how the NFT economy works.

These unique, digital, Non-Fungible Tokens can be traded, or exchanged for money. Their value is entirely based upon what someone is willing to pay for them, and what someone is willing to sell them for.

The only primary difference is that NFTs can have commissions attached to them. In this case, if you create an NFT, you will get a percentage commission each time your NFT is sold.

How are NFTs Non-Fungible?

A question that comes up a lot when people ask “what’s an NFT” is how they are non-fungible. NFTs operate in the same system as most cryptocurrencies, utilizing blockchain technology. Essentially, every NFT has a unique cryptographic key that identifies it. This key cannot be copied or forged. Due to this cryptographic key, blockchain technology is able to trace the digital possession of the token, ensuring that there is never an existing duplicate, or fraudulent creation. Blockchain technology accomplishes this by tracking the NFT all the way back to its creation.

Due to this, whatever your NFT is, it is completely unique on the digital medium.

What’s the Appeal?

Hopefully you have the answer to “what’s an NFT” now, but you may still be asking what the appeal of this technology is.

There’s a number of reasons to get involved!

If you are purely interested in investment opportunities, NFTs offer similar options that crypto investing does. Value of individual NFTs rises and falls with their sales and demand. Additionally, the creation of new NFTs can affect the value of yours. Furthermore, with the birth and growth of the metaverse, NFTs are part of creating digital property, and will continue to have their value(s) affected by this innovation.

If you are interested in the artistic side of NFTs, it can be an exciting economy that exists similar to the art trading industry. Find digital assets that interest you, or that you think may go up in value due to their artistic significance. This may make you profits, or it may simply provide you with unique digital assets that you enjoy.

There are a number of appeals to NFTs, find what excites you and build your strategy around it!

Source: Plato Data Intelligence: PlatoData.io