There’s been an explosion of interest around the NFT market. The art world has accepted NFTs as the new popular method of selling and trading digital art and the crypto market has seen the potential for profit and investment within the industry. Despite the intrigue, there’s still a veil of mystery around what a NFT actually is and how it works. In this, we explore.
What does NFT mean?
NFT stands for non-fungible token.
A token that is non-fungible means that one token does not equal another token. Let’s look at Bitcoin to explain: One Bitcoin equals another Bitcoin and they can be traded one-for-one like a dollar. These are fungible and represent the same thing and hold the same value. Non-fungible, though, means that one is not the same as the other. In the same way that one Van Gogh piece is not the same as another Van Gogh, one NFT is not the same as another NFT.
How do NFTs work?
Basically, NFTs can be anything that is digital. Usually, this is digital art in any form from drawings to cartoons, from trading cards to music. Anything that can be made digitally or can be turned into something digital can be an NFT. A lot of the hype around NFTs is in digital art and collectables in the industry.
When you buy or win an NFT in an auction, you get the rights to own the digital form of it. In the same way that a person might own an art piece and have a letter or certificate of originality of the ownership, the owner of an NFT has blockchain backing up their ownership.
Because of the way things work, it’s possible to copy the artwork or make a replica of the NFT. This isn’t very different from making an identical copy of original artwork. The key purpose of NFTs is in the direct ownership – and the rights to that. So just because you might own a very convincing Van Gogh piece, it doesn’t mean you own the original. Similarly, you might be able to copy and paste a digital art piece, but it doesn’t mean you own it.
The tech behind a NFT in a nutshell
Most NFTs are supported by Ethereum’s network and the information is stored on the blockchain. While they exist on Ethereum’s blockchain, they’re different from the native cryptocurrency (ETH). This is because Ethereum is designed as a platform for other networks, applications, and blockchains to operation on. NFTs are used with blockchain and smart contracts as the underlying technology.
If you want to buy or sell NFTs, there are several marketplaces that allow NFT transactions. These include OpenSea, Rarible, and Nifty Gateway, but this is just a small list of others that are available.
Are NFTs safe and secure?
Like all things blockchain-related, NFTs are as secure as the person who owns them lets them be. What this means – if someone is storing their NFT in a secure cold wallet and keeps the key to the information offline and very safe under their bed, their NFT is pretty secure. But if they’re using open internet and insecure networks, there’s a possibility their information can be hacked and their NFT can be stolen. So although blockchain makes it possible to add layers of security, NFTs – like cryptocurrencies – can be stolen.