How Do NFTs Work?

Bryan Healey18 Jun 2022

Since 2020, NFTs seem to have emerged as gifts from the universe. These digital assets, which include anything from art and music to in-game components, are selling like a 201-carat diamond watch, with certain NFTs commanding millions of dollars. The Nyan Cat meme, which was bid off for $600,000 in February 2021, and Jack Dorsey's first tweet, which was auctioned off for $2.5 million, do not exist in the real world but have become extremely valuable due to NFTs.

What are Non-Fungible Tokens (NFTs)?

NFT is an abbreviation for “non-fungible token,” which implies that concealed within those eccentric artworks is a distinct and non-transferable unit of data recorded on a digital ledger utilizing blockchain technology to provide evidence of ownership. To ensure the originality of each NFT and to verify who owns it, the same or equivalent technology being used for cryptocurrencies is employed. But, unlike with a cryptocurrency unit, each NFT is fully original and cannot be swapped like-for-like. Essentially, NFTs could be created from nearly any unique item that could be stored digitally and has value. They function similarly to any other collector's object, such as a painting, except instead of purchasing a tangible thing, you pay for a file and evidence that you hold the original copy.

How To Buy NFTs

In 2021, NFT revenues reached $25 billion. The excitement is genuine, and it's not going away anytime soon considering Beeple's work "Everydays" was auctioned for more than $69 million. Nevertheless, many are still unclear about where to begin or how to buy NFTs.

Set Up a Cryptocurrency Wallet

Setting up a cryptocurrency wallet is the very first step in buying an NFT. If you're new to cryptocurrency, the easiest place to start is by creating an Ethereum wallet. NFTs rely heavily on Ethereum, which has emerged as the industry's leading blockchain network. Ethereum is the cryptocurrency used to acquire NFTs on the most popular markets, such as Crypto.com and Binance. The MetaMask wallet is by far the most simple to set up among the several crypto wallets that handle ETH. All you have to do is go to Metamask and create an account.

Choose an NFT Marketplace

The next step is to decide where you want to buy NFTS. OpenSea is a prominent NFT platform. Its notoriety has attracted several of the most significant NFT collections, like Cryptopunks and Bored Apt Yacht Club. Because OpenSea employs the Ethereum blockchain, it is simpler and more secure than most competitors.

Buy NFTs

You've created a crypto wallet, funded your wallet with ETH, and decided to purchase your NFT on Opensea. You must now signup on Opensea and link your wallet to the platform. After that, you could explore the marketplace and select an NFT that appeals to you.

How To Sell NFTs

Many have been inspired by the hype surrounding NFTs to turn their artwork into NFTs. If you're a skilled digital artist, you could also make money by selling NFTs. Here's how to go about it:

Find an NFT Platform

You may have some ideas for amazing digital art that you'd want to sell, but you might not know where to begin. Rarible is a popular platform for starting that process. This website lets you create and sell NFTs and is also inexpensive and simple to use. Just create an account and you're ready to start making NFTs.

Create Your NFT

It's time to be creative and create the NFTs you want to sell. You could also upload an MP3, PNG, or GIF file with a maximum size of 30MB. You have the freedom to be as creative as you want while being influenced by NFT trends, or create your NFTs from your original and unique imagination. What's important is that you showcase your creativity in the NFT market.

List Your NFT

Next, list your NFT. Set a price for your NFT, and leave a title and description to entice and give potential buyers info on what your NFT is. Try to be creative and write something compelling that would motivate buyers to look at your NFTs.

Once you're ready to list your NFT, there could be a gas fee (fees being charged for buying and selling NFTS), so make sure you link your cryptocurrency wallet to pay for the fee and get your NFT listed on the platform. Your cryptocurrency wallet is also where payments will be deposited for NFTs you sell.

How To Invest in an NFT

NFTs are purchased and sold using an NFT marketplace designed exclusively for blockchain transactions. Because of the scarcity model, NFTs could vary in cost from a few dollars to millions of dollars.

Here's how to invest in NFTs:

Set Up a Cryptocurrency Wallet

Create a cryptocurrency wallet and purchase some cryptocurrency. Since NFTs are virtually always on the Ethereum blockchain, your wallet should be compatible with Ethereum.

Find an NFT Marketplace

Consider multiple NFT markets. One of the most popular is OpenSea.io, which bills itself as a vendor of unique digital goods and collectibles.  Rarible, Axie,  and Mintable are other notable NFT markets.

Find NFTs to Invest In

Look for the NFT you wish to purchase. You should select an NFT that you believe has significant value potential. The NFT could be a piece of art, music, film, or even a video game item.

Place a Bid or Purchase NFTs

While some marketplaces let you buy an NFT directly, others work more like an auction house. You'd have to place a bid on the NFT you're interested in. Keep in mind though that NFTs are still relatively new to the market, and it’s unclear if they will keep their value over time. If you're planning to invest in NFTs, do so with caution.

How To Mint an NFT

An NFT is a blockchain-based asset that establishes the property of digital goods and physical assets. Minting an NFT is the process of transforming files into digital assets stored on the blockchain.

Here's how to mint an NFT on the OpenSea platform:

  • Buy Ethereum.
  • Create a cryptocurrency wallet.
  • Link your OpenSea wallet to your cryptocurrency wallet.
  • Create a collection.

It's simple to add NFTs to your first NFT collection after you've successfully created it:

  • Open the collection you've created.
  • Tap "Add New Item."
  • Upload your NFT and give it a name.
  • Fill in the NFT's properties, levels, and other descriptions.
  • Finally, tap "Create."

NFTs are conquering the digital art and collectibles industry. Just as the world thought Bitcoin was the digital solution to currency, NFTs are being marketed as the digital solution to collectibles. Although they can be complicated to comprehend at first, once you fully understand how NFTs work, you can join the NFT frenzy and who knows? You might just get lucky and earn millions.

Bryan Healey

Bryan Healey

Bryan, known by his friends as 'blockchain bryan' has been playing with crypto since 2014, early in it's inception. He wants to share what he's learnt over these years, and hopes you'll get some value out of it.

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