NFT (non-fungible tokens) or unique tokens, which have become the new phenomenon of the blockchain ecosystem, offer groundbreaking innovations, especially in the digitalization of art and gaming assets.
NFTs, which are generally obtained by digitizing imagination products, can be sold at astronomical prices by auction. For example, the digital art piece “Everydays: The First 5000 Days” was sold for $ 69.3 million at the auction it was released.
Similarly, the NFT of the “Overly Attached Girlfriend” image, which was released as an internet joke in 2012, was sold for 200 ETH in April, which is approximately 412 thousand dollars.
As reported by Cointelegraph, fashion giants such as Louis Vuitton and Christian Dior are also aiming to create non-fungible tokens.
Finally, journalist Cüneyt Özdemir put one of his tweets up for sale as NFT. The message, which seemed to be sold entirely as NFT, contained the words “This tweet is an ‘ART WORK! #MerhabaNFT”. Later, this tweet was sold for 10 thousand dollars.
While all these developments are taking place, we have compiled the questions and answers most asked by those who have not been interested in NFT before or who are new to the blockchain ecosystem:
1) What is non-fungible token / NFT?
The non-fungible token (NFT), which is a “unique token” in Turkish, means a unique token encrypted on the blockchain network. NFT, which works differently from the conventional coin and token concept; It can be defined as a unique, unalterable entity whose originality and ownership rights are absolute.
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Non-fungible tokens are not interchangeable. NFTs, which represent sometimes a picture, sometimes a video or a sound file, have the potential to reach a high value because they are classified as unique assets.
Today, NFTs are preferred in areas such as digital artworks, interactive game items and sports collection cards.
2) What distinguishes NFT from cryptocurrencies?
The ability to be substituted (fungibility) or being used interchangeably is a critical feature for cryptocurrencies. For example, when Bitcoin was produced, by which miner it was mined, and how many wallets it has been in to date does not affect its value. 1 BTC is always 1 BTC.
Non-fungible tokens, on the other hand, have features that make each one “unique”. The owner of NFT knows that there is no other example of the token in his hand. Non-fungible token, on the other hand, cannot be divided, another instance cannot be created.
3) How is NFT produced?
NFTs in the Ethereum blockchain network are usually produced according to the token standard called ERC-721. We can define ERC-721, which is the first standard to provide NFT production, as an overhaul of the ERC-20 standard used in Ethereum-based cryptocurrencies. This standard was first introduced in 2017. Unlike the ERC-20, these tokens cannot be traded on cryptocurrency exchanges and cannot be converted into other cryptocurrencies.
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The data to be produced as NFT is loaded on the decentralized file storage protocol called IPFS (InterPlanetary File System) through platforms designed for this purpose. After determining the unchangeable parameters of the NFT, technical data such as the number of the token, its price and how much share from its sale should be paid to the owner of the work is added to ensure its production.
4) How to buy NFT?
Unique tokens can usually be purchased through auction sites or platforms developed for this purpose. NFTs, which are mostly sold through auctions, can change hands at a fixed price determined by the owner when appropriate.
After the transfer is made to the wallet specified by the purchaser of the NFT, the full ownership right is transferred. If the user wishes, he can then sell his NFT to another user.
5) Is NFT an investment?
NFT products are generally evaluated as works of art and their prices are determined by the owner. There is not much difference between investing in assets with value such as sculptures, paintings, antiques and purchasing NFTs. Just as an important collection item has been purchased, it is possible that its value will increase as time passes and provide income to the NFT owner.
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6) How to understand the originality of NFT?
Users who want to put their produced NFTs for sale must have a profile verified by the auction or trading platform to prove the authenticity of their work.
The author’s wallet address on the blockchain is clearly stated. In this way, the originality of the work can be checked instantly on the blockchain. On the other hand, as in crypto currencies, the movements of NFT assets on the blockchain can be controlled and their originality can be understood.
7) What can NFT change in the field of art?
In the initial phase, the use of NFT to solve intellectual property problems is expected to intensify. Since almost any content can be copied or used without permission on the Internet, it is easy to understand who the content actually belongs to thanks to NFTs.
At the same time, authors can get their labor, time and imagination in return with a more democratic sales method. Especially if NFT changes hands several times, it is possible to send a certain percentage of the fee to the owner of the work each time.
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Thanks to NFT, almost everyone can obtain artworks. People who cannot access traditional auction methods have the opportunity to obtain their works through digital platforms. Consequently, more art lovers can participate in the ecosystem and the owners of the works can get the value they deserve.
8) Where are NFT files stored?
NFTs containing pictures, audio, video or any data are stored on a decentralized file storage protocol called IPFS. These files are divided into small pieces of encrypted data and archived in a distributed form over IPFS. Then the IPFS data of the file is saved on the blockchain and secured.
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DISCLAIMER: The statements contained here are not investment advice. Never trade without researching the markets thoroughly and without comments from different circles. Read the comments of the investors you trust and consult their opinions. Remember that every trading transaction involves risk. Make your own decision when taking any action. Cointelegraph cannot be considered directly or indirectly responsible for any damages or losses arising or allegedly arising from investment products or services.