NFTs, or non-fungible tokens, are one-of-a-kind assets that usually come in the form of digital artwork, collectibles, videos, or in-game items.
An NFT shares many similarities with cryptocurrency tokens. Both are digital assets that utilize blockchain technology and NFTs–like crypto–can be stored, sent, received, and managed. Unlike the vast majority of cryptocurrencies, which are designed to share similar characteristics to digital money, NFTs are non-fungible, which means each NFT is entirely unique. Whereas any Bitcoin can be used interchangeably with another (and one Bitcoin holds equal value to another), no two NFTs are the same.
NFT Explained for Beginners
While traditional cryptocurrencies are designed with fungibility and divisibility in mind, all NFTs are non-fungible and the vast majority are not designed to be divisible, meaning most NFTs can’t be broken down into smaller units that still add up to the same value as a whole unit. While fractionalized NFTs (F-NFTs) that enable fractional ownership do exist, they represent a small share of the overall NFT market.
Therefore, NFTs allow users to own unique and/or collectible digital assets that come in the form of art and music, videos, virtual in-game items, digital tickets, collectibles, and more. Almost anything can be turned into an NFT, including Taco Bell GIFs or, on one memorable occasion, a $95,000 real-life Banksy artwork that was purchased, turned into an NFT, and physically burned.
Why Are NFTs Valuable?
Due to an NFT’s inherent scarcity, in-demand NFTs often command staggering values from NFT collectors, enthusiasts, and speculators. Even multiple NFTs that feature the same identical image have separate, unique digital signatures. For example, a creator can release a limited run of 50 NFTs, each depicting the same illustration. These limited run NFTs can be sold individually to separate owners, who would then each own their unique iteration(s) of a limited run release.
How Are NFTs Created?
NFTs can be minted, or created, by anyone with a crypto wallet and the requisite funds to pay for the transaction fees involved with minting an NFT. Once an NFT is created, it can be listed for sale on an online NFT platform.
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