It's very common to see crypto-savvy individuals use certain images like Crypto punk as their social media display pictures. When you inquire about the images, you will most likely hear, “That's my favorite NFT.”

You are like, okay…, but what does that mean? They go on to give you an explanation that is most likely complex. You can't help but shake your head and pretend that you understood what they explained so they can stop talking or maybe change the subject of discussion.

It's possible that you have heard of NFTS and you have seen people use it as their display pictures, but you don't understand what it is all about. In this article, you will learn about NFTs, their features, their importance, how they work, and what you can do with them.

What is an NFT?

The term, "NFT," is an acronym for Non-fungible tokens. A token is a term used to refer to a digital asset that represents value in the crypto ecosystem. Non-fungible simply means that an item or commodity cannot be exchanged for another item even if they are similar.

For instance, you can exchange USDT for Bitcoin. This is possible because a cryptocurrency can be exchanged for another cryptocurrency. You can even exchange cryptocurrencies for Fiat currencies. Cryptocurrencies are fungible tokens.

Going by this explanation, an NFT is a valuable token that cannot be exchanged for one another or exchanged with one another. It is non-fungible because no two NFTs are the same.

Same way, no two humans have the same fingerprint, it's the same way no two NFTs have the same characteristics. Each is unique. In the past, especially at its infant stage, NFTs were only used to represent digital arts. Now, the reverse is the case as it can be used on almost everything digital.

Features of NFTs

• It is powered by Blockchain Technology

NFTs are built on Blockchain Technology. Blockchain is the technology that makes it possible to know the original owner of a piece of Art with ease and within a very short time frame like in seconds. Blockchain recorded information in an orderly chainlike manner so it is easy to trace the true owner of an Art.

• They are unique

There are no two humans on Earth with the same fingerprints. Similarly, there are no two NFTs with the same characteristics. You can see this as a feature humans share with NFTS.

• Their value is influenced by the forces of demand and supply

The value of each NFT also differs and is influenced by the forces of demand and supply. No two NFTs can be sold at the same price. This is because the value each creator places on his or her NFT differs and the number of persons who are willing and capable of buying the NFT differs. This is usually referred to as traffic. When NFT C has higher traffic than NFT D, the price is greatly influenced as NFT A will cost more than NFT B.

• Transferrable

NFTs are unique but transferable. No two NFTs are the same but they can be transferred to another person. This means that you can sell the NFT you created, and buy NFTs created by another person. When you buy an NFT created by another person, it is important to know that the creator of the NFT retains the copyright of the NFT except otherwise stated by the agreement between you and the seller.

How do NFTs work?

NFTs can be created and minted by any individual including you. To mint an NFT means to publish it publicly for commercial purposes. Commercial purposes here imply that you are publishing it so it can bought and sold at the marketplace.

When a creator creates an NFT or NFTs, each NFT contains a code that makes it unique and different. The creator selects a marketplace,takes the necessary steps, and publishes it. Individuals interested in buying NFTs are found in NFT marketplaces.

An NFT marketplace is a place meant for the buying and selling of NFTs. The market is digital, not, physical. There are different types of NFT marketplaces. The NFT marketplace differs in terms of the level to which it allows you to mint and buy NFTs.

For instance, open marketplaces allow individuals to sell their NFTs and buy NFTs without restrictions. The reverse is the case in closed NFT marketplaces. In closed marketplaces, you have to apply to join the marketplace, and your application must be approved before you will able to buy and sell your NFTs.

Why are NFTs important?

• It makes the process of ascertaining the owner of an Art easy

In today's technology-driven world, creating and publishing content is easy. Claiming to be the creator of the content is easy and it's often difficult to know the originator of the content especially in a situation where no credit was given to the creator.

This is the reason for the numerous court cases around the infringement of copyright and intellectual theft. NFTs make it very easy to ascertain this because they are built on Blockchain Technology.

Information is recorded on the Blockchain accordingly and transparently. Tracing the origin of an art is not difficult on the Blockchain. With NFTs, there will be fewer court cases around infringement of copyright and intellectual theft.

• It makes the tokenization of real-world assets possible

Tokenization simply means representing an asset digitally on the Blockchain. Investing in real-world assets like real estate can be financially demanding. When it is tokenized, it is divided into bits with NFTs representing shares. Individuals can buy these NFTs and become shareholders of the real-world asset. Not only does this make investing in real-world assets less financially demanding, but it also makes the process seamless, efficient, and transparent.

• It protects creators from individuals with malicious intent.

Creating a beautiful piece of Art is not an easy task. Creators must be protected from individuals who want to duplicate their work unlawfully. You can buy an NFT created by someone else, but the creator retains the copyright of the NFT, except otherwise stated by your contract.

Also, you cannot make copies of the NFT that you bought as NFTs cannot be duplicated. This protects creators from those who have intentions of making several copies of the NFTs to sell them as theirs.

What can you do with an NFT?

• Earn Money

With NFTs, you can make extra bucks through selling and trading your NFTS. To earn money selling and trading NFTs, you need to understand the marketplaces and choose the one that mostly aligns with your goals. Then, create and publish your NFTs.

• Support Your Favorite Artists

You have a creator you admire, right? You can use NFTs to support them. This can be done through purchasing NFTs from them. For instance, popular artiste, Grimes, sold over $ 6 million worth of NFTs. That provided her with another source of income while boosting the relationship she has with her audience.

• Invest in the virtual world and Real World Assets

With NFTs, you can invest in items that are valuable in the virtual world and real-world assets like real estate without breaking the Bank. Some NFTs represent ownership or shares in real-world assets. This provides opportunities for individuals like you to invest in tangible assets like real estate.

Next steps

In conclusion, given its numerous use cases, NFTs (Non-Fungible Tokens) have proven to be more than just hype. From being a timely solution for artists, creators, and collectors in our world where intellectual theft is the order of the day to being the bridge between the virtual and real worlds. This is shown in how it allows you to invest in real-world assets like Real Estate. As the NFT space continues to evolve and grow, it is important to understand how it works and the developments in the space.