NFTs have been dominating the news lately. Recent articles have talked about digital art being sold for millions of dollars, and sportsmen selling unique digital versions of their best plays. For the uninitiated, all of this sounds quite confusing. Before starting to browse through the NFT market, though, it’s important to review the basics especially if you’re new to this strangely, engaging marketplace.
The basic concept behind NFTs
In order to understand NFTs, first we have to learn what a blockchain is. Blockchains house blocks, or sets of information with limited storage, kept through a network of computers. When that limit is reached, the block closes-up and establishes a link with the block that came before it. As a result, each block contains information regarding its place in the chain. Therefore, if someone tries to alter or delete data, the network would detect this change immediately. This makes it one of the most secure methods to store information.
Blockchains are usually employed to store transaction data. This process creates assets that are identical to each other, known as fungible tokens. Cryptocurrencies like Bitcoin and Ethereum are good examples. Non-fungible tokens or NFTs, on the other hand, possess unique identification data. This uniqueness is what makes NFTs so useful. When an NFT is paired with a real world possession, for example, it becomes an extremely safe way to prove its ownership.
The potential of NFTs
The advantage of blockchain technology is that it offers an almost hacker-proof method of storing information. Companies have invested in blockchain technology to store data about their supply chain, and verify contracts. Moreover, governments can use it as a way to safely store sensible information, like migration and voting records. In contrast, NFTs are being used in a series of innovative endeavors, like creating unique pieces of digital art or adding value to game-based virtual economies. This technology, for example, can allow movie production to decentralize. Rather than being financed by a single studio, a community of fans can purchase NFTs to amass the necessary funds. Furthermore, blockchain technology is being used to securely vote on which story should move into production, making the process much more trustworthy and transparent.
How to start buying NFTs
In order to purchase cryptocurrency and NFTs you need a private key and a crypto wallet, which are used to prove ownership and securely store keys respectively. Once a trustworthy wallet has been found, it’s necessary to connect it to a bank account or credit card. Afterwards, it’s just a matter of creating an account in an NFT marketplace. There are many popular marketplaces but it’s important to remember that NFT sellers can be as reliable as the ones on eBay, so it’s highly advisable to make a bit of research before buying anything.
Purchasing NFTs can be extremely profitable, but also risky. There are many self-proclaimed gurus offering dubious advice online, but it’s best to first consult with a true expert. An analyst with, at the very least, a bachelor’s degree in financial services can provide insightful advice regarding solid long-term investments. They can help first-time buyers understand the difference between a valuable NFT with a promising future, and a pump-and-dump scheme. And this is so important for first time buyers it cannot be understated. It can also mean the difference between selling a piece of digital art for multiple times its original price or losing thousands of dollars in a matter of days.
Understanding how blockchains work and where do cryptocurrency and NFTs come from is not easy. It requires understanding complex ideas about computer networks and filtering through questionable sources. Nevertheless, it’s a fascinating concept that has triggered a wave of innovation and, with the help of experts, can open the door for some profitable opportunities.
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