What is an NFT and How to Invest your Money in Digital Tokens?
There has been a lot of talks lately about Non-Fungible Token, especially since right now they are valued in billions of dollars. But do you know what an NFT is?
In theory, a non-expendable asset has unique characteristics, and therefore cannot be exchanged for any other resource of equal value, which makes it highly attractive.
Knowing in-depth about digital tokens is key to understanding the future, and to taking advantage of all the investment opportunities and financial prosperity that they offer you.
Expendable and non-expendable goods:
If you are wondering what an N FT is, you have come to the right place. In this article, we will explain how it is defined, what its characteristics are, and how you can invest money in these assets successfully.
The starting point is to fully understand the concept of expendable or non-expendable property.
The first of them refers to goods that can be exchanged, and whose value varies depending on their weight, number, or measure.
A classic and simple example of a consumable good is money. If you have a $ 10 bill you could exchange it for another 10 euro bill, since it is the same, and also, it does not lose its value.
While non-expendable goods cannot be substituted or exchanged under any precept or circumstance. They are simply unique and exclusive.
A work of art is a non-expendable good. This means that it cannot be exchanged for another because its values are not equitable or equivalent.
So understanding the difference between the two assets is crucial to familiarize yourself with the topic of Non-Fungible Token in a simple and precise way.
What is an NFT?
Once you have mastered the essence of a non-expendable asset, it will be more practical and dynamic for you to know what an N FT is.
Non-Fungible Token (NFT), whose literal translation is Non-Fungible Token, are defined as digital units of value that are unique in the world.
This means that an NFT cannot be modified or exchanged for another asset of equal value, because there is simply no other like it.
Comparing a non-fungible token to a work of art is one of the easiest ways to understand what an NFT is.
Take the example of the famous painting by Leonardo Da Vinci, known worldwide as “The Mona Lisa.”
There is only one on the entire planet, the only original, and it is in the Louvre Museum in Paris. So if someone wanted to have it they should buy it (assuming it was for sale).
And although you may be thinking that you could acquire a replica without problems, you must be clear that there is only one original work, and that is precisely what gives it so much value.
In the case of NFTs, the same thing happens. They are irreplaceable and unique digital assets that, although they can be copied or replicated, do not replace their original versions.
This means that the person who owns the NFT owns the original. And this is easily verifiable through its respective certificate of authenticity and the acquisition rights that it carries.
According to the BBC, NFTs are “inimitable assets” in the digital environment, which can be bought or sold like any other property, except that they do not have a tangible form.
Main features of NFTs
It is not enough to know what an N FT is, so it is also important that you know some of its characteristics:
1. Non-Fungible Token cannot be imitated. Although they can be replicated, there will only be one original asset in the entire world.
2. They do not admit exchanges, since they are “non-fungible”.
3. An NFT does not have a tangible representation or form. It is a digital asset or voucher, not a “real” item. They are pieces of digital content that are stored on a server.
4. Some NFTs support different value ranges depending on their uniqueness. An example of them is the NBA’s digital or collectible card games.
5. These non-fungible assets are based on the famous “chain of blocks”, or Blockchain. Therefore, they cannot be hacked or forged, as this technology is 100% decentralized.
6. You can buy or sell them, just like other assets or properties. But in this case, the operations are supported by the Blockchain.
These are some of its characteristics, but the truth is that the list is more extensive. It includes particularities related to its standards and origins that are also worth knowing.
How these digital assets work
To understand all the dimensions of these assets or digital content, that is, to know well what an NFT is, you must analyze its operation.
The first thing you should know is that any digital content can become a token thanks to Blockchain technology and smart contracts.
Both endow the NFTs with a series of metadata that guarantee their authenticity, as well as identifying their author.
Additionally, they allow the identification of their acquisition and departure value, as well as every one of the transactions that they have experienced since the first moment of their creation.
An NFT can be a meme, an info-product like an ebook, a JPEG file, and even a tweet.
When they are converted to a token, they are created with a digital certificate of ownership and authenticity.
This means that only the person who has acquired it owns the property rights. And as for smart contracts, it should also be noted that these are very useful.
For example, they serve to assure creators that they will receive a portion of the profits derived from the sale of their tokens in the future.
Specifically, NFTs work with Blockchain technology; the same as cryptocurrencies like Bitcoin.
This technology works through a network of fully decentralized computers, whose nodes or blocks are linked and secured thanks to cryptography.
You should know that each NFT is assigned a digital certificate of authenticity, whose metadata cannot be altered or modified.
Do you wonder what that means? Or what is its importance? It’s simple: if you buy a Non-Fungible Token there will always be proof of its first value and the amount you have paid.
How to invest your money in an NFT
Currently, a large part of the NFTs is based on the standards of Ethereum and its blockchain.
And since this technology is widely popular, it is very easy, safe, and simple to carry out buying or selling operations.
For this, you must use certain wallets, also known as “digital wallets”, that operate with this network.
However, you must remember that you will not be able to make active sales purchases, as is the case with digital currencies since NFTs are unique works.
You can create, or buy and sell a token through the famous “NFT marketplaces”, such as MakersPlace, Valuable or Niftygateway.
The prices of these assets are stipulated there, which can be fixed or adjusted to an auction model.
These markets concentrate a large number of NFT creators, as well as artists who offer their tokens for sale; and of course, to the asset owners who do business with them.
Payments are made in cryptocurrencies, such as Ethereum, and therefore, you need to have a crypto active wallet to carry out this type of transaction.
Why are they valued in millions of dollars?
Today the most important question to ask yourself is not what is an NFT. But why these digital assets are valued in billions of dollars.
More and more investors are willing to buy Non-Fungible Token globally since they are convinced that their value will increase over time.
Therefore, the time will come when they can sell them for a greater amount of money, taking into account that they are unique assets.
Million-dollar operations have already been closed in this regard, which has caused surprise and uproar. Here are some of them:
- The token for a piece of art by Mike Winkelman was auctioned for $ 69 million.
- A 10-second video that sold for $ 6 million.
- The Nyan Cat Gif, which later became a meme, sold for over half a million dollars.
- The singer’s “Grimes” digital works sold for more than $ 6 million.
- The drawing of a rock that was sold for 260 thousand euros.
- The first tweet ever to sell for $ 2.9 million. The author was the founder of Twitter himself, millionaire Jack Dorsey . (This NFT was purchased by a renowned Malaysian businessman).
The potential of NFTs:
At this point, you should be more clear about what an NFT is, how it works and how you can invest money in them in a safe and decentralized way.
For many, Non-Fungible Tokens are one of the most powerful assets in the modern world in terms of generating wealth.
Therefore, you should not underestimate its possible reach and power, especially if you want to expand your wealth thanks to investments that come to life in the crypto environment.