Updated on February 12, 2024
Perhaps you have already heard about the current trend in the world of cryptocurrencies. Are you familiar with the term NFT? If you don’t know exactly what to change under it, you should definitely get smarter. It is a token that can be used to make really good money today. Are you wondering what the NFT token actually is and how it works? In this article, you will also learn where such a token can be purchased and what types you can choose from.
What are NFTs?
The term NFT is an abbreviation of the English name “Non-Fungible Token”, which can be translated into Czech as “non-fungible token”. What does it mean? Simply that it cannot be exchanged for any other asset of similar value. Therefore, it is not possible to exchange one token for another, as it works, for example, with regular currency, when we can simply exchange one hundred koruna banknote for another. Each NFT has its irreplaceable representation.
These are tokens that are stored on the blockchain and that act as proof of ownership of a certain digital product. It can be a picture, a song, a video, and more. And they therefore carry information about the owner of the given item. This is precisely why we cannot freely exchange them among ourselves. These items remain available to other users as well, so for example a particular image can be viewed by virtually anyone. However, the owner registered in the blockchain who has ownership rights to the object is only one.
We can compare it, for example, to registration in the real estate register. When you purchase a property, you are registered as its owner in the cadastre. And everyone knows who the property belongs to. At the same time, it is not possible for you to simply exchange your property with, for example, your neighbor. Each of these items is unique and has a different value. You can of course decide to sell it. Just like with NFTs. These are usually exchanged for cryptocurrency. And usually for Ehereum.
In order to be able to imagine how young NFT tokens actually are, it is important to remember that the first such tokens began to be created in 2014. But at that time, everything was still in its infancy. Only CryptoKitties started more significant business activity in 2017. These tokens saw a really big development in 2021.
How do NFTs work?
However, lest you get the wrong idea that NFT is a work of art itself, we must point out that the opposite is overwhelmingly true. NFTs are just tokens that are stored on the blockchain. They most often use the Ethereum blockchain, but they can also register on the Polygon, Solana or Bitcoin networks . These tokens carry the necessary metadata. That is, information about the owner and the part, while a link to the given product is also part of it. Their owners keep their tokens directly in their cryptocurrency wallets. If we wanted to store entire works on the blockchain, we probably wouldn’t pay.
The functioning of NFT is based on so-called smart contracts. These are programmed in such a way that, when certain conditions are met, they program a predetermined amount of tokens (it doesn’t have to be a single token, but a whole collection) that contain specific data, and these are then sent to a predetermined crypto wallet. These contracts can also include information about license fees that their creator can collect, or about token deletion. And that after a certain period of time has passed, or after the specified conditions have been met.
Virtually anyone can create an NFT today. And not only with the help of a complex algorithm, but also through various platforms. For example, on Rarible , Foundation, OpenSea or others. They will create an NFT for you according to your requirements. But it’s not free. You have to pay a certain fee for this service. On the other hand, you can create your NFT without any deep knowledge in just a few minutes. You can then immediately sell the NFT created in this way, offer it for auction, or just save it in your crypto wallet.
NFT or cryptocurrency?
Based on what we have already mentioned here, you must have realized that NFT tokens are significantly different from classic cryptocurrency. They are tokens that were not created to launch a new decentralized currency. They are only carriers of information about the work and its owner. NFTs are therefore created for a different purpose than, for example, Ethereum or Bitcoin.
That being said, the major difference is that it is unmistakable. So you can’t just exchange one NFT token for another. And that’s because each of them has a different character and a different value. Just as it is not possible to exchange one work of art for another. Each of them is unique.
And another significant difference is that NFTs cannot be divided unlike other types of cryptocurrencies. If you want to buy Bitcoin, for example, where the value of one Bitcoin is currently around 800 thousand crowns, you will find that you would rather buy only a part instead of the whole Bitcoin. Like 0.3 BTC. This is not possible with NFT. On the other hand, you can only purchase this token in its entirety.
NFT and its kind
NFTs are used in various fields. Now let’s see what kinds of NFTs you can buy.
It is in the world of art that NFTs represent a real revolution. Not only new artists get a new opportunity to monetize their own works. This is because they can also sell in digital form in this way. Owners can then display their works in virtual galleries and, of course, trade with them.
NFT tokens have also been very popular with players, who can own original game characters, weapons or anything else they use in the game. Players trade these with each other within individual games.
NFTs can also take the form of tickets to various events. Of course, NFT tickets can also be transferred to other people or resold at will. Such tickets may also include various benefits such as entry to the VIP zone, refreshments and more.
Of course, among collectible NFTs we can also include art and gaming NFTs, which can be of great value to collectors. But it can also be different collectors’ collections.
It is therefore clear why it is worthwhile to trade NFTs. In many cases, these are original collector’s items that can command a high price today. And above all within the given gaming community or within art collectors. Of course, each NFT is unique. And therefore it also has a unique value. But we can also meet tokens that are worth hundreds of thousands or even millions of dollars.
Tokens are traded in special places called NFT markets. It can be, for example, the already mentioned platforms Rarible, Foundation, OpenSea and others. However, in order to be able to trade tokens, you must of course first purchase a crypto wallet. Because as said, NFTs are kept in crypto wallets. Similar to what happens with regular cryptocurrency. You also need to purchase a cryptocurrency on whose blockchain the given NFT token is stored. This is so that you can pay for the token transfer. The most common is Ethereum.
Then all you have to do is look at the individual exchanges and choose a token that you think could have future potential. Or simply one that interests you as a collector or player. It depends on what your future intention is with your NFT.
Let’s now imagine some NFT collections that have been a great success with collectors and traders in the past.
Among the first we must definitely mention CryptoPunks. This collection is one of the oldest and at the same time the most successful. It was created as early as 2017, but this collection, numbering 10,000 characters, only gained its popularity over time. Many people have found a figure between the individual images, with which they identify in terms of appearance and value. That’s probably why they present themselves with them on social networks.
Bored Ape Yacht Club
If you’re in the area, you should also be familiar with the Bored Ape Yacht Club’s monkey collection. It consists of hand-painted images of 10,000 monkeys, each of which is unique. This collection has also become popular among well-known celebrities, including Justin Bieber and Madonna. These images are further complemented by a collection called Mutant Ape Yacht Club.
Also, the MoonBirds collection consists of 10,000 unique images. This time, as the name of the collection suggests, it is about owls. These tokens bring various benefits to their holders, which include access to the PROOF Collective club as well as the Highrise virtual world. And the longer the owner holds this NFT, the more rewards he can draw.
So let’s understand NFTs as virtual tokens working on the blockchain. However, they differ from ordinary crypto-currency in that they are irreplaceable and carry information about the work and its owner. Today, virtually anyone who owns a computer with an internet connection, a crypto wallet and the necessary cryptocurrency can trade with NFT tokens. Trading with these tokens has become very popular, especially among collectors – whether of art objects, or game characters or game virtual accessories.
Trading NFTs can really pay off – a number of tokens have risen in price rapidly over time. But it must be added that not all NFTs have a high value. Experts even claim that over 90% of current NFTs are worthless. Nevertheless, it may happen that their price will increase in the future, or that others will be created that will have potential. However, it should be mentioned that, unlike 2021, the NFT market is currently rather in the doldrums. It is a young trend, and it is common for them to initially experience fluctuations.
Since it is a type of virtual currency, you should keep in mind that investing in NFTs can be quite risky. This market is also subject to price fluctuations, so it is certainly not a safe bet. And since this is a new trend, no one can predict very well what direction investments in these tokens will take.