What is NFT and how does it work?


NFT stands for a non-fungible token. This means that hidden in those quirky artworks, there is a totally unique and non-interchangeable unit of data stored on a digital ledger. This data uses blockchain technology to establish proof of ownership. NFTs are collectible digital assets that hold value, just like how physical art holds value, so do NFTs.

NFTs are a lot like cryptocurrencies such as Bitcoin and Ethereum. However, an NFT is completely unique, and it can’t be exchanged like-for-like, which is where non-fungible starts to make sense. The file stores extra information that elevates it above pure currency and brings it into the realm of, well, anything, really.

Any kind of easily reproduced digital file can be stored as an NFT to identify the original copy, like photography, art, music, videos, tweets, and even memes. One can make NFTs from almost anything unique that can be stored digitally and holds value. They’re like any other collector’s item, like a painting or a vintage action figure. But instead of buying a physical item, one is instead paying for a file and proof that he or she owns the original copy. 

The unique identity and ownership of an NFT are verifiable via the blockchain ledger. They were first launched on the Ethereum blockchain, but other blockchains including FLOW and Bitcoin Cash now also support them. Whether the original file is a JPG, MP3, GIF, or anything else, the NFT that identifies its ownership can be bought and sold just like any other type of art. And just like with physical art, the price is largely set by market demand.

NFTs will most likely come with a license to the digital asset it points to. But this doesn’t automatically confer copyright ownership. The copyright owner may reproduce work and the NFT owner gains no royalties. 

Because of the high demand for many types of NFT, they are often released as ‘drops’, much like with events, when batches of tickets are often released at different times). This means a frenzied rush of eager buyers when the drop starts, so one will need to be registered and have your wallet topped up and ready to spend.

The sites listed below are just some of those that sell NFTs:

  • OpenSea
  • SuperRare
  • Nifty Gateway
  • Foundation
  • VIV3
  • BakerySwap
  • Axie Marketplace
  • Rarible
  • NFT ShowRoom

NFTs are also making waves as in-game purchases in video games, much to the delight of parents everywhere. These assets can be bought and sold by players, and include playable assets like unique swords, skins, or avatars.

As a creator of art, the birth of NFTs could potentially give one access to markets that would otherwise not have been interested in their work. The novelty of the medium is such that people are willing to buy art that they otherwise would not have.

The other benefit to art creators is that NFTs are essentially lines of code, and so that code can carry anything. Several NFTs already include the provision that the original creator of the artwork gets a percentage of the price an NFT is sold for each subsequent time it is sold.

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