What Is NFT?

The internet is seeing an explosion of activity and buzz around NFTs. These unique digital assets are not only collectibles, providing a lucky owner to own a one-of-a-kind piece of art, but they are also becoming wildly profitable investments.

But what is NFT and why are they all the rage right now? If you don’t want to keep missing the boat then you need to study and learn what NFTs are as soon as possible.

It’s still early enough in the lifecycle of the NFT craze, that you can get into them early and potentially earn some serious money, kind of like how the early purchasers of Bitcoin are sitting on a huge profit at the moment.

Keep reading to learn exactly what an NFT is, and why NFT investing should be on your to-do list. 

Fungible vs Nonfungible

NFT stands for nonfungible token. In order to understand what nonfungible means, you first need to understand what fungible means.

Say you have a dollar bill. You walk up to your friend and trade your dollar bill with their dollar bill. Each one is identical, and they are both authentic. You can swap without concern because they are both equal.

They are fungible, meaning that one dollar is the same as all the other dollars in the system. They aren’t unique, and it doesn’t matter which dollar you have.

NFTs are also related to cryptocurrencies, in that they live on the blockchain. Cryptocurrencies are also fungible. One bitcoin is one bitcoin, and it doesn’t matter which one you have. 

But NFTs are nonfungible, meaning that an NFT is one-of-a-kind, or is super limited. Each NFT is unique and is not mass-produced.

What is NFT and Why Do They Matter?

But what exactly are NFTs? They are digital assets. Technically, they can be anything. But in current times, most NFTs are digital art pieces.

They are images, files, or characters that exist online. Think of a painting, such as the Mona Lisa. The original Mona Lisa was painted by Leonardo da Vinci. It is insanely valuable because there is only one of these original paintings.

The Mona Lisa, therefore, is nonfungible, as you can’t just swap it for another Mona Lisa. 

However, there are many duplicates available. You can buy a print of the Mona Lisa, which is a cheap copy. These do not have value and are fungible. A printer might print one thousand copies, and one copy is the same as another. 

So why would you buy an NFT, if someone could easily replicate it online? Because NFTs live on the blockchain, just like cryptocurrencies, ownership, and authenticity can be tracked.

That means that you can confirm that any NFT investments that you buy to be original and authentic, so you know you are getting a one-of-a-kind piece.

To invest in NFT collectibles, all you need to do is visit an NFT marketplace online, where artists and second-hand sellers will list their assets for sale. You will typically use cryptocurrencies to pay for these, and you can store them in your wallet.

Because they are unique, they have the potential to rise in value, to the point where you can sell one in the future for many thousands of dollars, if not millions of dollars, if your NFT was created by a famed artist. 

Start Collecting NFTs Today

So what is NFT? They are unique digital assets that are not commodities, nor can they be replicated. Their authenticity and ownership are tracked thanks to the power of the blockchain.

And they are investments, as they have the potential to rise in value so you can sell them for a profit later on.

Looking for more information related to emerging technology and financial markets? Head over to our blog to keep reading today.