What Are Non-Fungible Tokens (NFTs)?

You’ve heard about them in the news: Bitcoin tokens? Ethereum? Dogecoin tokens? Decentralized finance? Well, NFTs have been around for a while. But what actually are these digital tokens. The truth is that we don’t know much about them. No one knows how to define them, which could be frustrating, but it makes us wonder, doesn’t it? So let’s find out!

Non-fungible tokens or NFTs?

Image by Riki32 from Pixabay 

Often people think of these unique digital items as things like cryptocurrency tokens or even digital wallets. To clarify their point of view, think of any “unique coin” that has become popular in the last few months. This is our definition of non-fungible token: something different from traditional currency, and that represents an important part of its ecosystem. These goods exist in this space for the benefit of consumers, because NFTs are often limited to certain types of services.

Different NFTs can represent such things as art (which is why so many people would want to see the works of talented artists), games, music, entertainment, memes, books, music and other forms of expression, and they represent valuable assets. And by valuable, we mean that users can use these NFTs to pay what they want (or receive something). Some NFTs can be bought and sold on auction platforms or exchanged on the decentralized market. Think of collectables cards, tickets to concerts/events, video game skins, and others. In addition to those, there can be some less familiar examples: anything made in blockchain, for example, smart contracts, social media posts, NFTs in gaming and crypto economy. There are also more known ones: A digital wallet to store your money at all times, digital stamps, etc. They are everywhere, just as cryptocurrencies are. But don’t worry, not all are created equal, as there are two main types and they are very similar to each other. Let us illustrate a little bit on these 2 types to focus on the differences.

Non-fungible tokens (NFT) vs. Fungible tokens (FOT). On the left, NFTs contain a hard-coded asset. For comparison purposes, you can see a FOT with the price label, and a normal fot on the right. Source: https://www.paxos.com/

NFTs vs. ERC-20 tokens.

Image by Sergei Tokmakov Terms.Law from Pixabay 

In the above picture, both of them are tokens, but when it comes to these tokens the first one is meant for ownership. As a result, each user will receive a number of units (called nfts), which will then give access to whatever he wants, but the second one is a general reference currency (ERC-20) for trading purposes or buying and selling. Each person who wants to buy or sell a particular type of NFT will need several fots and the process of storing those tokens takes place in a public ledger, known as a contract. NFTs can also be used to generate new coins by minting random amounts of existing ones, but with a limit of 50 to 100 million and as we have covered recently, these tokens are often expensive ($0.01 to 0.1 ETH).

So, where can you get your NFT and spend it? How to use it?

Image by Pete Linforth from Pixabay 

One of the major advantages is that they are unsold (unsold is here means that a given owner has the opportunity to acquire it, but only for a finite period of time, or until a pre-set expiration date). Therefore, most companies, such as Facebook, Uber, Apple or Google, allow users with a specific profile to access them. For example, if I have 1 million followers on Twitter, my fan page will have 30,000 followers. That’s just one example, but that’s enough for now!

Since it’s not hard to understand, once you have access to a NFT, you have the power to earn and spend it. Here is our article about that!

How much does it cost to purchase NFTs?

Image by Chetraruc from Pixabay 

There are quite simple ways to measure the costs for purchasing NFTs. Every unit is usually priced somewhere between $0.00 and $0.02. According to a recent report published by Statista, the average price of NFTs was $0.11 per NFT in the United States in 2017. From that data we can easily see that collecting NFTs will probably cost you:

$5 for every 1000 NFTs and a minimum of $1,000;

$1 for every 25 thousands NFTs and a minimum of $10,000;

$0.05 for every 10,000 NFTs, but that’s just for initial purchases.

As the amount of NFTs increases, all these numbers go up too:

$5 for every 1,000 NFTs is equivalent to $1000 (or $1,000 for each individual);

$1 for every 25 thousand NFT is equivalent to $25 (or $1,000 each);

$0.05 for every 10,000 NFTs is equivalent to $1,000,000 (or $1,000,000 for each individual);

$0.01 per 1 NFT is equivalent to $1.50 (or $1000,000 for each);

But don’t let the value scare you, since NFTs can be traded for cash for various exchanges. For example, according to Bitstamp, you can trade BTC, ETH, LTC, BCH etc for NFTs. Since it’s not easy to make NFTs, it’s much simpler to swap them into dollars. Not all exchange rates are available yet, so take the risk! Of course, they can be relatively high, especially for currencies with higher volatility ratios, but it’s worth trying.

Conclusion

We hope this tutorial helped you a bit, even if you don’t understand the concepts mentioned at all. Our goal is not to discourage you, more to provide you with information that allows a better understanding of this area of ​​things. We hope that it gave you a good idea on how to start investing without paying excessive attention to the details that are present within the field, but that could make your life easier down the road. Thank you!

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