NFTs, which have recently become very popular especially with the meeting of the art world with blockchain technology, have attracted the attention of almost all segments of the digital world. Many things, from tweets to videos, from digital artworks to photographs, have been auctioned as NFT. So what is this NFT? How is it produced? How is it bought and sold? Huobi, the digital asset trading platform, has been gathered under 10 topics for beginners to wonder about NFT. Here are 10 questions of NFT craze ...
2- How is NFT different from other crypto currencies?
"Non-Fungible Token" means the digital asset (token) that cannot be divided and cannot be reproduced. Unlike cryptocurrencies like Bitcoin and Ether, which are "Fungible", NFTs are unique digital assets. To explain with an example, today you can buy and buy a Bitcoin or Ether by dividing it into chunks and exchange the same cryptocurrency in its own currency. However, NFT, which is a private digital asset, cannot be exchanged for another token, as it is unlike any other. Its intrinsic value is determined by its producer or investor.
3- How are NFTs produced?
NFTs are produced according to the ERC-721 token standard prepared by #Ethereum developers. There are platforms that enable the transaction to be carried out easily so that users do not get bogged down in the technical world of blockchain. The only thing needed to generate NFT is a digital cryptocurrency wallet. After the file to be produced as NFT is uploaded to the IPFS system via these platforms, the parameters of NFT that cannot be changed are determined. After determining the features such as how many NFTs will be produced, the price, how much share will be paid in the next sale, NFTs are produced by paying the transaction fee of the blockchain network. With the completion of the transaction, NFTs are transferred to the crypto money wallet and recorded in the entire blockchain where the production is carried out.
4- How can I get NFT?
There are platforms where NFTs are exhibited and purchased. You can have the NFTs you like on these platforms, as determined by the manufacturer, by auction or direct purchase options. When the purchase is complete, NFT is transferred from the manufacturer's wallet to your wallet. If you want, you can resell your purchased NFTs through marketplace applications.
5- Is NFT an investment tool?
NFTs are different from other cryptocurrencies by design, and their values determine the person or investor who produces the work rather than the command board. If the investment issue is interpreted through digital artwork, it is no different than investing in physical art. Similarly, the value of an asset purchased as a collection item is determined by parameters such as how rare the asset is, its age, and its cosmetics.
6- What effect will NFTs have?
Considering the current usage areas of NFTs, it can be said that they first solved the intellectual property problems. While it is very easy to copy a work in digital environment; NFT solves this problem by revealing who owns the copyrights. Since they are a programmable digital asset, the shares that artists will buy from the next sale can also be encoded into NFT. Thus, in the event of the sale, the relevant amount is automatically transferred to the artist's wallet. The digital nature of the works allows all types of users from all over the world to buy them. As the customer base expands thanks to digitalization, the number of people who can access the work and want to invest, and therefore the demand increases; the higher the demand, the higher the price. As the demand increases, so does the supply. Both more works and works at different price levels are coming to the market. This increases accessibility for investors and art lovers, and expands the ecosystem by selling more works.
7- How can I be sure of the originality of NFTs?
In the crypto money ecosystem, the reputation of people is highly valued. Artists who produce NFT and want to put it on sale go through the verified profile stream used by NFT marketplace apps to prove that their work is original. If you have the wallet address of the relevant artist, these addresses are shared publicly for payment purposes, you have the chance to confirm the originality of the work. In addition, by tracking NFT's movements through the blockchain monitoring application, we can be sure of the originality of both the artist and his works.
8- What are the sound NFT sales?
If you have a look at the most interesting sales of the last period: American artist #Beeple (Mike Winkelmann) sold a collage of his works for 69.4 million dollars at auction organized by the auction house Christie's. Lebron James' dunk video NFT, sold through the #NBA #Top #Shot application, found buyers for $ 77,000. Twitter CEO Jack Dorsey's tweet was bought by a Turkish-born person for $ 2.9 million, while Elon Musk put his tweet, which included GIF and music, to auction as NFT.
9- Where are the files in NFTs stored?
NFTs contain evidence of many file formats such as pictures, audio, short video and documents. Since these files are difficult and costly to be stored on the #blockchain, they are stored on a distributed file storage protocol called #IPFS. Uploaded files are encrypted and divided into small pieces and shared among IPFS drops. The proof that the relevant file has been uploaded to IPFS is recorded on the blockchain with NFT.
10- What are the NFT usage areas of the future?
As the experience with NFTs increases, it is seen that creative new business models are also set up. First, the digitization of physical assets, ie 'tokenization', can be adapted to a wide range of sectors. For example, last week in the USA, a house designed in a 3D virtual world was sold for 500 thousand dollars. In addition, it is seen that land sales are made in some games as NFT. Social media is another area where NFTs are expected to have an impact. Metrics such as the number of views, views and views that content producers turn into money have the potential to be made unmanageable by central social media companies thanks to NFTs. Digitization of physical assets, on the other hand, seems to cause us to redesign many of the processes we are accustomed to.