So, we’ve put together a short guide with the basic NFT concepts you should know to be part of the conversation and take a leap into this exciting universe.
Let’s start from the beginning.
What Are NFTs?A non-fungible token or NFT is a one-of-a-kind unit of metadata recorded on a blockchain that can be linked to digital or physical assets. What makes them so great is that they are unique and cannot be replicated or altered.
Although the current market for NFTs is centered mainly around artwork, the industry is slowly expanding. These tokens have the potential to represent individuals' identities, property rights, and much more.
How Are NFTs Created?NFTs are created through a process called minting and destroyed through a process called burning.
Minting essentially refers to the process by which an NFT becomes part of the blockchain. So, once an asset is recorded on the blockchain, you can say it’s been “minted,” and it can no longer be altered.
Burning, on the other hand, means destroying the NFT by removing it from circulation. To burn an NFT, the holder should send it to an inaccessible address.
How Is NFT Value Determined?When deciding whether a given NFT is worth the investment, there are two key aspects to keep in mind: rarity and utility.
NFTs typically have different levels of rarity, which are determined by their traits. The rarer the NFT, the more valuable it will be.
On the other hand, some NFTs have utility, that is, real-world use cases. Utility-based NFTs usually grant holders exclusive benefits and perks within the ecosystem, such as access to members-only events or governance rights.
Roadmap, Tokenomics & White paperApart from assessing the NFT’s rarity and utility, you should always pay attention to the project’s roadmap, tokenomics, and white paper.
The roadmap is a document that sets out the future plans for an NFT project. A solid roadmap gives projects a sense of reliability, sustainability, and potential.
The word “tokenomics” refers to the token’s economics —that is, a token's statistics, quality, and data.
Finally, the white paper is a document that offers investors detailed technical information about the NFT and its roadmap.
By assessing the roadmap, tokenomics, and white paper of a project, you can get a more comprehensive view of its past, present, and future to make an informed decision.
Where Can You Buy An NFT?In most cases, you’ll need crypto to buy an NFT. So you’ll most likely need to resort to an exchange.
An exchange is an online platform where you can buy and sell cryptocurrency. There are decentralized exchanges (DEX), which allow for peer-to-peer transactions, and centralized exchanges, where transactions go through a third party.
Once you have your crypto, you’ll need to head to an NFT marketplace to buy your token. A marketplace is an online platform where people can buy and sell NFTs, and one of the most famous ones is OpenSea.
Where Are NFTs Stored?So, you’ve purchased the NFT. Now what?
Well, it needs somewhere to be while it’s not in use. A wallet is a device or program that stores your digital collectibles until you want to trade them or send them elsewhere.
There are cold wallets, which keep your tokens entirely offline, and hot wallets, which are always connected to the internet and the appropriate network. Wallets can also be non-custodial, which offer you sole control of your private keys, or custodial, whereby another party has control of your private keys.
Well, there you have it. Now you know the basics!
If you want to dig deeper into the exciting world of NFTs, you can start by exploring our blog posts.