Here’s what NFTs are and what it means when you buy one

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There’s no getting around the problem: NFTs are everywhere. But what exactly are they and how does selling them work? Five questions and answers.

1. What is an NFT?

NFT stands for non-fungible token or non-replaceable token. These NFTs are digital files that are linked to a digital “something”, such as an image, video or tweet. The NFT indicates who owns that image, video, or tweet.

In terms of technology, tokens are comparable to bitcoin. Simply put, NFTs are stored around the world and anyone can see how they are traded and who owns the token.

2. How does selling NFT work?

NFTs are often sold by auction houses. After the sale, ownership of an NFT is recorded in the blockchain, the same technology used for cryptocurrencies as bitcoin. Blockchain is a large online ledger with complicated encryption techniques.

When purchasing an NFT, a note is made on a blockchain who is the new owner. Because such a blockchain is stored on thousands of servers around the world, the information is preserved.

3. How is the value of an NFT determined?

People have always attached value to physical goods. For example, some people are willing to spend hundreds of thousands of dollars on a watch. Digital objects did not have the same value because they were never unique. After all, they could easily be copied.

Of course, objectively, a digital image of a cat still isn’t worth hundreds of thousands of dollars. Yet the image of a flying cat with a recognizable melody, also known as Nyan Cat, sold for nearly 500,000 euros.

The value of an NFT is determined, among other things, by the following criteria:

  • Authenticity: the authenticity of the NFT.
  • Rarity: There is only one NFT among some.
  • Popularity: Well-known NFTs sell for more.
  • Utility: Some NFTs have functional purposes.

4. But can I just take a screenshot of the work?

Not a dumb question, but that’s not how it works. By taking a screenshot, you are not the rightful owner of the work. You can see an image of mona-lisa save it to your phone, but don’t sell it to an art dealer. This is not the real painting.

When you buy an NFT, you become its rightful owner. Similar to selling cryptocurrencies, the owner can sell an NFT.

5. When did the NFT hype start?

What is striking about NFTs is that they have been around since mid-2017, but have only become more popular since early 2021. This is likely due in large part to the huge sums involved in some NFTs in the world. ‘era. But now, more artists and performers have embraced the tokens.

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