The term NFT has been bandied about a lot recently, but what does it actually mean? This comprehensive guide is here to give you all the information you need before getting started with NFTs.
Currently, NFTs are going through what is referred to as a “crypto winter” for the first time. NFTs initially withstood more than popular cryptos earlier this year, but as the winter grew colder, even high-end assets and collections like the Bored Ape Yacht Club have seen their prices drop.
What are NFTs?
An NFT or non-fungible token is a form of data stored on a blockchain. It acts as a digital representation of a unique asset that cannot be replicated or swapped for another seemingly identical NFT. NFTs are mostly minted on the Ethereum blockchain and are most often associated with digital files such as photos, videos, and audio.
How Do They Work?
NFTs resemble conventional digital currencies such as Bitcoin, Ethereum, and Dogecoin in many respects. This is because NFTs function on top of a blockchain network and are shown as digital assets.
The distinction between NFTs and the digital currencies mentioned above is that each NFT token may be identified by a distinctive transaction key. Simply put, this indicates that no two NFTs are alike.
Blockchain
A blockchain is a decentralised database that is used to track and store data. A ledger is a common comparison for blockchain; a ledger is used by an accountant to keep track of financial transactions. A rolling tally of all debits and credits to that account is kept in the ledger, which helps calculate the account balance. Every time a transaction occurs, it is recorded together with the change in the account’s balance.
A blockchain is a decentralised, open ledger that guarantees to save all transaction data. The information from transactions is organised into blocks, each of which is linked to the blocks that came before and after it in a chain, hence the name blockchain.
Minting NFTs
The word “minting” is one that you will frequently come across when looking for the best NFT tokens to purchase. Simply put, minting is the process of creating a new NFT token that doesn’t already exist.
Consequently, when you purchase NFT tokens, you are doing so in order to acquire a digital asset that has already been produced by another party.
Fractional NFTs
You are probably already aware that cryptocurrencies may be divided into smaller pieces, ensuring that you don’t have to buy an entire token to access the market.
Some people don’t know that NFTs can also be used to break digital tokens into smaller fractions.
How Are NFTs Different From Cryptocurrencies?
Cryptos are fungible assets, meaning that any Bitcoin, for example, can be replaced with another Bitcoin as they both share the same value. Depending on their perceived value and demand, each NFT is distinct, unique, and valued differently.
Investing In NFTs
In order to place a bid on a non-fungible token, you will need to create and fund a crypto wallet on an NFT exchange. The cryptos required to buy an NFT are kept in a digital wallet.
How to buy NFTs?
Looking to buy your first NFT? This quick guide has everything you need to know in order to make your first purchase.
Do I need an on-chain, blockchain wallet?
NFTs are non-custodial assets which are traded in peer-to-peer marketplaces, using digital wallets. Non-custodial wallets are digital wallets that allow users to take full ownership of their assets, and keep said assets from freezing in case of a platform failure.
How to sell NFTs?
NFTs are sold in peer-to-peer marketplaces. To sell NFTs you need to hold your tokens in your non-custodial wallets and list them on a digital marketplace.
The Delta App
Acquired by eToro in 2019, Delta is a multi-asset explorer which provides users with a single, clear, and complete overview of their portfolio, and allows users to view and track their cryptos, stocks, NFTs, and funds in one place. Delta enables users to view on-chain blockchain assets, as well as accounts from eToro and other brokerages all in one convenient place. eToro users can create a Delta account, and view and explore NFTs on the Delta app.
Flipping NFTs
Since NFTs are rare by nature, there is inherent demand for them, creating plenty of opportunities to flip them for profit on NFT platforms.
NFT royalties
Through future sales in the secondary market, the NFT’s original artist or content producer gets compensated with royalties.
Types of NFTs
Owning a non-fungible token means having unique ownership of a smart contract that has content on it — a piece of digital art, music, or anything you can think of. Here are some examples:
Digital collectibles
A unique or limited-edition replica of a digital item is referred to as a digital collectible. Usually, there is some sort of visual component, such as digital art, a video clip, or a digital trading card.
Social NFTs
Some NFTs are purchased for their artistic value, while other NFTs are purchased for the sake of belonging to a community or a new brand, such as the Bored Ape Yacht Club.
NFT tickets
NFT tickets are electronic access badges that grant holders special privileges at the event they are attending.
Gaming NFTs
Players get ownership of in-game assets thanks to gaming NFTs. Due to the fact that they are not constrained by the boundaries of the game publisher, their ownership has greater importance.
There are additional types of NFTs out there, such as sporting moments (unique ownership of videos of seminal moments in sports) and virtual real estate.
eToro Art: Our NFT Collection
eToro.Art is eToro’s NFT collection of communities we believe in, projects we support, and sometimes, just art we love! eToro.Art is one of the most valuable NFT collections and includes pieces from Bored Ape Yacht Club, CryptoPunks, World of Women, Beeple, Damien Hirst as well as NFTs from up-and-coming artists and projects.
Now that you are more familiarised with NFTs, let eToro.Art be your gateway into this world.