What Are NFTs? Understanding and How Non-Fungible Tokens Work

2024-08-02

What Are NFTs Understanding and How Non-Fungible Tokens Work.webp

BittimeNon-Fungible Tokens (NFT) are a phenomenon that exploded in 2022 in the crypto world. 

NFTs have changed the way we view and interact with digital assets. So, this article will discuss what NFT is. Keep watching, OK!

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What are NFTs?

NFT is the abbreviation of Non-Fungible Token. This is a digital asset that is verified using blockchain technology. 

Unlike other digital assets that can be exchanged for each other, each NFT is unique and cannot be replaced by another similar token. NFTs can take various forms such as works of art, music, videos, and even items in blockchain-based games.

What Does "Non-Fungible" Mean?

The term "non-fungible" means that it cannot be exchanged or replaced with another item of equal value. For example, one Bitcoin is the same as another Bitcoin, making it "fungible." 

Instead, each NFT has unique characteristics such as size, creator, and rarity that make it non-exchangeable for other NFTs. For example, concert tickets are non-fungible because each ticket represents a specific seat and date.

How How NFTs Work

NFT (Non-Fungible Token) functions as a digital representation of a unique asset created through a process called minting. 

This process involves coding and recording asset information on a blockchain, which guarantees the authenticity and ownership of the asset.

Bagaimana cara kerja NFT?

Minting Process

  1. New Block Creation: NFT information is recorded in a new block on the blockchain.
  2. Information Validation: Validators verify NFT data to ensure its integrity.
  3. Block Closure: Once the data is validated, the block is added to the blockchain permanently.

Minting also takes advantage smart contract, which is an automated code that regulates ownership and transfer of NFTs. 

Every NFT created has identifier unique and directly connected to a specific blockchain address. This information is public so anyone can verify asset ownership.

What is the use of NFT?

NFTs (Non-Fungible Tokens) have a variety of uses that go beyond just digital works of art or collectibles. 

This technology has opened up new opportunities in various fields by combining unique digital ownership, blockchain security, and potential integration with various applications.

1. Digital Collections

NFTs were initially popular as digital collectibles, such as CryptoKitties which was launched in 2017. Each of these virtual cats has a unique identity on the Ethereum blockchain, with different attributes. 

In addition, kother popular collections such as Bored Ape Yacht Club And CryptoPunks offering exclusive status to its owners, creating a community with high social value.

2. Digital Art and Photography

NFTs allow digital artists and photographers to monetize their work in a fairer way. For example:

  • Digital Arts: Artists can sell their work directly to buyers without intermediaries, as well as earn royalties every time their NFTs are resold.
  • Photography: Photographers can convert their work into NFTs and sell them with certain ownership rights, as is done with photography collections Ocean Intersection of OpenSea.

3. Music and Entertainment

NFTs allow musicians to sell their work by giving exclusive rights to buyers. By monetizing music in the form of NFTs, artists can grant special access, such as early listening rights or invitations to special events.

4. Virtual Worlds and Games

NFTs also have an important role in games and virtual worlds, such as:

  • Virtual Assets: Players can own virtual properties, avatars or rare items in the game.
  • Trade: In-game items that previously could only be used in certain games can now be traded as NFTs on the open market.

5. Digital Identity and Domain

NFTs can be used to represent ownership of a website domain or unique digital identity. For example, some NFTs represent domain names that can be used to create personal or corporate websites.

Read also: What is Pudgy Penguin NFT: Everything You Need to Know

Difference between NFT and Cryptocurrency

Although NFTs (Non-Fungible Tokens) and cryptocurrencies are both based on blockchain technology, they have fundamental differences in how they work, intended use, and characteristics.

1. Uniqueness

  • NFT: Each NFT is unique and cannot be directly exchanged with other tokens because it has a specific identity and value. 
  • Cryptocurrency: Cryptocurrencies, such as Bitcoin or Ethereum, are fungible, meaning that each unit can be exchanged for another unit of the same value.

2. Function and Purpose

  • NFT: Designed to represent ownership of unique digital or physical assets, such as works of art, music, or collectibles. NFT serves as proof of ownership or authenticity of the asset.
  • Cryptocurrency: Used as a medium of exchange or digital store of value, similar to money, but without a central authority like a bank.

3. How to Use

  • NFT: NFT transactions involve trading digital assets at a value determined by the market or creator. NFTs are often used in art, games and digital collectibles.
  • Cryptocurrency: Cryptocurrency is used to purchase goods or services, or as an investment traded on financial markets.

4. Ownership

  • NFT: NFT ownership includes exclusive rights to a particular digital asset, but does not necessarily provide a copyright or reproduction license.
  • Cryptocurrency: Ownership of cryptocurrency means controlling a digital asset that can be used without additional restrictions, such as copyright.

Most Popular NFT Marketplace

NFT marketplace platforms play an important role in enabling users to buy, sell, and create NFTs. Here are some of the leading NFT marketplaces:

1. OpenSea

As the largest NFT marketplace, OpenSea offers various NFT categories, from digital art to web domains. The platform is based on the Ethereum blockchain, but also supports Polygon for faster and cheaper transactions.

2. Rarible

Rarible is an Ethereum-based marketplace that prioritizes creator freedom. Users can mint, sell, and buy NFTs with great flexibility, as well as supporting a community model through the RARI token.

3. SuperRare

Focusing on high-quality digital art, SuperRare is a place for collectors to find unique works of art from leading artists. The platform offers an exclusive experience for buyers looking for premium art NFTs.

4. Foundation

Foundation is a marketplace that provides a spotlight on independent artists. With a minimalist interface design, the platform attracts creators and collectors who prioritize aesthetics and authenticity.

5. Decentraland Marketplace

Decentraland is an Ethereum-based virtual world that allows users to buy and sell virtual property, avatars and other assets. NFTs here have additional uses in interactive virtual worlds.

Marketplaces like these continue to grow, enabling users to connect with global creators and communities, and unlocking new potential for digital assets across a variety of sectors.

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Some Examples of Popular NFTs

Beeple’s "Everydays – The First 5000 Days"
A digital collage of 5,000 diary images by Beeple sold for $69 million at a Christie's auction in 2021, making it one of the most expensive NFT works in the world.

CryptoPunks
A collection of 10,000 unique pixel characters launched by Larva Labs in 2017. Some of them have sold for millions of dollars and became early symbols of the NFT trend.

It’s Cat
The iconic meme of a cat with a Pop-Tart body flying through space. A remastered version of its NFT sold for 300 ETH (approximately $560,000) in 2021.

RTFKT Digital Sneakers
NFT-based digital shoes created by RTFKT. One of the collaboration series with Nike, “CryptoKicks iRL,” features advanced technologies such as auto-lacing and motion sensing.

Cryptovoxels
An Ethereum-based virtual world where users can buy, sell and build digital property as NFTs. All of these properties can be traded on marketplaces such as OpenSea.

Decentralized
An NFT-based metaverse platform where users can own virtual land (LAND tokens) and use it to create a variety of experiences, from art galleries to concerts.

Jack Dorsey’s First Tweet
The Twitter founder's first tweet was sold as an NFT for $2.9 million, becoming an important symbol in internet history.

Bored Ape Yacht Club (BAYC)
A collection of 10,000 cartoon-style monkey-shaped avatars. In addition to great value, BAYC offers access to exclusive events and various benefits for its owners.

Use Case NFT.

NBA Top Shot
Clips of historic moments from NBA games sold as NFTs. This platform allows fans to have digital footage of their favorite games.

Axie Infinity In-Game Assets
NFTs are digital creatures called Axie that can be used to fight, breed, or trade. This game opens up real earning opportunities for players.

Read also: 10 Best NFTs on the Base Network, Check the List Here!

Guide How to Create and Sell NFT

Creating and selling an NFT is a process that involves several steps, from preparing the digital asset to listing it on the marketplace. Here are the practical steps:

1. Prepare Digital Assets

NFTs can be images, videos, music, or other types of digital files that are copyrighted. Make sure the work is original and eye-catching. You can use software such as:

  • Procreate or Photoshop for 2D images.
  • Blender or Houdini for 3D works.
  • NFT generators like Well or NFT-inator for beginners with no design experience.

2. Choose the Right Blockchain

The blockchain is where NFTs are stored after the “minting” process. Some popular options:

  • Ethereum: Compatible with most NFT marketplaces, but has high gas fees.
  • Solana: Lower gas fees and fast transactions. Suitable for large collections.
  • Flow: User-friendly, energy efficient, and suitable for NFT beginners.

Consider cost, speed, and compatibility with your wallet before choosing a blockchain.

3. Create a Crypto Wallet

A crypto wallet is required to store NFTs and carry out transactions. Some popular choices:

  • MetaMask: Integrated with many NFT marketplaces.
  • Trust Wallet: Supports various digital assets and has a simple interface.
  • Rainbow: Suitable for mobile users, with a user-friendly design.

Make sure the wallet is compatible with the selected blockchain.

4. Select NFT Marketplace

Marketplace is a place to mint and sell NFTs. Popular choices:

  • OpenSea: The largest marketplace with minting options without gas fees.
  • Rarible: Offers a "lazy minting" feature where the buyer covers the gas costs.
  • SuperRare: Focus on high-quality NFT artwork.

5. Minting NFT 

After selecting a marketplace:

  • Connect Wallet: Login to the marketplace and link your wallet.
  • Upload Digital Files: Add name, description, metadata and blockchain used.
  • Minting Process: NFTs will be minted and stored on the blockchain.

6. List it for Sale

Once the NFT has been created, you can sell it:

  • Enter price: Select fixed price or auction format.
  • Confirm sale: Complete the transaction via your wallet.

Some marketplaces charge a commission or gas fee for this process, so pay attention to the costs before setting a price.

How to Buy NFTs?

To buy or sell NFTs, the first step is to have a compatible crypto wallet like MetaMask. After that, users can visit NFT marketplaces such as OpenSea, Rarible, or Zora. 

On this platform, users can explore the various NFTs available, make purchases, or auction their digital assets. 

The transaction process is carried out using cryptocurrency, usually Ethereum, and all transactions are recorded on the blockchain.

Conclusion

NFTs have opened a new chapter in the world of digital assets by providing a unique way to own, trade and authenticate various forms of digital works.  

So, that's a discussion about what NFT is, from the meaning, how it works, to how to transact NFT. Hopefully this article can help, OK!

FAQ Non-Fungible Token (NFT)

1. What is a Non-Fungible Token (NFT)?

Non-Fungible Tokens (NFTs) are unique digital assets that cannot be exchanged for other equivalent assets. NFTs can be works of art, music, videos, or other collectibles stored on the blockchain to ensure authenticity and ownership.

2. Why Do People Buy NFTs?

People buy NFTs to gain exclusive ownership rights to unique digital items. Additionally, NFTs are often considered a profitable investment opportunity, especially if the items have high artistic or historical value.

3. Are NFTs a Good Investment?

NFTs can be an interesting investment, but they are very risky because their value depends entirely on market demand. Before purchasing, it is important to do in-depth research and only invest funds you are willing to take the risk of.

How to Buy Crypto on Bittime

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Also, visit the Bittime Blog for interesting updates and educational information about the crypto world. Find reliable articles about Web3, blockchain technology, and digital asset investment tips designed to enrich your crypto knowledge.

 

Reference

Domenic Molinaro, NFTs for Beginners: How to Make Your Own NFT, accessed January 10, 2025

Sean Michael, NFTs vs. cryptocurrency: Key differences and how they work, accessed January 10, 2025

NFT Evening,10 Best NFT Examples for Inspiration in 2025 accessed January 10, 2025

Disclaimer: The views expressed belong exclusively to the author and do not reflect the views of this platform. This platform and its affiliates disclaim any responsibility for the accuracy or suitability of the information provided. It is for informational purposes only and not intended as financial or investment advice.

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