Member-only story
What are NFTs & how do they work? Step-by-step guide:
Understanding NFTs and How They Work:
NFTs have emerged as the most innovative development of our fast-changing digital world. NFTs have managed to create enormous interest among artists, collectors, and investors worldwide and altered how we think about ownership in a virtual space. So, what are NFTs? What do they do?
NFTs is a short form for non-fungible tokens. NFT represents ownership of some unique thing or piece of content as digital assets. Art, music, videos, virtual lands, and even digital clothes are some of these products. NFT is non-fungible, unlike cryptocurrencies like Bitcoin and Ethereum, which are fungible and can be used on a one-to-one basis directly. The token, being non-fungible, has properties that make it differentiable, and that’s where NFT derives value in uniqueness.
Traditionally, most NFTs are built using blockchain technology, and by and large, on the Ethereum blockchain. What is essentially a decentralised ledger guarantees that the NFT has been created and possesses real authenticity and provenance because the ownership and transaction history are recorded in a way that is secure and irreversible.
How Do NFTs Work?
Creation: Minting is the process of creating an NFT. The artist or creator will upload work to an NFT marketplace and mint a token that represents ownership of a digital item. Such a token is then stored on the blockchain.
Smart Contracts: NFTs depend on smart contracts. In simple words, smart contracts refer to self-executing agreements that have pre-written terms in the codes. In such contracts, the ownership details of the respective NFT and the shares of royalties to the respective creator every time the said NFT is resold are defined.
NFTs are sold on speciality marketplaces, with buyers using platforms like OpenSea, Rarible, or Foundation. Transactions mostly happen in cryptocurrency, that being Ethereum. Once purchased by a buyer, the NFT will be transferred into the digital wallet of said owner and therefore have verified ownership.
