NFT Explained In 5 Minutes | What Is NFT? Non Fungible Token | NFT Crypto Explained

Today we will dive a little into the world of contemporary art, understand what NFTs are, how to create them, and how to make money on NFT.

If you spent the last year, not in the forest, then you probably came across the concept of NFT. 

NFT images are trumpeted literally at every turn, they are promoted by celebrities, ordinary users are interested in them, and NFT tokens themselves can bring millions of dollars to their owners. 

Simple examples of this have long been in front of our eyes - an NFT token with the first tweet in the history of Twitter, made by the founder of the company Jack Dorsey, was sold for almost 3 million euros, and the world-famous gif of a flying cat Nyan Cat went under the hammer for 600 thousand dollars.

OK then. Copyrights exist not for the first day, and a meme may well become their object. 

Therefore, the situation with Nyan Cat can still be explained in an old-fashioned way. But how do you even sell a tweet? It's all about those same NFTs. Today we will understand what these tokens are, how to create them, and how to make money on NFTs.

What is NFT

Let's start with a simple and easy-to-understand analogy. Imagine that you are buying an apartment. 

Information about the purchase is entered into the state register, where the new owner of the apartment, the date of the transaction, the apartment data, and your own data are recorded. In fact, this is what NFT does.

The abbreviation NFT stands for Non-fungible token - non-fungible, and if even simpler, a unique token. 

They first appeared back in 2017 on the Ethereum blockchain platform. True, unlike bitcoin, ether, and other cryptocurrencies, NFT is a unique object with its own price, which has no analogs.

Remember our apartment example? The record in the state register about the sale of an apartment is also unique, and you can evaluate the apartment itself in absolutely any figure. 

Another issue is that the buyer must agree with your price, and only in this case, the transaction will be completed. 

Same with NFTs. It certifies that the object of the digital space belongs to you. And just like with an apartment, you can sell it to anyone at any price. 

More precisely, in fact, in most cases, you are not selling the object itself, but only a unique token that refers to it. But we will talk about this in more detail below.

It could be a Nyan Cat GIF or the first-ever tweet. Or maybe a jpg image of Everyday: The First 5000 Days, a collage of 5,000 paintings by the artist Beeple, which was sold this year for almost $70 million. 

In fact, NFT is a digital analog of a document certifying your right to some object. It contains information about the owner and the same set of rights that is provided by the token.

How to make money on NFTs and why you need them

The demand for digital goods appeared long before the advent of NFTs. Many gamers have bought skins in CS: GO, Dota 2, and many other games. 

Moreover, the cost of such skins was often expressed in completely non-symbolic figures. 

Of course, in those days, users did not buy NFTs, but the software code of the skin, but this hardly changes the essence.

Even more, money is spinning when it comes to collectibles. Here you can recall the most expensive NFTs. 

This includes the collage Everyday: The First 5000 Days, already mentioned above, worth almost $ 70 million, the T206 Honus Wagner baseball card, which went under the hammer for $ 3.25 million, and The Merge project, which has become a real record holder, brought its author 91.8 million dollars.

Imagine that you have a unique baseball card. Or maybe you paint, collect stamps, or create game characters. 

All your creativity can be sold digitally using NFT. Although the application of NFT is much wider. 

Unique tokens can be useful in work tasks as well. For example, they may certify your right to receive unique information or access to a private club.

But to make money on NFT, it is not necessary to create something new. As is the case with any asset, the price of an NFT token for a certain object changes over time, and you may well invest - invest your money in a project at the bottom of the market and sell at the top, thereby earning on the difference in price. 

But, as with any investment and speculation, there are no guarantees that you will be able to make money on such actions. Investing is always a risk, and NFTs are no exception.

Another example of a possible application of NFT is the purchase of digital tickets for a concert, football match, or any other event. 

They can be used as souvenirs or, for example, an autograph of a celebrity. The use cases for NFTs are vast, and their potential is truly enormous.

At the same time, like any blockchain project, NFT is not tied to any one server. All operations with tokens are distributed over hundreds of thousands of systems around the world. 

Any transactions with NFT are recorded by each computer in the network, and anyone can view data about them.

In essence, by purchasing NFTs, you are claiming your right to a digital object to the whole world, and this information will remain online forever.

Pitfalls of NFTs

The problem is that the use of NFTs does not rule out the possibility of fraud. Despite the absolute transparency of working with tokens, their creation does not at all guarantee that the author actually owns the property. And this situation happens quite often.

In addition, it should be taken into account that a variety of rights for the buyer of a token can be registered in NFT. 

In other words, instead of the right of ownership of an object, it can only speak of the possibility of using it, and sometimes even without the right to profit from such use. 

Although, of course, there is nothing wrong with that if the NFT is bought for this purpose, and, in fact, you just want to leave a memory of yourself in the digital space.

Most NFT tokens traditionally refer to a specific object located on a specific server. But what happens if you buy NFT and the server moves to another domain or goes offline altogether. 

In this case, the NFT token will no longer refer to the object you purchased. And it's good if such a situation arises due to an accidental failure. In fact, it can be quite a malicious act.

Another point concerns possible plagiarism, against which the NFT does not insure in any way. 

Yes, once created, an NFT token can neither be counterfeited nor stolen. But do not forget that this is not a physical and not even a virtual object of sale. Is this just the most secure certificate of the right to this object? 

Therefore, it costs nothing for an attacker to copy an object tied to an NFT and create their own token for this copy. Moreover, a copy on the Internet is a very loose concept.

Small insurance in case of buying NFT for a non-original object can be the use of specialized online platforms that take care of the copyright protection of the content creator. But even they cannot give a full guarantee here.

How to create an NFT

So we come to the most interesting part - how to create an NFT token. Any specialized platform like OpenSea can be used to create an NFT. 

In addition to registering there, you will need a wallet in the Ethereum system and, in fact, digital content to which you will link the token.

The algorithm for creating an NFT depends on the platform you choose. But in the general case, for this, you need to log in to the system through the Ethereum wallet, create a collection and upload the necessary images, animation, music, or even 3D animation to it. 

For example, the same OpenSea supports files of JPG, PNG, GIF, SVG, MP4, WEBM, MP3, WAV, OGG, GLB, and GLTF formats and weighs no more than 100 MB.

After that, you need to add a description and a link to the object, as well as set the basic parameters of the token and click the "Create" button. The token is sent for verification, after which it can be sold.

As for the token itself, its non-fungibility is ensured by the unique combination of the object to which it is linked and your identifier in the system or a unique key that signs any token passing through your account. 

Actually, it is thanks to such an individual signature that any user can trace the entire path that NFT has gone through since its inception and all the owners of this certificate.

In addition to your ID and token object data, there are a number of options inside the NFT that describe what the certificate owner can do. 

The main ones are resellable and copyright_transfer. The first one is responsible for the possible resale of the token, and the second one is responsible for the transfer of copyright to the object to its owner. Moreover, if the copyright_transfer status is false, then, in fact, you are buying only your place in history and the possibility of reselling the token (if the resellable parameter allows it). There is no way to even copy the file attached to it.

conclusions

Many users, to be honest, and some journalists mistakenly equate an NFT with a digital object. But in fact, the NFT is a digital certificate denoting your rights to an image, animation, music, or any other object. 

At the same time, such a certificate does not always mean the transfer of exclusive rights to the content to you.

For example, with the help of an NFT token, you can give yourself the right to listen to some tracks, attend a certain event, or simply enter your name in the history of some meme. 

In this case, you will not receive any ownership of the object itself. There are also reverse situations when NFT certifies the fact of buying exclusive rights to an object. 

Moreover, recently there are more and more situations when, with the help of NFT, not only digital assets are sold, but also quite tangible things and even intellectual property for all kinds of know-how.