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What is NFT, and how does it work?

What is NFT, and how does it work?

March 11, 2022

The term NFT has long been featured on news sites, especially in articles related to financial markets, and is commonly found with millions of dollars. It is why, like other people, you may be wondering what NFT is and what its uses are.

First of all, before we get into NFT in detail, we need to explain it in simple language. For example, suppose you created work with Photomontage in Photoshop, then you want to sell it; therefore, anyone can have a copy of your work on their computer. Finally, by downloading that work, you will not be paid any property rights.

The second example, suppose you have painted an oil painting and want to sell it. In the first example, the photo, the second example, the painting, you can convert both to an NFT. With this conversion, even with the destruction of the physical commodity – here the painting – the work itself does not disappear in the form of an NFT. The right of ownership is retained in possession of the original owner of the NFT.

In other words, if the painting is converted into a photograph and that photograph is sold in the form of an NFT, the photograph will have a unique identity card that even its copies will not be equal to the original work. Therefore, even a JPEG image can be converted to NFT and be sold. With the explanations provided, you are reasonably familiar with this asset. NFT is a digital asset that retains its value as a kind of cryptocurrency.

First, it is better to get familiar with the word NFT itself, which means “non-Fungible Token”. It is a digital token and a currency token like Bitcoin and Ethereum, but NFT is unique and cannot be exchanged, unlike a standard coin in Bitcoin block chain.

You may be wondering what “non-fungible” means. NFTs cannot be exchanged directly like banknotes because no two NFTs are alike. For more clear understanding, you can consider a concert ticket. In a concert, no two tickets are equal, and each ticket is unique and includes specific information such as the buyer’s name, the concert date, and the seat number. This information makes it impossible to exchange tickets.

We can understand the importance of this token and its differences from other cryptocurrencies with the above explanations.

Types of NFTs

There are many types of NFTs, but they can be dedicated to digital art, music files, videos, or anything unique that is valuable. Simply put, NFTs are collectable items, but instead of having an oil painting, for example, you will have a JPG image.

As mentioned, tokens are not limited to a specific role and have many uses, some of which are mentioned below:

  • The token acts as a gateway to block chain applications and services.
  • Tokens play a role in verifying the eligibility of individuals for certain voting rights.
  • Tokens can play an essential role in the user experience. For instance, with the help of user tokens in an Internet browser, various services can be provided to them.
  • One of the important roles of tokens is the exchange of assets (values). Tokens have been used in block chain to convert the value.
  • In addition to all of the above uses, tokens can indicate ownership of a particular good. This application shows the difference between fungible tokens and non-fungible tokens.

In other words, non-fungible tokens have a “Unique Value Proposition” (UVP), and each has a unique identifier to be identified among other tokens. In other words, non-fungible tokens have a “Unique Value Proposition” (UVP), and each has a unique identifier to be identified among other tokens.

It is because of this unique feature that NFTs become rare and highly valued due to high demand. Moreover, with the help of NFTs and trade, the transfer of ownership can also be done.

How does NFT work?

NFTs are part of the Ethereum block chain and, as a result, a chip in which additional information is stored. This additional information is an integral part of these cryptocurrencies and allows them to cover art, music, video, and the like in various photo, movie, and music formats. Because these cryptocurrencies retain value, they can be bought and sold, and like different types of artwork, this value is regulated by market and demand.

Why is NFT important?

NFT tokens have the potential to be a key component of the block chain-based digital economy, which can be used in a variety of areas such as video games, digital authentication, licensing, certification, or fine arts. Storing data ownership and identity on the block chain increases data integrity and privacy and easy transfer and management without the need for trust in these assets, which can reduce friction (fees) in the global trade and economy.

Uses of NFTs

Gaming

NFTs are popular in the gaming industry because these tokens solve some inherent problems; for instance, top games like Fortnite have banned the sale of features and accessories such as weapons and skins. With these tokens, these features can be easily transferred in different games. NFTs will thus help the in-game economy.

Identification

NFTs are ideal for counteracting counterfeiting. Examples to illustrate this include digitizing our identities, including our academic credentials, medical credentials, and even our appearance.

Digital Art

For artists working in the digital arena, copyright protection has always been a major challenge, and today stealing works of art in the digital world is as easy as drinking water. On the other hand, using NFT innovation, one can buy a work of art and display it in a digital space. Using the block chain, the ownership of the person (private key) is proved on the work of art. Artists can also make more profit by eliminating intermediaries.

How to buy NFT

By reading this article, you may be wondering how to buy an NFT. NFTs can be obtained in one of the following ways:

  • Obtain NFTs from gaming or through Depp (decentralized application)
  • Buy NFT through the token markets
  • Trade this token with someone else

How to access Depp and get NFT via mobile

To access Depp, install one of the browser-enabled wallets on your phone:

  • MetaMask
  • MyEtherWallet (MEW)
  • Trust Wallet
  • Coin base Wallet

However, some of these wallets, such as Coin base Wallet, can be used on the desktop in addition to mobile.

Enter the Browser section of the wallet and in the address field, enter the link to the desired Depp website. After entering the Depp, sign up and connect your wallet to the dep. From now on, you can start playing or buying and selling NFTs.  

WAX block chain

WAX, which stands for “Global Capital Exchange”, is a block chain explicitly created for trading virtual items such as collectable and rare works within video games and virtual worlds. The WAX block chain acts as a decentralized marketplace and platform for Depp. Instead of relying on a game developer or a centralized network, users can own their digital assets and trade them on the WAX platform with anyone they want.

One of the reasons NFTs are so popular in the WAX block chain is that they are easy to buy. You can easily create a WCW wallet on this platform with a username and password or a social media account such as Twitter, Facebook, or Reddit.

All in all, from now on, we should see the NFT slowly move from games to painting, defy, digital identity, and other usable items. The scope of its applications depends only on the imagination of the digital currency community and developers.

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