NFTs are of hype nowadays because they are sometimes sold for astronomical sums, also major companies are increasing the craze as we can see these in art market and video games.
What is an NFT?
NFT stands for Non-Fungible Token, means the asset in NFT are non-fungible. Lets firtst understand what is fungible and non-fungible.
Item which is "fungible" can
be exchanged with an equivalent item -- for example, a $10 bill with another $10
bill or with 2 * 5$ bills. Similarly, Crypto
currencies, which use a digital public record of transactions called a block
chain, are fungible.
However, NFTs are digital items that can
only be bought and sold using blockchain technology. But they are not fungible,
thus making them different type of asset. Mostly they are traded over Ethereum
The most coveted NFTs that are in hype
are released via collections of thousands of unique individual cartoons, such
as the Bored Ape Yacht Club. The tokens aren't limited to images, as in people
can also buy virtual land using Sandbox. Critics argue that people are spending money on useless and
meaningless items which can be spent for making world better place but
supporters say that NFT’s are the future and slowly everything will become digital.
Some even predict that this will revolutionize the way we buy and sell
properties or ex, there will be virtual real estate agents selling virtual
How are NFTs traded?
Like cryptocurrencies, NFTs are also brought and sold on specialized platforms. OpenSea is the best-known NFT marketplace. Sale is not necessary the transfer of object but it depicts transfer of certificate which depicts the new owner, also user’s can see the list of all the owners which were present in the past. Meaning how many hands were exchanged by the
Before buying/selling NFT the user needs to create a wallet. Metamast is free internet browser extension which creates a wallet you need to trade in opensea.
Then you need to add relevant cryptocurrency in the wallet ETH is most used for buying selling NFT’s.
What are the risks?
There are multiple technical process that are misunderstood and investors are not aware of what they are dealing with.
Every interaction with the blockchain involves fees to pay for verifying the transaction and thousands if users rush to verify the transaction in blockchain. So you have to pay hefty price tag for any NFT you purchase or sell and sometimes you are paying the processing fee larger than the NFT token you purchased. Some people use bots to wait for price tag to reduce for buying the NFT’s
Also sometimes new investors are not fully aware of the deep sea of NFT market and they something’s pay much more to buy NFT which then goes unsold and investors loose money over it.