In the year since NFTs exploded in popularity, the situation has only gotten more complicated. Pictures of apes have sold for tens of millions of dollars, Grimes getting millions of dollars for NFTs or about Nyan Cat being sold for million dollars, there’s been an endless supply of headlines about million-dollar hacks of NFT projects

If you are interested in NFTs and want to explore more about what they are, you have come to the right place. Let’s dive in and see what all the fuss is about!


What is an NFT?

NFT stands for ‘non-fungible token’. Non-fungible means that something is unique and can’t be replaced. By contrast, physical money and cryptocurrencies are fungible, which means they can be traded or exchanged for one another. Every NFT contains a digital signature which makes each one unique. NFTs are digital assets and could be photos, videos, audio files, or another digital format.

Unlike cryptocurrencies such as Bitcoin or Ethereum, which are fungible and can be exchanged on a one-to-one basis, NFTs are indivisible and cannot be exchanged on a like-for-like basis.


Brief History of NFTs


Here are some of the key events in the history of NFTs:

  • 2014: Kevin McCoy and Anil Dash create the first NFT, Quantum.
  • 2017: CryptoKitties is launched on the Ethereum blockchain.
  • 2021: NBA Top Shot is launched.
  • 2021: Beeple's Everydays: The First 5000 Days sells for $69.3 million at Christie's auction house.


How NFTs Work?

Here's a step-by-step breakdown:


  1. Creation: NFTs are created through a process called minting. Artists or creators use specialized platforms or smart contract protocols to create and tokenize their unique digital assets. They provide relevant metadata, including the name, description, and any additional attributes or characteristics associated with the asset.
  2. Smart contracts: NFTs are implemented using smart contracts, which are self-executing contracts with predefined rules and conditions. Smart contracts facilitate the creation, ownership, and transfer of NFTs. They are typically written in programming languages like Solidity (for Ethereum) and specify the logic and behavior of the NFTs.
  3. Token standards: NFTs adhere to specific token standards, such as ERC-721 (Ethereum) or other compatible standards like ERC-1155. These standards define the basic functionality and structure of the NFTs, including how ownership is transferred, how metadata is stored, and how smart contracts interact with the NFTs.
  4. Ownership and uniqueness: Each NFT is assigned a unique identifier, often referred to as a token ID, which distinguishes it from any other token in existence. This token ID serves as proof of ownership and represents the authenticity and uniqueness of the digital asset associated with the NFT.
  5. Metadata and storage: NFTs contain metadata, which includes information about the asset and its attributes. This metadata can include details like the creator's name, description, image or media file, edition number (for limited editions), or any other relevant information. The metadata can be stored directly on the blockchain or hosted off-chain with a link or reference to the external location.
  6. Ownership transfer: When an NFT is sold or transferred, the ownership of the token is updated on the blockchain. The smart contract associated with the NFT handles the transfer of ownership rights from the seller to the buyer. This transaction is recorded on the blockchain, ensuring transparency and immutability of ownership history.
  7. Royalties and secondary sales: NFTs can include royalty mechanisms, enabling artists and creators to earn a percentage of subsequent sales whenever their NFT is resold in secondary markets. Smart contracts can be programmed to automatically distribute the royalty payments to the original creator or rights holders whenever a secondary sale occurs.
  8. Storage and display: NFTs themselves are not the actual digital assets; rather, they act as tokens of ownership and authenticity. The associated digital assets, such as artwork or music files, are typically stored separately, either on centralized servers or decentralized storage systems. NFT marketplaces or platforms often provide ways to display or access the associated digital assets linked to the NFTs.
  9. Verification and authenticity: Blockchain technology ensures the authenticity and provenance of NFTs. The decentralized nature of blockchain networks makes it difficult to alter or tamper with the ownership records, providing a robust verification mechanism for buyers and collectors.
  10. Trading and marketplaces: NFTs can be bought, sold, and traded on various online marketplaces or platforms dedicated to NFT transactions. These platforms facilitate the discovery, listing, and transaction of NFTs, connecting buyers and sellers in a digital marketplace environment. The platforms often provide features like bidding, auctions, and price negotiation to facilitate the exchange of NFTs.


Want to buy or sell NFTs?

Here's how you can do:


  1. Choose an NFT marketplace. There are many different NFT marketplaces, so it's important to choose one that is reputable and has a good selection of NFTs that you're interested in. Some popular NFT marketplaces include OpenSea, Rarible, and SuperRare.
  2. Create an account and connect your wallet. In order to buy or sell NFTs, you will need to create an account on the NFT marketplace of your choice. You will also need to connect a cryptocurrency wallet to your account. This is because NFTs are bought and sold using cryptocurrencies.
  3. Fund your wallet. Once you have created an account and connected your wallet, you will need to fund your wallet with cryptocurrency. This is so that you can purchase NFTs. You can fund your wallet by buying cryptocurrency from an exchange like Coinbase or Binance.
  4. Find the NFT you want to buy. Once your wallet is funded, you can start browsing the NFT marketplace for the NFTs that you want to buy. You can filter your search by category, price, and other criteria.
  5. Make an offer. Once you find the NFT that you want to buy, you can make an offer. The seller will then have the option to accept or reject your offer.
  6. Pay for the NFT. If the seller accepts your offer, you will need to pay for the NFT using cryptocurrency. Once the payment is processed, the NFT will be transferred to your wallet.


To sell an NFT, you will need to follow the same steps, but in reverse. First, you will need to list your NFT for sale on the NFT marketplace. You will then need to wait for someone to make an offer on your NFT. Once someone makes an offer, you can either accept or reject it. If you accept the offer, the buyer will pay for the NFT using cryptocurrency. Once the payment is processed, the NFT will be transferred to the buyer's wallet.


It is important to note that there are some risks associated with buying and selling NFTs. First, the value of NFTs can be volatile, so you could lose money if you sell an NFT for less than you paid for it. Second, there is always the risk of fraud or scams when buying or selling NFTs. It is important to do your research and only buy NFTs from reputable sellers.


What is an NFT marketplace?

The NFT landscape is evolving, but typically, most NFT marketplaces fall into one of these three categories:

  1. Open marketplace – Anyone can sell, buy or mint NFTs. Minting refers to the process of uniquely publishing your token on the blockchain to make it buyable. Open marketplaces typically mint NFTs for you, though creators can also mint their own works. Bored Ape Yacht Club, Crypto Punks, and Pudgy Panda are some examples of NFTs in this category
  2. Closed marketplace –Artists must apply to join and the marketplace usually undertakes the minting processes. Selling and trading are more restricted.
  3. Proprietary marketplace – A marketplace which sells NFTs trademarked or copyrighted by the company operating it.


Remember to exercise caution and conduct due diligence when buying NFTs. Pay attention to the reputation of the marketplace and the authenticity of the NFTs you're interested in purchasing.