What is an NFT? Non-Fungible Token Explained


An NFT is a digital piece of art like art (music, in-game items, jpeg files, gif files, etc) kept on the blockchain. They can be bought and sold online at the NFT marketplace just like cryptocurrencies they use the same technique used by cryptocurrencies.

All though they can not be exchanged for similar things or equivalency. This is the main difference between Non-Fungible Tokens and Fungible tokens ( Cryptocurrency, which is similar to each other it means if you and I both have 1 bitcoin then its value is the same for both of us and can be exchanged.

Understanding NFT

An NFT means Non-Fungible Token that is the combination of two words Non-Fungible and Token. Let’s start with the word Non-Fungible. In general, Non-fungible refers to Non-replaceable or it can also be defined as Non-exchangeable. Suppose X and I have a note of Rs.100 which is similar and that can be exchanged without any problem because both own the same value. But if I got an autograph of a celebrity then my note of Rs.100 is not similar to X’s notes. Now my note has a unique value that means it can not be replaced with another note of Rs.100. Similarly, an NFT has unique value just like my signed note. If I have a unique note then I can easily show this to anyone to prove its ownership but how can we prove the ownership of an NFT?

Now, come to the word Token. If we buy a house, we sign a registry then we have a way to prove its ownership by showing its documents to anyone. A token is just like a registry present digitally. Now we have a question a physical registry is tracked by the municipal, court, and the central authorities but who tracks NF Token? Well, a token is tracked and recorded by the public in the form of blockchain. A token is present on the blockchain network and is maintained by all the persons who are part of that blockchain. A blockchain is a system on which bitcoin and other cryptocurrencies are based. You can learn more about it in our Blockchain post. Let’s suppose I own an NFT on the Ethereum blockchain then all people on the Ethereum have a copy of the block which proves my ownership of owning the NFT.

How NFT is different from Cryptocurrency?

NFT and cryptocurrency uses the same technique this is the similar ends of cryptocurrency and NFT. Physical currency and Cryptocurrency are fungible which means they can be exchanged for one another. They have the same value, one rupee is equal to one rupee and one dogecoin is equal to one dogecoin. 

NFTs are different from cryptocurrency because each NFT contains a digital signature which makes it hard to exchange for another one so that is why it is called Non-fungible.

Forms of NFT

An NFT can have multiple forms. It can be both tangible and intangible items, like

  • GIFs
  • JPEG
  • Art
  • Videos
  • Collectibles
  • Music
  • Video Game Skins

There are some amazing examples of NFT that are sold for millions of dollar


Twitter’s Co-founder Jack Dorsey sold his first-ever tweet as an NFT for more than $2.9 million.
Trevor Jones’ artwork of the title “the Bitcoin angle” was sold for $3.2 million
Beeple’s NFT was sold for $69 million earlier last year
XCOPY’s NFT “Death Dip” sold for $1.8 million
And so on

What are NFTs Used For?

Blockchain technology and NFTs provide artists and content creators with a unique opportunity to monetize their work. For example, artists no longer rely on galleries and auction houses to sell their work. Artists can instead sell it directly to consumers as an NFT to maintain more profits. In addition, artists can set royalties and receive a percentage of revenue each time a work is sold to a new owner. This is a great feature because artists usually don’t receive future revenue after the first sale of their work.

Even celebrities like Amitab Bachchan and Salman Khan are jumping on the NFT bandwagon, releasing unique memories, artwork, and moments as securitized NFTs.

How to Buy NFTs?

If you`re eager to begin your very own NFT collection, you`ll want to gather a few key items:
First, you`ll want to get a virtual pocket that permits you to keep NFTs and cryptocurrencies. You`ll probably want to buy a few cryptocurrencies, like Ether, relying on what currencies your NFT issuer accepts. You should buy crypto the usage of a credit score card on systems like Coinbase, Kraken, eToro, or even PayPal and Robinhood now. You`ll then be capable of circulating it from the change in your pockets of choice.

When researching your options, don’t forget to consider fees. When buying cryptocurrency, most exchanges charge you at least a percentage of the transaction amount.


Should You Ride on NFT wave?

Yu says. “NFTs are risky because they have an uncertain future and there isn’t much data to compare their performance with,” she says. In the meantime, it may be worth trying NFTs for a small amount since they are so new.

Investments in NFTs are therefore largely a matter of personal choice. You may want to consider it if you have the money, especially if the piece is meaningful to you.

However, an NFT’s value depends entirely on what someone else is willing to pay for it. Consequently, the price will be driven by demand rather than fundamental, technical or economic factors, which typically affect stock prices and at least form the basis of investor demand.

In other words, an NFT may sell for less than you paid for it. If no one wants it, you might not be able to resell it at all.

Like when you sell stocks at a profit, NFTs are also subject to capital gains taxes. NFTs, however, since they are considered collectibles, may not receive the preferential long-term capital gains rates that stocks receive, and may even be taxed at a higher rate for collectibles, though the IRS has not yet ruled what NFTs are defined for tax purposes. You may want to consult a tax professional when considering adding NFTs to your portfolio if the cryptocurrencies used to purchase them have appreciated in value since you bought them.

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