How Do NFTS and Other Digital Assets Actually Work in Practice?
Did you know that artist Beeple sold his recent NFT for 69 million dollars? You may be wondering how digital assets can sell for so much money. If you’re in the fintech industry, you’ll have heard about NFTs.
But they’re generating buzz beyond the industry. Art galleries, magazines, and news articles abound about NFTs.
Because of the blockchain network, the entire NFT purchase process is transparent. If you buy an NFT you have complete ownership over it, and this is stored in the blockchain.
But what does this mean practically? Keep reading to learn everything you’ll want to know about NFT digital assets.
What Is an NFT?
NFTs, or non-fungible tokens, are one-of-a-kind digital tokens that represent assets. You use blockchain technology to sell unique pieces of digital art and other items.
What does non-fungible mean? An NFT is a digital token that can’t be traded for any other token.
Here’s a quick example. Imagine a dollar bill. You can trade one dollar for another, right?
However, that would change if you talk about paintings. You can’t sell a painting you made in kindergarten and pretend it’s the same as the Mona Lisa.
In this way, an NFT ensures you have complete ownership over your digital assets. It is unique.
Sellers use NFTs to represent different items. The NFT is not the item you’re purchasing. Rather the NFT represents your ownership of the digital asset.
Sellers use NFTs to represent concert tickets, digital art, music, and films. You can also use an NFT to represent assigned seating, memes, or virtual items in video games.
When you buy an NFT, you are the sole owner. The purchase history will be stored within the blockchain.
You’ll have the private key to store in your wallet to prove ownership. The vendor will also have a public key to show proof of your purchase.
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How Do You Buy an NFT?
You’ll want to browse through NFT marketplaces when you’re ready to buy. Just like in the Fine Art world, there is often artificial scarcity. You may see fierce bidding wars when you’re buying digital assets.
This keeps the value of your asset high and can give you a higher return on investment if you sell down the line. To buy, you can bid or buy from your marketplace of choice.
You and the seller enter into an encrypted transaction or contract. This block of data is shared with the decentralized network.
The consensus algorithms in place will verify your block. This block will then form part of a ”chain” of other verified data blocks.
Build Your Digital Assets With NFTs
NFTs are a secure and transparent way to build your digital assets. With NFTs you can show provenance for any digital item you purchase.
From concert tickets to digital art, you’ll have proof of ownership. Your NFT can’t be traded out for another coin, so you’ll have complete security.
Interested in learning more about cryptocurrency and the blockchain? Be sure to browse our other articles on the site!
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