NFTs are tokens that we can use to represent ownership of unique items. They let us tokenise things like art, collectibles, even real estate. They can only have one official owner at a time and they’re secured by the Ethereum blockchain – no one can modify the record of ownership or copy/paste a new NFT into existence.

NFT stands for non-fungible token. Non-fungible is an economic term that you could use to describe things like your furniture, a song file, or your computer. These things are not interchangeable for other items because they have unique properties.

Why Are Non-Fungible Tokens Important?

Non-fungible tokens are an evolution over the relatively simple concept of cryptocurrencies. Modern finance systems consist of sophisticated trading and loan systems for different asset types, ranging from real estate to lending contracts to artwork. By enabling digital representations of physical assets, NFTs are a step forward in the reinvention of this infrastructure.

To be sure, the idea of digital representations of physical assets is not novel nor is the use of unique identification. However, when these concepts are combined with the benefits of a tamper-resistant blockchain of smart contracts, then they become a potent force for change.

Perhaps, the most obvious benefit of NFTs is market efficiency. The conversion of a physical asset into a digital one streamlines processes and removes intermediaries. NFTs representing digital or physical artwork on a blockchain removes the need for agents and allows artists to connect directly with their audiences. They can also improve business processes. For example, an NFT for a wine bottle will make it easier for different actors in a supply chain to interact with it and help track its provenance, production, and sale through the entire process. Consulting firm Ernst & Young has already developed such a solution for one of its clients.⁶

Non-fungible tokens are also excellent for identity management. Consider the case of physical passports that need to be produced at every entry and exit point. By converting individual passports into NFTs, each with its own unique identifying characteristics, it is possible to streamline the entry and exit processes for jurisdictions. Expanding this use case, NFTs can be used for identity management within the digital realm as well.

NFTs can also democratize investing by fractionalizing physical assets like real estate. It is much easier to divide a digital real estate asset among multiple owners than a physical one. That tokenization ethic need not be constrained to real estate; it can be extended to other assets, such as artwork. Thus, a painting need not always have a single owner. Its digital equivalent can have multiple owners, each responsible for a fraction of the painting. Such arrangements could increase its worth and revenues.

The most exciting possibility for NFTs lies in the creation of new markets and forms of investment. Consider a piece of real estate parceled out into multiple divisions, each of which contains different characteristics and property types. One of the divisions might be next to a beach while another is an entertainment complex and, yet another, is a residential district. Depending on its characteristics, each piece of land is unique, priced differently, and represented with an NFT. Real estate trading, a complex and bureaucratic affair, can be simplified by incorporating relevant metadata into each unique NFT.

Decentraland, a virtual reality platform on Ethereum’s blockchain, has already implemented such a concept.⁷ As NFTs become more sophisticated and are integrated within financial infrastructure, it may become possible to implement the same concept of tokenized pieces of land, differing in value and location, in the physical world.

What is NFT Used For?

People interested in Crypto-trading and people who like to collect artwork often use NFTs. Other than that, it has some other uses too like:

• Digital Content – The most significant use of NFTs today is in digital content. Content creators see their profits enhanced by NFTs, as they power a creator economy where creators have the ownership of their content over to the platforms they use to publicize it.
• Gaming Items – NFTs have seen a lot of interest from game developers. NFTs can provide a lot of benefits to the players. You can buy items for your game, and when you’re done with that, you can recoup your money by selling them.
• Investment and Collaterals – Both NFT and DeFi (Decentralized Finance) share the same infrastructure. DeFi applications let you borrow money by using collateral. NFT and DeFi, both work together to explore using NFTs as collateral instead.
• Domain Names – NFTs provide your domain with an easier-to-remember name. This works similar to a website domain name, making its IP address more memorable and valuable, usually based on length and relevance.

How to Buy NFTs?

Having understood what is NFT used for and its specific advantages over other cryptocurrencies, you might want to venture into buying NFTs. If yes, you will need to acquire some essential items before you can do that;

• You’ll need a digital wallet that allows you to store your NFTs and cryptocurrencies.
• Then you need to purchase some cryptocurrency depending on what currencies your NFT provider accepts, most likely Ether.
• You can use platforms like OpenSea, Coinbase, Kraken, PayPal, etc., to buy cryptocurrencies.
• Then you will be able to move it from the exchange to your wallet of choice.

Keep in mind that most exchanges charge at least a percentage of your transaction as fees when you buy crypto.

Popular NFT Marketplaces

Once you’ve got your wallet set up and funded, there’s no shortage of NFT sites to shop. Currently, the largest NFT marketplaces are:

•  OpenSea.io: This peer-to-peer platform bills itself a purveyor of “rare digital items and collectibles.” To get started, all you need to do is create an account to browse NFT collections. You can also sort pieces by sales volume to discover new artists.

•  Rarible: Similar to OpenSea, Rarible is a democratic, open marketplace that allows artists and creators to issue and sell NFTs. RARI tokens issued on the platform enable holders to weigh in on features like fees and community rules.

•  Foundation: Here, artists must receive “upvotes” or an invitation from fellow creators to post their art. The community’s exclusivity and cost of entry—artists must also purchase “gas” to mint NFTs—means it may boast higher-caliber artwork. For instance, Nyan Cat creator Chris Torres sold the NFT on the Foundation platform. It may also mean higher prices — not necessarily a bad thing for artists and collectors seeking to capitalize, assuming the demand for NFTs remains at current levels, or even increases over time.

Although these platforms and others are host to thousands of NFT creators and collectors, be sure you do your research carefully before buying. Some artists have fallen victim to impersonators who have listed and sold their work without their permission.

In addition, the verification processes for creators and NFT listings aren’t consistent across platforms — some are more stringent than others. OpenSea and Rarible, for example, do not require owner verification for NFT listings. Buyer protections appear to be sparse at best, so when shopping for NFTs, it may be best to keep the old adage “caveat emptor” (let the buyer beware) in mind.

1. Digital Artworks

Currently, digital art is one of the most common (and expensive!) forms of non-fungible token in the market. At first glance, it looks like a great platform to support and showcase the works of the diverse creatives of this generation. More than that, it’s also the idea of utilizing tech to form galleries of digital artworks up for sale. Think about modern fine art collections, but instead of physical paintings, you have images, video clips, drawings. You get the picture.

2. Collectibles And Sports

If you’re an avid collector, you might want to look into the digital equivalents of your interests in NFT markets. You’ll be surprised with the increasing number of limited edition cards, sports moments (yes!), and collectibles available online.

3. Music

As NFTs change the landscape of every other industry, they can also have the potential to take over the world of music.

Usually, it would take years for musicians to reach millions of dollars when releasing an album or a single. But selling music with the exclusivity of non-fungible tokens can only take them a day to reach millions.