Nonfungible tokens (NFTs) for beginners

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What are NFTs, and why are they revolutionizing the art world?

NFTs are digital objects that are verified on the blockchain and hold features such as uniqueness and non-interchangeability. They can take the form of pretty much any category but are most notably appearing in the form of art, music, items in blockchain-based video games, and video. 

One area that NFTs have taken particularly by storm is the art world, where digital tokens are selling for tens of millions of dollars at major auction houses and beyond. Budding artists who would once post their work for free or sell it cheaply are realizing that they can cash in on their talent through the use of blockchain technology and NFTs.

Nonfungibility 

The value of NFTs revolves around the nonfungible nature of these digital assets, which is the feature that sets them apart from cryptocurrencies, as NFTs and cryptocurrencies are not the same things. Each NFT has its own unique set of attributes — such as size, scarcity, creator, etc. — and therefore cannot be interchanged with another asset. By way of comparison, Bitcoin (BTC) is a fungible asset. If you are fortunate enough to own 1 BTC and you exchange it for another 1 BTC, nothing has changed. You still have the same amount of Bitcoin to use or hold, or “hodl,” onto.

If you are wondering how nonfungible tokens have changed the art world already, look no further than Christie’s, an auction house with a history of more than 250 years. That is where digital artist Mike Winkelmann, aka Beeple, famously sold one of his pieces — “Everydays: The First 5000 Days” — in a JPG format for $69 million. It was a sign of the times that proved just how much the blockchain space has influenced modern art. 


Security and functionality 

Just because there is no physical safe from which to steal NFTs doesn’t mean that security isn’t an issue. Similar to the cryptocurrency industry itself, the NFT industry remains a nascent market in which developers are working out some of the kinks and users are getting educated. 


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