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NFT how does work? | All about Non-fungible NFT tokens

The word NFT has been one of the buzz words of digital currencies in recent times. Many people call the multi-million dollar prices of NFTs a digital scam, while others herald the opening of a new window into the human world. tokens

Meanwhile, there are many people who are looking for a simple and complete answer to the question of what NFT is and what are its uses. Our goal in writing this article is to explain the concept of NFT in a simple and complete way, emphasizing its features and applications, especially in games, metaverse, and web space 3. How to make NFT and buy and sell NFT are among other topics raised in this article.

NFT is ?

Before the technical examination of the concept of NFT, we want to examine the simplified form of its concepts. Suppose you have created a work using photomontage in Photoshop and you want to sell it. Anyone can have a copy of your work on their computer, and by downloading that work, no ownership rights will be paid to you. In another example, suppose you have painted an oil painting and want to sell it. In the first example, a photograph and in the second example, a painting, you can convert them both into an NFT, and with this conversion, even with the destruction of the physical product – here the painting – the work itself in the form of an NFT is not lost, and the right to own it remains with the original owner of the NFT.

If we want to explain more simply than this, it should be said that if the painting is converted into a photo and that photo is sold in the form of an NFT, this photo will have a unique ID that even its copies will not be equal to the original work. In this way, even a photo in JPEG format can be converted into an NFT and sold.

In fact, NFTs are digital assets that can be collected like works of art.

This digital asset maintains its value as a form of cryptocurrency. In fact, just as a hand-woven carpet or a painting retains its value over time and is considered an investment, the same applies to NFTs, which we will explain below.

The word NFT itself means “Non-Fungible Token” (Non-Fungible Token | NFT), and in fact, it is a digital token and a type of cryptocurrency like Bitcoin and Ethereum. But unlike a standard coin on the Bitcoin blockchain, an NFT is unique and cannot be exchanged.

What does irreplaceable mean?

You may have wondered what “non-fungible” means. In fact, NFTs cannot be exchanged directly like banknotes because no two NFTs are identical. To better understand, you can consider a concert ticket, in a concert, no two tickets are the same and each ticket is unique and includes specific information such as the buyer’s name, concert date and seat number. This information makes it impossible to exchange tickets with each other.

With the above explanation, you can understand the importance of this token and their difference from other cryptocurrencies. An NFT is not just an asset and includes additional information that elevates the NFT’s value to more than a pure currency and into its true realm. Therefore, NFTs come in many forms but can be dedicated to digital art, music files, videos, or anything unique that has value.

To put it simply, NFTs are a type of collector’s item, but unlike, say, an oil painting, you’ll have a photo in JPG format.

Explaining the non-commutability property is easily done using examples. A Solana digital currency coin is always equal to another Solana coin or even a thousand toman bill is identical in every way to another thousand toman bill. But, for example, a cubist painting by Picasso has a value that is given to the highest bidder at an auction.

Artists who want to sell their works as NFT must register in a store and “mint” digital tokens by uploading and validating their information on a blockchain. This work includes a cost of about 40 to 200 dollars. After creating NFTs of their works, artists can register them for an auction. In the following article, we will learn how to do this and sell the works, and we will mention that the costs of this work will be much more than $200.

What is the difference between exchangeable and non-exchangeable tokens?

By reading the above material, we know that NFT is a non-exchangeable token or token, but we have only defined it, and maybe we need more explanations to understand the true meaning, to understand the difference between exchangeable and non-exchangeable tokens.

Blockchain technology has always been described by cryptocurrencies. If you are new to blockchain, you might think that this technology is only suitable for the development of crypto assets, but in fact, the potential of using this technology goes beyond cryptocurrencies.

Currently, governments, companies, and individuals can put various critical identifiers, certificates, and data on the blockchain. Even students can have their diplomas in the form of a blockchain that is recognized all over the world. But what happened to make people have access to such a special feature? To answer this question, we need to learn about exchangeable and non-exchangeable tokens.

 

What is a token?

Token refers to a visible representation of different feelings, facts or qualities and people encounter it in their daily life. For example, a hotel key is proof or representation of payment for a room, or your ID card represents your employment with a company. Also, a person’s driver’s license indicates that he has passed the driving test and is qualified to drive. Similarly, a token can be described as a special existential entity in the crypto space.
This token can have value, voting rights, shares or anything else and is not limited to a specific role but can be assigned to different roles. A token can represent a specific property or asset of a company, and it is possible for the company to offer tokens to its investors in public auctions.

What is the importance of the token?

Now the question arises as to what is the role and importance of tokens and why in order to get acquainted with NFT, we must first be familiar with the token. As mentioned, tokens are not limited to a specific role and have many uses, some of which are mentioned below.

• The token acts as a gateway to blockchain applications and services.
• Tokens play a role in confirming the eligibility of individuals in some voting rights.
• Token can play an important role in user experience. For example, with the help of users’ tokens in an internet browser, various services can be provided to them.
• One of the important roles of tokens is to exchange assets (values). In fact, tokens are used in the blockchain to convert value.
• In addition to all the above applications, the token can represent the ownership of a specific product, and it is this use that shows the difference between exchangeable tokens and non-exchangeable tokens.

What is the basis of the difference between tokens?

There is no doubt that blockchain is a suitable technology for managing digital assets of various types because it is highly secure. Also, tokens that are unique and can store data and information instead of value are preferred over other tokens. This type of token, known as a non-exchangeable token, is defined in Ethereum by the ERC-721 standard. As a result, it is well known that both tradable tokens and non-tradable tokens such as NFTs focus on information storage.

In economic definitions, a fungible asset refers to its ability to be exchanged for other assets or goods of the same value. The most common example of tradable asset is money and fiat currency. For example, a 50,000 Toman note has the same value for each person. Gold is another example of a tradable asset because an ounce of gold in any country will have the same value in another country. But as mentioned at the beginning of the text, NFTs are non-exchangeable tokens and cannot be exchanged with other tokens and receive their value from the commodity assigned to them.

Exchangeable tokens, as their name suggests, are easily exchanged for each other. In fact, both of the exchangeable tokens of a digital currency project have the same conditions, and for this reason, their exchange can be done easily. The feature of exchangeability in tokens used for payment is very important because one of the main characteristics of money is exchangeability.

You can exchange any ten thousand toman note with another ten thousand toman note printed on a different date, and this exchange has no effect on the value of your assets, but it is not possible to do this with two works of art.

On the other hand, non-exchangeable tokens have a “Unique Value Proposition (UVP)” and each one has a special identifier to distinguish it from other tokens. It is because of this unique feature that NFTs become rarer and rarer and become very valuable due to high demand. In addition, NFTs can be used to transfer ownership in addition to trading.

How does NFT work?

NFTs are part of the Ethereum blockchain and as such, are tokens that have additional information stored in them. Of course, currently, issuing NFT tokens in other blockchain networks such as Binance is also possible. The information added to the non-exchangeable tokens is an important part of the tokens and allows them to cover art, music, video, and the like in various photo, video, and music formats. Since these cryptocurrencies hold value, they can be bought and sold, and like different types of art, this value is regulated by the market and the supply and demand mechanism.

Of course, according to the above, it cannot be said that there is only one digital version of the NFT artwork in the market. Just as genuine and copied paintings exist and are traded in the world, the same is true for NFTs, not all of which are worth the original (genuine) NFT. Of course, we must also add that by downloading a photo, you cannot own it, because this photo does not contain stored information that can be part of the Ethereum blockchain.

How to buy NFT?

NFT can be purchased through various platforms, each of which has a different purchasing method. However, to buy NFTs from any platform, you need a cryptocurrency wallet specific to that platform, and this wallet must be topped up with cryptocurrencies accepted by the platform through cryptocurrency exchanges. Due to the high demand for NFTs, they are sold at various events and auctions, and buyers must have registered and topped up their wallets for this event in advance. In these auctions, each NFT is sold at the highest bid by users.

In addition, NFTs are also recently being used for in-app purchases of games. These assets are bought and sold by players. For example, swords of a particular character in the game, different skins or avatars are all considered among these assets.

How is NFT made?

So far in this article, we have learned about NFT and its uses. Now the question arises, how to create an NFT and participate in its sale? It is good to know that the creator of the image below sold this image for $3,600.

Simply put, it is possible for anyone to create a work of art and sell it by converting it to NFT on the blockchain. You can even consider a percentage as a commission that you will receive by reselling it. As with buying NFTs, you need a wallet full of crypto to make them, which makes it difficult to make.

The hidden costs of this work have an astronomical price because the sites charge a “transaction fee” (Gas Fee) for each sale. Blockchain network fees, conversion rates, and their volatility should also be considered. Considering all these things, you may come to the conclusion that the fees paid will be much more than the money received from the sale of NFT. Of course, keep in mind that the commission percentage of some sites is different from others, which can be estimated with a little search.