What Is an NFT and How Does It Work?

What is an NFT(Non-Fungible Token)?Know about the definition, working, uses, applications in real estate, examples, marketplaces, and everything.

What is an NFT(Non-Fungible Token)? Know about the definition, working, uses, applications in real estate, examples, marketplaces, and everything. 

What Is an NFT and How Does It Work?

Are you interested in blockchain technology(the technology behind Bitcoin and other altcoins)? If you are aware of your privacy, you must be in favor of blockchain technology.

This article is a stopping point for all those crypto lovers who are searching for an easy-to-understand guide on NFTs. After reading this guide, you will be left with no doubts in your mind. The simple and sweet language will be suitable for both beginners and advanced crypto enthusiasts.

So, bear with me till the end and then see the results.

Traditional Creators' Community

First, let me ask you some questions,

  • Why am I writing this blog post?
  • Why did I start Uncoverify as a crypto and blockchain blog?
  • Why am I intended to create unique guides for you?

The possible answers to these questions may be, I am a creator who wants to provide unique, interesting, and usable guides to his audience. By giving my guides, I want to charge something from you and earn a living. I also want to make sure that no one accesses my creatives without paying. Neither I want anyone to resell my content nor do I want them to maliciously access the content.

This is not just my answer, rather it is the answer of every creator who wants to make his living with his creative work. Do you know how the creators on the internet are paid these days? There are different methods of earning through creatives on the internet but we are not going to discuss all of these. The most common method is to supply relevant ads.

To supply the ads, first, they collect the information of the audience and then provide it to the advertising platforms.

In such circumstances, the information of the users is sold to third parties, i.e., the advertising platforms. The advertising platforms keep the major portion of the revenue generated from the ads and give a little amount to the creators.

This is not a fair way, means, this is justice neither to the audience nor to the creators. Now, let's discuss what can replace this traditional method.

Blockchain Creators' Community

The injustice discussed above can be solved by the following method.

A creator should produce the tickets of his work and then sell them to his audience. The tickets should be designed in such a way that their copies cannot be produced. Whenever someone uses the service or product of the creator, he/she has to present the ticket. There may be different types of tickets like buying tickets, one-time using tickets, part-time tickets, etc.

As people are now paying for what they are using, third parties should be stopped from tracking the private information of the users. Advertising networks should not be allowed to display targeted ads.

Organizing things in this way will do the following things:

  • Stop the third party to interfere between the audience and the creator.
  • Pay the maximum amount to the creator for his work.
  • Protect the privacy of the users.

What Is an NFT?

The word NFT stands for Non-Fungible Token. Let's first understand the meaning of the word. 

Non-Fungible is an English word that means something that can't be replaced. Let's take the example of Bitcoin. One Bitcoin can be traded for another and all of its kind can be exchanged for one another. So, a Bitcoin is replaceable and is therefore Fungible.

Let's take another example, you have five different notes each of $1. Now, don't want your money in a scattered way. Rather you want them a single note. In such a circumstance, you can exchange these five notes of $1 each with a single note of $5. This means a dollar is fungible.

Thus, an NFT is a cryptographic coin that has its unique value and ownership that cannot be replaced by any other. It is a digital or cryptographic certificate of authenticity working on the Ethereum blockchain and has an ownership value that cannot be changed and can be tracked through the whole process of marketing.

As we have already discussed, an NFT is just like a cryptocurrency but there do not exist two similar NFTs.

Let's take an example. I have a book called "The Bitcoin Standard". This book has been sold multiple times and many people own this. I write my name on the first page, read the entire book, and underline some important statements in the book. Now, this book has become a special or non-fungible one. There does not exist a book that is in all the way similar to the copy of the book that I own.

So, an NFT is just like the above book. It can represent a digital item like a Gif, audio, video, document, picture, or a physical one like building, wearable, electronic device, or any other thing. Anything in the world may have a non-fungible token that represents its ownership and tracks the entire chain of ownership.

How Does NFT Work?

All of this information is recorded on a public blockchain called Ethereum. To transfer the ownership of a single item, it has to be verified by a number of devices on the network. After it has been verified by a majority of the computers participating in the process, the transfer gets completed.

You can also merge two or more NFTs together to create a different one. The metadata and attribution of the previous ones merge in a new one. For this purpose, the owner of all the NFTs being merged should be the same.

What Are the Uses of an NFT?

As we have already discussed, a Non-Fungible Token is the proof-of-ownership and is available on a distributed ledger of the blockchain. It can be used to represent the ownership of any digital or physical asset.

For example, you are an artist. You make a digital painting and now want to sell it online. You can create an NFT of your artwork. This NFT is made in a programmable format that has in its records the metadata and attribution. You can attribute it as an artwork or give a special attribution like the Madhubani painting(a type of artwork in India). The metadata keeps the record of the original creator, the present owner, the date of creation, etc. These basic things cannot be changed.

So, it is a cryptographic certificate of a digital or physical asset that keeps the full record of ownership and tracks the marketing of the asset. Everything can be converted into an NFT to keep the originality intact and track the ownership. The working of every industry can be made more secure and more productive with the help of NFTs. NFTs in the long run help upgrade the financial system to a better, decentralized, and fair one. 

NFTs and the Real Estate?

How can you sell a building that you own? Well, you may contact a broker or set a to-let poster on the main gate of your building. Obvious! Right. Here I am not intended to say that.

How do you transfer the ownership of your building? You do it by doing the document work. You contact a lawyer for this purpose. He verifies that you own the building. He does this by contacting some government officers, authenticating your documents, and a lot more. This takes a lot of time and money.

However, this becomes very simple with present-day blockchain technology. You just visit an online platform that allows you to create NFTs. You register there and create one for your building and then sell it through the same or a different platform. The platform charges a very small amount for this purpose. This amount is again distributed to all those computers that participate in the blockchain ledger of the NFTs. In fact, such platforms are made by the participating computers themselves.

What if the buyer does not have enough money to own the full building. In this case, you can create multiple NFTs of your building and then sell them to multiple buyers. It all depends on you whether you want to sell the full property or a part of the property.

Take another case, you have multiple land properties. These all are located in different parts like one part is at the center of the city and the other is near the beach. One is under construction while the other is a serving building for a hotel. Owning and selling all of these becomes easy with the NFTs. You can create a single NFT of all the property that you own and then sell it.

Examples of NFTs?

If I take Bitcoin into consideration, I can say that the NFTs were discovered with the discovery of Bitcoin. But it is not so? The technology behind NFTs, i.e., the blockchain technology, was discovered with the discovery of Bitcoin.

NFTs came on the web recently. There are various famous examples of NFTs. Let me list down some of these.

  • The first-ever tweet on Twitter(earlier Twttr) was tweeted by Jack Dorsey on 21st March 2006. It is "just setting up my twttr". Recently, Dorsey created an NFT of the tweet that was sold for $2.9 million.
  • CryptoKitties is a blockchain game developed by Dapper Labs in November 2017. In this game, players can purchase, nourish and breed new cats. This game runs on the Ethereum blockchain and makes the players feel like real life in the virtuality. The purchasing and selling all goes with NFTs.
  • Mike Winkelmann, a digital artist known as Beeple, sold his NFT for $69 million. Every day, he makes a digital art. He made a collage of the first 5000 days of his work, created an NFT, and sold it.

Wrapping Up

20 years back, there were a few who knew about the internet and those are the leaders of today's tech world. Similarly, a time is soon coming when there will be blockchain and decentralization everywhere on the internet. To be one of the early birds of this technology you should start exploring the crypto world.

We are currently in Web 2.0 and this is transforming to Web 3.0. In Web 3.0 the whole internet will be a decentralized one. This will use NFTs, cryptocurrencies, blockchains, etc. for this purpose. Know more about Web 3.0 here. So, if you want to become one of the leaders of future internet running fully on blockchain technology, then start exploring the technology and its uses.

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