Understanding NFTs: A Comprehensive Guide

Written by Daisie Team

Published on 10 July 2023 8 min read

With the digital world evolving at an exponential rate, it's no surprise that the realm of digital ownership has taken a fascinating turn with the advent of NFTs. If you've heard of NFTs and wondered what they are, this guide will help you navigate this exciting domain. We'll break down the world of NFTs explained in a way that's easy to understand, even if you're new to the scene.

What are NFTs?

Non-Fungible Tokens, or NFTs as they're more commonly known, have become a hot topic in the digital space. They're changing the game in digital ownership and the way we perceive value in virtual assets. Let's dive deeper into what NFTs are, their history, and how they function.

Definition of NFTs

NFTs, short for non-fungible tokens, are a type of digital asset. Unlike cryptocurrencies like Bitcoin or Ethereum which are fungible and can be exchanged on a like-for-like basis, NFTs are unique. Each NFT has distinct information or attributes that set them apart from each other—this means no two NFTs are the same. They're like digital snowflakes, with each one having a unique code that verifies its authenticity and ownership.

History of NFTs

The concept of NFTs isn't as new as you might think. The idea can be traced back to 2012 with the creation of Colored Coins on the Bitcoin blockchain. However, NFTs as we know them today began to take shape with the launch of Ethereum's ERC-721 standard in 2017, which gave birth to the first successful NFT project—CryptoKitties. But it's in 2021 that NFTs really took off, with some pieces selling for millions of dollars and big-name artists, like Beeple, entering the NFT market.

How NFTs work

NFTs leverage blockchain technology to authenticate digital assets. The blockchain ledger records the details of the NFT, which includes the ownership history and proof of authenticity. This way, the owner of the NFT has a verifiable claim to the digital asset, which can be anything from digital art to virtual real estate. What's fascinating is that while anyone can view or copy a digital asset, only the owner of the NFT has the 'official' version.

Buying NFTs

Now that we've got the basics of NFTs explained, let's move on to the exciting part - how to buy them. From where to buy NFTs to practical tips to consider, this section will get you started on your NFT buying journey.

Where to buy NFTs

There are several online marketplaces where you can browse and buy NFTs. Some of the most popular ones include OpenSea, Rarible, and Foundation. Each platform has its own unique offerings and features, so it's a good idea to explore a few to find one that suits your needs. Do remember, you will need a digital wallet like MetaMask or Trust Wallet, and some cryptocurrency (often Ethereum) to get started.

How to buy NFTs

Buying an NFT is a straightforward process, similar to making a purchase on any online marketplace. Once you've set up your digital wallet and loaded it with cryptocurrency, you're ready to go. Browse the marketplace, find an NFT you love, click 'buy now', and confirm the transaction. Your new NFT will show up in your wallet once the blockchain confirms the transaction.

Tips for buying NFTs

Before you dive into buying NFTs, here are a few tips to consider:

Do your research: Understand the market and the artist before making a purchase. The more you know, the better your decisions will be.
Think long-term: Consider NFTs as a long-term investment. While some people have made quick profits, it's safer to think of NFTs as a long game.
Only invest what you can afford to lose: The NFT market is highly volatile. Prices can skyrocket, but they can also plummet. Always remember that investing in NFTs, like any investment, comes with risks.

Selling NFTs

Have you created a piece of digital art or own an NFT that you think could fetch a good price? Selling NFTs can be a lucrative venture if done right. Let's break down where to sell, how to sell, and some handy tips for selling NFTs.

Where to sell NFTs

The same platforms that enable buying NFTs, like OpenSea, Rarible, and Foundation, are also great places to sell them. These marketplaces are populated by a community of enthusiasts always on the lookout for unique digital assets. It's like eBay, but for digital art and collectibles!

How to sell NFTs

Once you've chosen a platform, selling your NFT is pretty straightforward. You'll need to create an account, connect your digital wallet, and then list your NFT for sale. You can set a fixed price or choose to auction your NFT. Once a buyer purchases your NFT, the funds will be transferred to your wallet, and the NFT will go to theirs. Simple, right?

Tips for selling NFTs

Before you list your NFT for sale, here are some tips to keep in mind:

Price it right: Pricing can be tricky. You don't want to undervalue your work, but overpricing can deter potential buyers. Look at similar works and their prices to get an idea of market rates.
Market your work: Use social media platforms like Twitter or Instagram to showcase your NFT and attract potential buyers.
Be patient: It might take some time before your NFT sells. Remember, this isn't a race, and good things often take time.

Creating NFTs

Are you an artist, a musician, or someone with a knack for creating digital content? Creating NFTs could be your next big step. Let's dive in to understand the process, the platforms you can use, and some helpful tips.

How to create NFTs

Creating NFTs is simpler than you might think. Here's a step-by-step guide to help you out:

Prepare your work: Ensure your digital content—whether it's art, music, or any other form—is ready and in the correct format.
Choose the right platform: Platforms like OpenSea, Mintable, and Rarible offer user-friendly interfaces to create and sell NFTs.
Mint your NFT: This is the process of turning your digital work into an NFT on the blockchain. It involves uploading your work, filling in details like name, description, and price, and then paying a 'gas fee' for the transaction.

Platforms for creating NFTs

There are several platforms to create NFTs, each having its own unique features. OpenSea and Rarible are more popular among artists due to their user-friendly interfaces. Mintable, on the other hand, allows you to create gasless listings, meaning you don't pay a fee until your work sells.

Tips for creating NFTs

Creating NFTs can be fun, but it's not just about minting and listing. Here are some things to keep in mind:

Quality matters: The quality of your work can significantly influence its value. Make sure your work is unique and high quality.
Understand your audience: Knowing who your potential buyers are can help you create work that resonates with them.
Brand yourself: Building a strong online presence can help attract buyers. You could use social media, a personal website, or community forums to build and engage with your audience.

So, are you ready to take the plunge into the dynamic world of NFTs? Remember, as with any endeavor, success may not come overnight. But with patience, creativity, and a bit of strategic planning, this exciting new frontier could hold great promise for you.

NFT legality and ethics

As exciting as the world of NFTs can be, it's important to remember that it's not just about creating, buying, and selling. There are certain legal and ethical aspects that you should consider. Let's take a closer look.

Legal considerations for NFTs

When it comes to NFTs, legal considerations often revolve around copyright, ownership, and authenticity. Here are a few key points:

Copyright Laws: Buying an NFT doesn't give you copyright to the work. The original creator retains the copyright unless they specifically transfer it.
Ownership: While you own the NFT, you don't necessarily own the copyright to the underlying work. For example, if you buy an NFT of a digital painting, you own the token, not the painting itself.
Authenticity: There's no foolproof way to verify that the person selling the NFT is the actual creator of the work. This creates legal risks around authenticity and ownership.

Ethical considerations for NFTs

There are also ethical issues tied to NFTs, particularly related to environmental impact and artist exploitation. Let's delve into this:

Environmental Impact: The process of minting NFTs requires a lot of energy and contributes to carbon emissions. This has led to concerns about their environmental impact.
Artist Exploitation: Some artists have reported instances of their work being used to create NFTs without their consent, leading to discussions about artist exploitation.

NFT scams and frauds

As the NFT market grows, so do the scams and frauds associated with it. Here are some scams to watch out for:

Fake Listings: Some scammers create NFTs of artworks they don't own and list them for sale.
Scam Websites: Be cautious of websites pretending to be legitimate NFT marketplaces. Always double-check the website's URL before making a purchase.
Phishing Attacks: Scammers may send emails or messages pretending to be from a known NFT platform, trying to trick you into giving away your private keys or other sensitive information.

Understanding NFTs, their legality, and ethics can seem daunting, but with the right knowledge, you can navigate this dynamic landscape. Keep these points in mind, and you'll be one step closer to mastering the world of NFTs.

Future of NFTs

Now that we've explored the current landscape of NFTs, let's turn our attention towards the future. Like any emerging technology, NFTs face certain challenges but also present exciting opportunities.

Potential uses of NFTs

NFTs are more than just digital art. Their potential uses extend far and wide, into areas you might not expect:

Real Estate: Imagine owning a digital representation of your home or office as an NFT. This could simplify property transactions and could even pave the way for virtual real estate.
Identity Verification: Your identity could be tokenized as an NFT, making it easier to verify your identity online without the need for passwords or security questions.
Music Industry: Musicians could sell their songs as NFTs, allowing fans to own a unique piece of their work, while artists can benefit directly from their sales.

Challenges for NFTs

With new frontiers come new challenges. Here are a few that NFTs need to overcome:

Environmental Concerns: As we mentioned earlier, the process of minting NFTs can be energy-intensive. Finding more environmentally friendly ways to create NFTs is a major challenge.
Market Volatility: The NFT market is very volatile. Prices can skyrocket one day and plummet the next — this instability can deter potential buyers and sellers.
Legal and Regulatory Issues: As NFTs become more mainstream, they will likely face more scrutiny from legal and regulatory bodies. Navigating these potential issues is a significant challenge.

Opportunities for NFTs

Despite these challenges, NFTs offer some exciting opportunities:

New Revenue Streams: For artists and creators, NFTs offer a new way to monetize their work. They can sell their creations directly to their audience, without the need for a middleman.
Proof of Ownership: NFTs provide indisputable proof of ownership, which can be useful in various industries, from art and music to real estate and identity verification.
Interoperability: NFTs work across different platforms, providing opportunities for cross-platform interactions. For example, a virtual pet NFT could follow you around in different virtual worlds.

As you can see, the future of NFTs is as exciting as it is complex. As we continue to explore and understand this new frontier better, we're likely to discover even more uses, challenges, and opportunities. So, keep your eyes peeled, and stay curious!

If you're eager to dive deeper into the world of NFTs, don't miss the workshop 'Intro to NFTs' by Andrea Orejarena. This comprehensive workshop will help you better understand NFTs, their potential impact on the creative industry, and how you can get involved in this exciting new space.