Understanding NFTs and Blockchain: A Comprehensive Guide

Written by Daisie Team

Published on 10 July 2023 7 min read

Imagine being able to own a one-of-a-kind digital asset that no one else in the world can claim; that's the magic of NFTs. Now, imagine a secure, transparent system that validates your ownership of that asset; that's the power of blockchain. Together, NFTs and blockchain are revolutionizing the digital world. Let's dive into this exciting realm.

1. Demystifying NFTs

NFTs, or Non-Fungible Tokens, are a fascinating part of the digital world. Let's break down what they are, how they work, and some platforms where they're popular.

What are NFTs?

NFTs are unique digital assets represented as tokens on the blockchain. Unlike cryptocurrencies such as Bitcoin or Ethereum—which are fungible and can be traded on a one-for-one basis—NFTs have distinct, non-interchangeable properties. This uniqueness makes them digital collectibles. Think of an NFT as a digital version of a signed baseball card—you own a unique item that cannot be replaced with something else.

How Do NFTs Work?

NFTs work by utilizing the power of blockchain technology. When you purchase an NFT, the transaction is recorded on the blockchain. This record verifies your ownership and proves that your NFT is not a replica. It's like having a notarized document for your digital asset. Here's a simple breakdown:

You find a digital artwork you love and decide to buy it as an NFT.
The transaction is processed, and your ownership of the digital artwork is recorded on the blockchain.
Now, the digital artwork is yours, and this ownership can be traced and verified on the blockchain.

Popular NFT Platforms

There are several platforms where you can buy and sell NFTs. OpenSea, Rarible, and NBA Top Shot are among the most popular. OpenSea and Rarible host a wide variety of NFTs, from digital art to virtual real estate. NBA Top Shot, on the other hand, exclusively sells NBA-related content. Remember, each platform has its own way of operating, so it's a good idea to familiarize yourself with their rules before getting started.

2. Exploring Blockchain

Now that we've looked at NFTs, let's shift our focus to the technology that makes them possible - the blockchain.

Understanding Blockchain Technology

So, what is blockchain? Essentially, it's a public ledger of all transactions that have ever taken place. It's decentralized, meaning no single entity controls it. Information on the blockchain is stored in blocks, which are linked together in a chain. Once a block is filled with transactions, a new block is created and linked to the previous one—hence, the term "blockchain".

Blockchain and NFTs

Blockchain and NFTs go hand in hand. All NFT transactions are recorded on the blockchain, which validates and verifies the ownership of the NFT. It's the reason why you can truly own a unique digital asset. Each NFT is attached to a token on the blockchain, which carries specific information that confirms its uniqueness and ownership.

Blockchain Security

The security of the blockchain is one of its key strengths. Because it's decentralized, it's incredibly difficult for any single person or entity to manipulate the data on the blockchain. Additionally, each block on the chain contains a unique code called a hash. If someone tries to alter the information in a block, the hash changes, alerting the network to the attempted tampering. This robust security makes blockchain a trustworthy platform for NFT transactions.

3. Buying and Selling NFTs

Now that we've demystified both NFTs and blockchain technology, let's delve into the practical aspects of acquiring and trading NFTs.

How to Buy NFTs

Buying NFTs is a straightforward process. Here's a simplified step-by-step guide:

First, you need a digital wallet that supports cryptocurrency transactions. Famous ones include MetaMask, Trust Wallet, and Coinbase Wallet.
Next, you need to load your wallet with cryptocurrency. Ethereum is the most widely used in the NFT world.
Now, you're ready to shop for NFTs. Head to an NFT marketplace—OpenSea, Rarible, and NBA Top Shot are popular choices.
Find an NFT you like, and click 'buy'. Your NFT will be transferred to your wallet, and the transaction will be recorded on the blockchain.

How to Sell NFTs

Selling NFTs is just as simple. Here's a quick guide:

First, make sure your NFT is in your digital wallet.
Next, head to an NFT marketplace. Most platforms require you to connect your digital wallet.
Once connected, you can list your NFT for sale. You can set a fixed price or put it up for bidding.
When someone buys your NFT, the funds will be transferred to your wallet, and the NFT will be transferred to the buyer's wallet. This transaction will be recorded on the blockchain.

Tips for Trading NFTs

As with any investment, trading NFTs requires careful thought and a solid strategy. Here are some tips:

Do your research: Understand the NFT market and the specific NFT you're interested in. Know the artist or creator's reputation and past work.
Don't bet more than you can lose: The NFT market is volatile, and prices can fluctuate wildly. Only invest what you can afford to lose.
Diversify: Don't put all your eggs in one basket. Invest in different types of NFTs to spread your risk.

4. NFT Art and Digital Ownership

Let's now turn our attention to the fascinating world of NFT art, and how it's changing the way we understand digital ownership.

The World of NFT Art

NFT art has exploded onto the scene, with digital artists and collectors alike embracing the potential of NFTs. But what does NFT art look like? Well, it could be anything—a digital painting, a GIF, even a tweet. The key is that it's tied to an NFT, which proves its authenticity and ownership.

You might have heard about Beeple, a digital artist who sold an NFT artwork for a staggering $69 million. Or perhaps you've come across CryptoPunks, 10,000 pixel-art characters that have become some of the most sought-after NFTs. These are just a few examples of how dynamic and diverse the world of NFT art is.

Digital Ownership Explained

So, what does it mean to own an NFT? When you buy an NFT, you're buying a unique token on the blockchain that proves you're the owner of a specific piece of digital content. That's right—you own it, even if it's a digital asset that anyone can view or download. It's like owning an original painting. Anyone can buy a print, but only one person can own the original.

Impact of NFT on Art Industry

The impact of NFTs on the art industry has been profound. For artists, NFTs offer a new way to sell their work and connect with collectors. They can sell their art directly to buyers, without needing a gallery or agent. Plus, they can program royalties into their NFTs, so they get a cut every time their art is resold.

For collectors, NFTs open up a whole new world of digital art to explore. Plus, the blockchain provides proof of ownership and authenticity, solving some of the biggest challenges of collecting digital art.

For the art industry as a whole, NFTs are a game-changer. They're pushing boundaries, challenging conventions, and sparking a whole lot of debate. And while it's still early days, it's clear that NFTs and blockchain are set to play a big role in the future of art.

5. Future of NFTs and Blockchain

Now that we've delved into the heart of NFTs and blockchain, let's explore what the future might hold for these two intriguing concepts.

Potential Uses of NFTs

The potential uses of NFTs extend far beyond digital art. Imagine owning an NFT for a virtual real estate in a video game, or an NFT that gives you access to exclusive content from your favorite musician. NFTs could also play a role in identity verification, providing a secure way to prove who you are online.

For example, NBA Top Shot has made headlines for selling NFTs of highlight clips. In the fashion world, brands like Gucci have started exploring digital fashion NFTs. Meanwhile, companies like Microsoft are looking at using NFTs to manage digital rights and royalties. These examples hint at the vast potential of NFTs.

Blockchain Beyond Cryptocurrency

Blockchain is most often associated with cryptocurrencies like Bitcoin and Ethereum. However, the technology has potential applications in a wide range of sectors. Blockchain could revolutionize supply chain management, for example, by providing a transparent, unalterable record of a product's journey from manufacturer to consumer.

Blockchain could also transform voting systems, providing a secure, tamper-proof method of recording votes. And in the healthcare sector, blockchain could allow for secure, decentralized patient records, improving data security and patient privacy. The possibilities are vast and certainly worth keeping an eye on.

Emerging Trends in NFT and Blockchain

As with any new technology, there are always emerging trends to watch. In the world of NFTs and blockchain, one trend to note is the growing focus on sustainability. The energy usage of blockchain networks, particularly those used for NFTs, has been a hot topic. We're starting to see a shift towards more sustainable solutions, like proof-of-stake blockchains.

Another trend is the increasing accessibility of NFTs and blockchain. More platforms are popping up where people can create, buy, and sell NFTs. Meanwhile, blockchain technology is becoming more integrated into our daily lives, even if we don't always realize it.

And let's not forget the legal and regulatory developments. As NFTs and blockchain become more mainstream, they're likely to face more regulation. This could shape the future of these technologies in significant ways.

So, what's the takeaway? The world of NFTs and blockchain is exciting, dynamic, and full of potential. It's a space that's constantly evolving, pushing boundaries, and challenging us to rethink our understanding of ownership and value. It's a space worth watching—and, for many of us, a space worth diving into.

If you're looking to dive deeper into the world of NFTs and blockchain, don't miss the workshop 'Intro to NFTs' by Andrea Orejarena. This workshop will provide you with a solid understanding of NFTs and their impact on the creative world. Join now to unlock the potential of this exciting new technology within your own creative projects.