Chances are you have a lot of questions when it comes to NFTs, so you’ll find below the answers to the 8 most common NFT questions.
What is an NFT?
NFTs are a file type, the same way we have “jpeg” files or “pdf” files and are unique digital assets that reside on the blockchain so that ownership of that digital file can be tracked.
There are many types of NFTs, including artwork, collectible items, media, music, video game items, memes, sport moments, real world assets and domain names.
Why would I want to own an NFT?
At first, NFTs might be perceived by people as just pixelated images on the internet. But they are not, in fact, they could potentially disrupt a lot of industries.
There many reasons why people should consider investing in NFTs. First, because many influential people in the business and investing world are endorsing NFTs, including Mark Cuban and Kevin O’Leary.
Plus, governments and major brands have embraced NFTs.
Another reason to consider investing in NFTs is because they are projected to become a $139 trillion market, compared to the US stock market that is a $48 trillion market and compared to the entire Cryptocurrency market that is a $2.7 trillion market. And, NFTs could potentially solve the big issue around fake memorabilia and fake art.
How do you buy an NFT?
First, you will need some Cryptocurrency, mainly Ethereum because most NFTs are purchased with Ethereum. You can purchase ETH on Binance.
Simply go to “Buy Crypto” and then select how you wish to pay for the purchase. Then type in the amount you wish to spend and the currency, and then select ETH in the “receive” section. Make sure you don’t have just enough ETH to purchase your NFT, have a little more to cover the gas fees. Gas fees are transaction fees when you purchase an NFT or list an NFT for sale. Gas fees vary according to the day and the NFT you’re purchasing so make sure you have enough Ethereum to cover these gas fees.
You will also need to install the “Metamask” Chrome extension that will act as a wallet to purchase your NFT.
Once your Metamask Chrome extension has been installed, you will be able to see the extension appear on the top right hand corner of the browser, as the picture of a fox.
Then, you can buy NFTs directly from the creator’s official website or on an NFT marketplace such as Opensea.io.
How do I know if an NFT is a good buy?
There are many elements that impact the value of an NFT.
First, it’s the rarity of an NFT.
The less NFTs are available under a collection (for example 10,000 NFTs or less under a collection) the rarer it is considered. Sometimes there is only one single NFT of its kind, which can also affect its price.
What can also impact the value of an NFT is when you buy it. Usually, when you buy an NFT during pre-launch because you’ve been whitelisted to do so, you will usually buy the NFT at a discount.
What also makes an NFT a good buy is its creator.
If the creator has a lot of influence or the creator is a celebrity, it will very likely make the price of the NFT higher than similar NFTs.
What can also make an NFT a good buy is its utility.
In other words, an NFT that gives access to something special to its NFT holders such as a special membership, a physical product, access to an event, the opportunity to monetize the NFT while holding it, discount codes, etc…
Where are NFTs stored?
NFTs are stored on the blockchain. The smart contract address pointing to the location of the NFT on the blockchain is received after an NFT is purchased and kept in a digital wallet.
There are two types of wallets you can store your NFTs on.
Soft wallets: They are typically found in the form of a desktop or mobile application, but can also be found on websites or as browser extensions. The data in soft wallets is stored on a server and require an internet connection to access and manage the assets (NFTs and cryptocurrencies). Soft wallets are considered less secure than hardware wallets.
In other words, they are a software where cryptocurrencies and private keys are stored. (Example: Metamask)
Hard wallets: A physical device (like Trezor and Ledger wallets) that add another layer of security because hackers cannot access them like they can access soft wallets.
What’s the connection between NFTs and cryptocurrency?
NFTs aren’t cryptocurrencies, but they are built using the same technology as cryptocurrencies.
NFTs exist on a blockchain, which verifies their unique identity and ownership. The blockchain also keeps a record of all the transactions connected to the NFT. Most NFTs are held on the Ethereum blockchain.
How do I know I’m not buying a fake NFT?
There are many fake NFTs around and it’s important to know how to identify a fake one. First, if an NFT is significantly cheaper than the NFTs under that collection, it’s a red flag.
Also, never buy an NFT from a link you’ve come across on social media or through a pop or direct message. To buy an authentic NFT, go to the creator’s official website or official social media profile and make sure their social media profile is their real one, and not a fake one created by someone else.
Plus, on opensea or any other NFT marketplace, check the number of buyers and transactions for that NFT collection. Go to etherscan too, to check all the transactions around that NFT by entering its hash. When you do, you’ll have access to the NFT’s metadata.
Can’t you just take a screenshot of an NFT?
Yes, anyone can take a screenshot of an NFT, but the NFT is on the blockchain which cannot be copied. Only the owner of the NFT has it in his digital wallet and only the owner of the NFT can sell it.
The best way to protect NFTs from being copied is by minting them. Minting an NFT is the process of tokenizing your asset. When you do, you have to pay gas fees which records the transaction on the blockchain.
So there you have it, the answers to the most commonly asked NFT-related questions so you can explore the world of non fungible tokens with more confidence.