What is NFT and how does NFT trading work?

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what is NFT

Buying and selling NFTs. Purchase and sale of rare and valuable items. Surely you have heard of them.

Their value? A Bitcoin can be exchanged for a Bitcoin with the same properties, just as a dollar can be exchanged for another dollar, but NFTs have different values and cannot be replaced with each other. This means that they are non-fungible. They have a great potential to be used, and they are only now starting their growth, with a huge probability of market increase, in general, in the digital economy.

Currently, among the popular words in the Crypto world NFT is in the top three. A creator uploads an original file online, assigning features to it (if it is unique, if it is part of a collection, or if it has multiple copies). Once created, the owner can start selling it, or copies of it.

In this article we provide basic explanations that will help you better understand what is NFT, and how NFT trading works.

First things first:

What is NFT?

NFTs are non-fungible tokens (NFT). They gained momentum around the beginning of 2020, the concept originating back in 2015. They are used as a method to sell assets online.

  • Fungible tokens can be exchanged;
  • Non-fungible tokens cannot be exchanged.

Digital art + blockchain = cryptoart

The blockchain is similar to a database based on which cryptocurrency transactions are recorded. It allowed the existence of this new crypto market, and now you can certify a digital asset through a unique cryptographic token: NFT. All of these tokens are unique and guarantee your ownership over the asset.

An NFT is also the popular term for digital artwork, traded through a blockchain. Any crypto digital creation is an NFT, for example: a gif, a meme, an animation, an avatar, a .jpg, a clip, a photo, video game articles, even Twitter messages.

NFTs turn online artwork and a host of other valuables into assets. They are unique and easy to trade.

You would think that any file can be multiplied, but it does not apply to NFTs, which is practically impossible, because the registers in which they are recorded are supported by thousands of computers around the world.

Interesting facts about NFTs

Why are NFTs so valuable and you may be wondering: how much could this digital art be worth, and if you invest in NFT, is there a chance to make good profit? Some have been sold for record highs, and these are numbers that continue to rise.

What can help us the most? Real examples. Here are some that will challenge your curiousity:

  • The artist Grimes (Elon Musk’s girlfriend) sold works worth over $ 6,000,000
  • Twitter founder, Jack Dorsey, put the first tweet in history up for sale, and its auction value reached $ 2,500,000
  • In Romania, Delia Matache sold her first NFT, for the song Racheta, the auction starting at $ 1,700. It sold for $ 3,000
  • Artist KristaKim sold a digital home for the equivalent of $ 500,000
  • A simple .gif with a cat was sold for $ 600,000
  • The most expensive NFT (at this moment) is Everydays: The first 5,000 days, signed by Beeple. Mike Winkelmann (Beeple) is a graphic artist and animator, and his NFT collection contains exactly 5,000 works created and published by him, daily, over the last 13 years. It sold for $ 69,000,000.

The trading volume of NFTs in 2020 increased by 299%, from $ 62.9 million in 2019, to $ 250.8 million.

How can you buy and sell an NFT?

NFTs are currently traded in cryptocurrencies. First of all, you need to buy cryptocurrencies and keep them in a crypto wallet. You will then need to register in one of the NFT markets, such as:

Usually, sales take the form of an auction, and if you add a good bid, it can become the winning bid. You can earn quite a profit if the value of the NFT increases by conducting your own auction.

To upload your creation to one of the above platforms, you will first need to purchase cryptocurrencies. Then, in order to use them on these platforms, you will need to create a digital wallet (using a crypto exchange platform) and then connect your wallet to the site where you want to sell or buy NFTs.

Then the fun part begins – for the sale you simply upload the creation on the platform. But beware: your creation must be in one of the formats available on that platform. You can upload digital paintings, music snippets, videos, benefit packages for your fans, concert tickets, brands and any combination. Also, the even more interesting part is that you can choose to upload a single copy or even multiple copies of the same work. This way you can sell limited edition items that can be collected.

Purchasing NFT does not always transfer you the copyright

Many times you will be entitled to basic use of the digital asset. For example, posting a video or image online.

NFTs are highly valued by collectors, becoming a real phenomenon, and by speculators, who want to be able to sell them later and make a profit.

In the world of NFTs everything seems to be new, and there is still a long way to go before they spread. Even so, owning one is still beyond the reach of the average person. The market is extremely dynamic, and you have to be up to date and very attentive to new trends when you invest in them.

Everything we buy has value in the market, so we can understand that an NFT can be considered a good investment.

Picture of Razvan Popovici

Razvan Popovici

Business adviser & entrepreneur

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