Below, we will introduce you to the basics of NFTs, minting, and gas fees.
The term NFT stands for Non-Fungible Token.
NFTs are tokens that represent ownership of unique, digital assets on the blockchain. This ownership is transparently recorded and secured through blockchain technology.
The creation (minting) of an NFT transitions a digital file (such as .jpg, .png, .mp3, .vid, .gif, etc.) to a digital asset, which allows it to be sold and owned. These assets can be anything from artworks, collectibles, or songs, to in-game purchases, domain names, or even real-estate. This means that NFTs can both represent something tangible (a physical object or experience), or wholly digital.
Think of NFTs as digital trading cards, but one-of-a-kind. They are like prints that can be resold. Similar to buying an autographed print, the NFT is owned exclusively by you, but anyone can view the work.
Both NFTs and cryptocurrencies are considered digital tokens, or assets. They are built on the blockchain and utilize the same technology.
However, cryptocurrencies are digital currencies that are fungible, or interchangeable. NFTs are singular and unique assets, making them non-fungible.
The term “fungible” refers to a good or asset that can be exchanged for another good or asset of equal value. For instance, a dollar bill is fungible, because it can easily be swapped for another dollar bill of the exact same value. The same goes for cryptocurrencies.
If something is “non-fungible,” it means it cannot be swapped for something of completely equal value. An acre of land would be non-fungible, as land is unique. Finding another acre with the exact same value*,* potholes and all, would be impossible.
Art is another example of a non-fungible asset. Its value is highly subjective—and this is where NFTs come in.
An NFT shows exclusive ownership of a digital asset, most often being an artwork or collectible. You might mint or purchase an NFT at a certain price, but because it’s non-fungible, its market value is likely to fluctuate.
Think of minting as giving life to, or publishing, an NFT. It’s the process of converting a digital file into a digital asset through a transaction that is recorded and stored on the blockchain.
This means that anyone can look up when the NFT was minted, by whom, and at what time.
An NFT cannot be purchased or traded without being minted first. You can’t sell something that doesn’t exist yet!
Once an NFT is minted, then users can buy, sell or trade the asset on secondary marketplaces, such as Opensea, SuperRare, Nifty Gateway, Foundation, Rarible, etc.
The wallet you use to mint an NFT will give you access to that digital asset in perpetuity, or until you decide to sell or trade it. This means that if you connect this same wallet to an NFT marketplace, you’ll likely see the NFT you minted magically appear in your profile page. This happens even if you minted the NFT elsewhere, such as the Open3 platform.
Gas is a blockchain transaction fee. It’s the fee you pay to execute any transaction on the blockchain (even failed transactions).
The amount of gas you have to pay on a transaction depends on the amount of computing power required to complete the transaction. If there is a high volume of traffic on the network and high demand for transaction validation, the gas fees go higher, and vice versa.
Gas fees are paid out to network validators for securing the blockchain and network.
Network validators are real people who stake their ETH to validate transactions and secure the network. These fees become their reward for participating in the process of transaction validation.
The more the validator has staked, the more they can earn through validating.
- NFTs are giving more power to content creators than ever before. Unlike the art market, NFTs give artists more autonomy, as they no longer have to rely on galleries or auction houses to sell their work. By cutting out the middle-man, artists can sell their artworks directly to buyers and keep more of the profits by doing so.
- They allow digital artists to sell their digital works of art for the first time.
- For each NFT transaction, there is a permanent record of when it was created, when, and by whom. This is the concept of provenance, which acts as the modern certificate of authenticity.
- The crypto and tech-rich are becoming interested in collecting art for the first time through NFTs, giving artists access to a massive new audience.
- Some see NFTs as the art historical movement/moment of our time.
- Sotheby’s, Christies have already had multi-million dollar NFT auctions
- A few NFT Marketplaces, such as SuperRare and ExchangeArt, have opened IRL galleries
What can you do with your NFT? Does it just sit there?
You can resell it, or claim utility and benefits from the creator. And, depending on the smart contract, you can license it for monetization. This means creating prints, putting it on t-shirts, etc.
But can't I just right-click-save?
You can right-click-save any image or file on the internet, but it does not mean you own it outright. All NFTs have an owner, and they can only have one owner at a time - whether that be the user that minted (created) the NFT, or the user that purchased it from the previous owner.
But NFTs are not real - they're not tangible. I can't hold it in my hands.
Arguably, money isn’t real either. It’s just a piece of paper that represents value.