What is NFT. Explained in simple words
An NFT token (non-exchangeable token) is a unique digital certificate, which is stored in a blockchain and guarantees the originality of the object and gives exclusive rights to it. This concept comes from the world of cryptocurrency.
Non-exchangeable tokens cannot be discreetly swapped, divided, replaced. The system is suitable for securing rights to a unique object - a work of art, real estate, an artifact in a computer game.
Simply put, each record in a blockchain is called a token. In an open blockchain, all tokens are like coins of the same monetary value, equal and interchangeable. That's how cryptocurrency money works: for example, one bitcoin can be easily replaced with another, and nothing will change.
But Non Fungible Token (NFT) technology is a game changer and works differently. A non-fungible token is a digital coin that cannot be replaced with another token without changing the value and essence of the object.
Like cryptocurrency, NFTs are created in a blockchain, which acts as a database to record all transactions. The blockchain guarantees the authenticity of non-interchangeable tokens. Thanks to this system, any user can verify the original and history of a particular NFT through the blockchain.
By purchasing an NFT token, the user acquires a certificate for the work. The work itself does not move anywhere. It sits in perpetual storage (IPFS). The certificate is essentially lines of code which confirm that it is the owner of the token who owns the original copy of the object. The NFT token is compared to a painting that may belong to a gallery, museum, or individual, but the audience can see it in a catalog or exhibition.
NFT tokens are sold in online marketplaces that operate like AliExpress or Wildberries. The creators of non-interchangeable tokens put them on marketplaces and wait for offers from buyers.
You can even create an NFT token yourself. To do this, you need to take a digital object (picture, music track, photo, etc.), register in a special marketplace (for example, on the sites Rarible, OpenSea or NFT Art fair edaf.art) and upload there the object with a description and price. On many services you will have to pay a fee for the creation of a blockchain record, i.e. a unique token.
An example of usage on The Secret.
"When an NFT token is sold by the mother of Ilon Musk's child, that token can be bought for millions. Elon Musk can digitize, tokenize, and sell anything, including his, my, and your virginity. And millions of followers will buy it. Warren Buffett could create any such instruments for fun and tokenize the virginity of his 97-year-old associate Charlie Munger - they too would sell at any price, like Snowflake stock at the IPO. But that doesn't mean that everyone will be able to sell the same thing."
The NFT technology was created in 2017 based on Ethereum smart contracts.
The first artwork turned into an NFT token was a black-and-white work by the artist Banksy, a 2007 stencil called Morons (White). Blockchain company Injective Protocol bought it, burned it, and created an NFT token, a virtual asset tied to a "digital image of an art object.
The first musician to turn his own album into a token was DJ 3LAU. He sold a limited edition album and made $11.6 million.
Singer Grimes, known as the mother of Elon Musk's child, sold 400 NFT tokens that were tied to four drawings created personally by her and her brother. In just 20 minutes, the token sale earned Grimes $5.8 million.
Overall, NFT is a way for creatives to monetize their skills and expand their audiences. Because of the lack of logistical difficulties, it's easier to sell artwork digitally than offline.
It's not just artwork that's being sold as non-monetizable tokens. Even a popular meme may have a new owner. A Nyan Cat gif showing a cat hurtling through space and leaving a trail of rainbows behind him was sold at auction for $590,000.