You might have heard of the term "Non-Fungible Token" (NFT) in cryptocurrency circles, but do you know what they are? How does one purchase one? What makes them so special compared to other cryptocurrencies? This guide will answer all of your questions!
An NFT is a cryptocurrency token, but one that is unique and can not be duplicated. It's composed of two different parts: The characteristics that define the token, and then there are the rules for how that token can be used once it exists.
NFTs have several benefits over other cryptocurrencies: They cannot be destroyed or hacked away from you (they are much more secure) They cannot be inflated by a central authority (due to the fact that they can not be duplicated or forged). You can see all transactions involving an NFT, which is good for transparency.
But before you dive in and buy one of your own, there are some things you should know: An NFT is just like any other cryptocurrency. You can store them on an online wallet or software wallet, trade them with others on a trading site, and even invest in them just like you would with any other cryptocurrency!
Ownership of a token is proven by possession of a private key. A transfer of ownership occurs when a transaction on the blockchain includes your wallet as a source or destination, and contains instructions to move some number of tokens from one owner to another. Tokens are ineligible to be stored in standard address types, and must be stored in either an ownership address or sub-address of the same type of NFT
Token functions (if any) are identified by a list of function codes. Functions of this type can only be executed if the transaction is signed by both the current and new owner of the asset.
NFTs are immutable, meaning that they can not be destroyed or hacked away from their current owner. NFTs also have a defined 'provenance'--the history of ownership that is stored on the blockchain indefinitely.
The total supply of tokens in existence is always equal to the total supply minus any tokens that are lost, destroyed, or sent to unrecoverable addresses.
Their value is entirely market-based; it is completely set by the market forces of supply and demand with no central administration setting the price. Token holders may benefit from holding NFTs if they believe that their ability to sell them in future will be worth more than the current market value.The basic idea behind the NFT is that they are tokens that represent something unique and rare - like a limited edition Magic: The Gathering card, for example. If you buy such a card on Ebay (or anywhere else), it's not really yours until you pay for it and get the physical object in your hands. Until then, it's still your friend's card.