We discussed that Non-Fungible Tokens (NFTs) aren’t actual cryptocurrencies but instead tokens on a blockchain that represent ownership of a digital creation like art, collectibles, or even real estate.
What makes them non-fungible is that you can’t replace one for another like you would exchange one dollar for another with no loss in value. Even if you create 1,000 copies of the same image or file and mint the same number of NFTs to represent ownership of them, each copy of the image will be uniquely identifiable from the other 999 pieces based on the metadata that each NFT token contains.
The Ethereum blockchain holds over 90% of the market share in terms of hosting NFTs. Other blockchains include Solana, Polygon, Cardano, Tezos. Without blockchains, NFTs lose their inherent property as immutable.
Prices on NFTs listed for sale via auction are driven by supply and demand, and therefore volatile. Marketplaces can be used to buy an NFT at a fixed price or function as a virtual auction, much like the exchange system for buying and selling cryptocurrencies and stocks. The higher the demand, the higher the price.
To bid on these digital asset tokens, you'll need to open and fund a crypto wallet and make your purchase on an NFT marketplace such as OpenSea, Axie, Rarible, or LarvaLabs. Your crypto wallet will also be used to store your NFT.
Make sure that you read the NFT license agreement to determine your rights as a buyer. Also look at the history of the asset's ownership, and whether, once owned, an asset could be used to generate income.
Once you own an NFT, the digital asset is (usually) yours to do with as you please. You can keep it as a collectible, display it for others to see, or use it as part of a larger digital project. You can also list it for sale.
When it comes to buying NFTs for their value as a collectible, they are a speculative investment driven by demand. There's no set rule for figuring out which collectible will increase in value and which ones won't.
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