NFTs Explained Simply: What Is an NFT (Non-Fungible Token)?
NFTs—a term that has created a stir in recent years, from art galleries to social media. Millions are flowing into digital artworks, collectibles, and virtual objects. From Beeple’s “Everydays” to Cryptopunks, NFTs appear to be anything but a passing trend. But why do people invest so much money in something that exists only digitally? And what exactly makes this technology so fascinating?
In this article we dive into all the questions surrounding NFTs—you’ll find the answers explained simply and in plain language.
Inhaltsverzeichnis
- 1 NFTs Explained Simply: What Is an NFT (Non-Fungible Token)?
- 1.1 What Are Non-Fungible Tokens, and How Do NFTs Work?
- 1.2 The Hype Around Digital Artworks and Collectibles
- 1.3 The Connection Between NFTs, Cryptocurrencies, and Blockchain
- 1.4 How Can You Buy and Create NFTs?
- 1.5 How Can You Create an NFT?
- 1.6 What Types of NFTs Are There?
- 1.7 The Challenges and Criticisms Regarding NFTs
- 1.8 In Closing
- 1.9 Further Articles
What Are Non-Fungible Tokens, and How Do NFTs Work?
NFTs are built on blockchains, most notably the Ethereum blockchain, which underpins the majority of NFTs. While classic cryptocurrencies such as Bitcoin or Ether are considered fungible tokens—meaning they are interchangeable with one another—a Non-Fungible Token is unique. Imagine you own a digital artwork stored on the blockchain. That artwork is an NFT that belongs only to you and cannot be replicated.
The Difference Between Fungible and Non-Fungible Tokens
A fungible token is like a coin or a banknote. If you swap one 10-euro bill for another, nothing changes for you. With a non-fungible token it’s different: every token is unique and represents a specific asset. Whether it’s a digital artwork, a video, or even virtual land—the uniqueness is the heart of the concept.
How Are NFTs Used?
An NFT uses the blockchain to document the ownership and provenance of a digital asset. Artists, musicians, and businesses use NFTs to monetize their works or products. Examples include digital artworks like Beeple’s “Everydays” or projects such as Cryptopunks and Cryptokitties, which are digital collectibles. The possible uses go far beyond art—from virtual real estate to gaming items.
Why Are NFTs So Popular Right Now?
There are many reasons why NFTs are in the spotlight today. On the one hand, they offer artists and creators a new way to sell and monetize their work. On the other hand, trading NFTs allows buyers to invest in unique and often limited digital assets. Platforms like Opensea have greatly simplified access to NFTs; here you can buy, sell, or even create your own NFTs.
The Hype Around Digital Artworks and Collectibles
The sale of Beeple’s digital artwork “Everydays: The First 5000 Days” for 69 million dollars marked a milestone in the art world and catapulted NFTs onto the global stage. This work, consisting of 5,000 images created daily, was certified by the blockchain as unique property—an innovation that opens completely new possibilities for artists.
Beeple’s success shows that NFTs are not just about access to digital content, but about exclusive ownership of a digital asset that is immutably documented on the blockchain. This exclusivity, combined with the prestige of owning such a unique work, explains the high demand for NFTs in the art scene.
Alongside individual works, projects like Cryptopunks and Cryptokitties are fueling the boom in digital collectibles. Cryptopunks, a series of 10,000 unique pixel portraits, were pioneers of the NFT market and today trade for millions.
Equally impressive is the success of Cryptokitties, a game in which users can collect, trade, and breed digital cats. These projects show that NFTs bring not only art but also entertainment and the passion for collecting into the digital world. The combination of rarity, innovation, and the potential for appreciation makes digital collectibles a central driver of the NFT hype.
The Connection Between NFTs, Cryptocurrencies, and Blockchain
The success of NFTs is closely linked to the growing acceptance of cryptocurrencies and the further development of blockchains. Most NFTs are created on the Ethereum blockchain, known for its advanced smart contracts. Ethereum not only enables trading but also the clear assignment of ownership and provenance, which gives NFTs their uniqueness.
How Can You Buy and Create NFTs?
If you want to buy NFTs, you first need a wallet—a digital wallet compatible with the Ethereum blockchain. You can fund such wallets with Ether, the currency of Ethereum. Once your wallet is ready, you can browse a marketplace like Opensea and buy NFTs.
Step-by-Step Guide to Buying NFTs
- Set up a wallet: Get a wallet that supports Ethereum. Popular options include MetaMask or Trust Wallet.
- Fund the wallet: Purchase Ether on a crypto exchange and transfer the cryptocurrency to your wallet.
- Visit a marketplace: Platforms like Opensea or Rarible offer a wide selection of NFTs.
- Buy an NFT: Choose an NFT that interests you and complete the transaction. Costs can vary greatly depending on rarity and popularity.
How Can You Create an NFT?
To create your own NFT, follow these steps:
- Set up a wallet: Get a wallet compatible with the Ethereum blockchain, such as MetaMask. Fund this wallet with Ether because you will need to pay fees.
- Select a marketplace: Visit platforms like Opensea or Rarible that allow the creation of NFTs. Log in there with your wallet.
- Upload your file: Upload your file—whether an image, video, or music file. The system will guide you through the steps where you can enter the title, description, and optional extras (such as licensing rights or limitations).
- Pay minting fees: Once you have entered all the details, you must pay the “minting” fees. These vary depending on the marketplace and the blockchain’s network load.
- Publish the NFT: After payment, your NFT is registered on the blockchain and is then visible on the marketplace. You can either put it up for sale or simply keep it in your collection.
With these simple steps you can create your own NFT and turn your digital work into a tradable resource.
What Types of NFTs Are There?
The types of NFTs are as diverse as the digital content itself. The best-known categories include:
- Digital art: From simple illustrations to elaborate 3D models, like Beeple’s “Everydays”.
- Gaming items: Virtual weapons, characters, or land that can be used in games.
- Virtual real estate: Plots and buildings in metaverse worlds such as Decentraland.
- Music and videos: Artists sell tracks or exclusive content as NFTs.
- Collectibles: Projects like Cryptopunks or Cryptokitties are examples of digital collectibles.
This variety shows that the potential of NFTs is far from exhausted.
The Challenges and Criticisms Regarding NFTs
Despite their great potential, NFTs also face criticism. The high demand has driven transaction costs on the Ethereum blockchain upward. In addition, the energy consumption of blockchains like Ethereum is often seen as problematic. Critics also question whether NFTs are truly sustainable or merely a temporary hype. Nevertheless, efforts are being made to develop more environmentally friendly solutions, for example through Ethereum’s move to a proof-of-stake system.
In Closing
