What Are Non-Fungible Tokens and How do They Work?

Non-fungible tokens (NFT)

Fungible items can be exchanged with one another with ease because their value is not tied to their uniqueness.

Non-fungible is a term that is used to describe things that are not interchangeable with other items because they have unique properties.

NFTs are tokens that we can use to represent ownership of unique items and they cannot change.

They are just a piece of data that is owned by an address and whoever has a password to that address owns that piece of data. This piece of data can be bought and sold to different addresses and the data is verified by blockchain.

Are NFTs Safe?

Non-fungible tokens use blockchain technology just like cryptocurrency and are secure. Because the nature of blockchains is distributed, it makes NFTs difficult (although possible) to hack. The NFTs have One security risk, you could lose access to them if the platform hosting the NFTs goes out of business.

How Is an NFT Different from Cryptocurrency?

Physical money and cryptocurrency can be traded or exchanged for one another, so they are called “Fungible.”

NFTs are different. Each Non-fungible token has a digital signature that makes it impossible for it to be exchanged for or equal.

How does an NFT work?

The process of creating NFTs is called Minting. For Minting, you need to have access to NFT platforms. There, you can convert your digital artwork into a unique asset on the blockchain network by paying fees associated with it. Most of the NFTs are minted on the Ethereum blockchain, although they can be minted on other blockchains. They help to tokenize things like art, collectibles, and even real estate. They only have one official owner at a time. The record of ownership of an NFT cannot be changed by anyone. NFT’s unique features make it easy to verify and validate their ownership and their transfer between owners.

Some of the advantages of investing in NFTs include:

1. Indivisible Non-Fungible tokens are Indivisible and cannot be distributed among multiple owners.
2. Rare NFTs are rare.
3. Ownership of NFTs is more transparent and secured by Blockchain.
4. Unique these are unique in all aspects, having unique properties and value.
5. Transferability: It is easy to trade NFTs freely in particular markets with a wide range of options for trading.
6. Authenticity: The immutability of the blockchain on which NFTs are stored provides the assurance of authenticity. It also ensures that they are immune to modifications, removal, or replacement.

Most Expensive NFTs

The Merge – $91.8 million

The most expensive NFT ever sold is “The Merge.” The $ 91.8 million price was a record for an artwork ever sold publicly by a living artist. 28,893 collectors purchased it on Nifty Gateway and bought 312,686 units of mass (which were single NFTs). The starting price of these units was $575, which increased by $25 every six hours.

The NFT contains three large white masses (dots) against a black background. The more mass buyers accumulated, the larger their mass would become. The NFT has a built-in mechanism that makes sure the token supply decreases over time. Every Merge token transferred merges with the token of the recipient wallet, resulting in a higher mass value and a single token. With the passage of time, it will result in just one final mess.

The First 5000 Days – $69.3 million

The First 5000 Days is one of Beeples’ high-value NFT projects. It is a collage of five thousand individual NFTs, which Beeples created for his Everyday’s series. It was sold for $69 million (42.329 ETH) in 2021 at the Christies Auction house.

Singapore-based programmer Vignesh Sundaresan bought the NFT. He is famous for making the most of his money by investing in the crypto markets.

The artwork is currently displayed in an online gallery in the “metaverse.” This can be accessed via a web browser if you want to check it out!

Clock – $52.7 million

The third most expensive NFT ever sold has an unconventional origin. It was created to raise funds for Julian Assange’s defense after he was controversially imprisoned in May 2019. Assange is currently imprisoned on charges of espionage against the US Government, through association with the Website he founded, WikiLeaks. The NFT itself is simply a clock depicting the number of days since Assange has been imprisoned.

The creator of this NFT is an anonymous artist named Pak. The anonymity of the artist – who refuses to reveal their identity in interviews – fits well with the cause it is raising money for.

HUMAN ONE – $28.9 million

The human one is a digital/physical hybrid piece of artwork also designed by Beeple. It sold for a record $28.9 million when it was auctioned off as part of Christie’s 21st Century Evening Sale on 9 November 2021.

The cool thing about this NFT is that its artwork changes over time. Although the art is not owned by Beeple, he retains remote access to it and is able to update it constantly. The NFT itself depicts an astronaut walking through diverse backgrounds which as mentioned change over time.

CryptoPunk #5822 – $23.7 million

CryptoPunk #5822 is one of the most expensive CryptoPunk ever sold, racking up a $23m price tag. There has also been huge bidding and listing activity on the NFT. There have been multiple bids of over 1000 ETH (~$3m) throughout the token’s lifecycle. However, these have the owner denied all. In addition to this, the owner 0xDeepak has listed it for tens of thousands of ETH on multiple occasions.

The NFT is rare, it has only one attribute. Only 2% of the collection has just one attribute, making it rare. In addition to this, it is a bandana which is only 5% of the collection share. Finally, #5822 is part of an alien’s skin, which is the rarest possible skin to have (0.09% chance).