What are NFTs and How Do They Work

How does NFT work?

Sam Smith once said that he's not the only one, but if he buys an NFT – he would be the only one. The one who owns this piece of digital art. It can be anything: picture, photo, track, gaming item or something you could ever dream of, even your Twitter post!

NFTs are traditionally stored on the Ethereum blockchain. 

Of course, blockchain is one more topic we would like to talk about. Still, in simple words, it could be explained as a system that allows us to store any information in total security without the possibility of editing. You did changes, bought, or sold something, and these records will be held in the blockchain forever.

Here are some NFT examples:

• Pak's 'The Merge' – is the most expensive NFT. It was sold for $91.8m Three. White. Dots. However, this token does not belong to one person. There were almost 30000 crypto investors to reach such funds. 
• Another expensive NFT is Beeple's 'The First 5000 Days' bought by Vignesh Sundaresan, Singapore-based programmer and crypto investor, for $69m.
• A great example of non-fungible tokens that has gained momentum – is NFT sneakers. There is a mobile game in Web3 called STEPN. The main purpose of the game is to earn cryptocurrency by walking or running. 

It is based on the Solana blockchain. How does it work?

Firstly, you download the app and sign up. Then you need to buy special sneakers to earn GST coins and convert them into money.

There are a few pairs of shoes for different levels: walker, jogger, runner, and trainer. The core differences between these types are speed of movement and coins you get for your activity with trainers. So people can earn money for their walking, imagine that!

Why is Ethereum good for NFTs?

As we have said before, the explanation of blockchain, NFTs are primarily based on ETH. Even though the same backend unites all Ethereum products, users can move between different products without excessive headache.

But other blockchains can also support them, for example, Solana or Avalanche – the right of choice belongs only to you here. 

Okay. Let us imagine: you will become an owner of an NFT. 

How to buy an NFT?

Step 1. NFTs are usually united in different collections. Find what you like. It would not be a problem unless it could be complicated due to the richness of tokens. By the way, one of the most popular collections is Bored Ape Yacht Club. It consists of 10000 apes, and you can even enter their club here.

Or another popular collection is Azuki – a collection of 10000 avatars that give you access to the Garden. 

Or even Cryptopunks, their avatars. We have mentioned Sam Smith at the beginning of this article, and you can even find the NFT of this singer. It belongs to the NFT Chairs collection.

Step 2. Then you need to get your crypto wallet according to the crypto, which stands for the non-fungible token you want to buy. 

Step 3. You should buy cryptocurrency. 

Step 4. Then buy your NFT.

Looks like Captain Hindsight writes this article, yes?
Obviously, you have one more question now.

Where to buy an NFT?

On the NFT marketplace. It is a special platform to buy and sell NFTs for cryptocurrency or money. Or even mint NFTs as well, without leaving a platform. 

Let us explain it: mint an NFT = make a non-fungible token by transforming digital data into a crypto collection. So you make NFT as NFT, not only the picture on the Internet. 

The Internet is full of different platforms.

• The most popular one is OpenSea. Probably, you have seen its logo with a ship on a blue background. It was founded in 2017 and now is the TOP-1 marketplace according to DappRadar.
• ​Binance is mostly known as the trading platform, but the NFT page is also available.
  These marketplaces are universal. 
• And if you need something special, NBA Top Shot is a unique marketplace for basketball lovers, where you can only buy NFTs of basketball players.
  

Who can make an NFT?

Anyone who wants to. There are no restrictions on who can be the author of the token: either a student or Elizabeth II. All you need is a concept and a few simple manipulations that will not be unclear thanks to tips on the sites.

The first thing we will recommend if you want to create your own NFT is to create a crypto-wallet, for example, on MetaMask.

This is a secure Ethereum wallet that will allow you to buy, sell and store NFT as securely as possible and free of charge. By the way, there is a desktop app for Chrome / Firefox / Brave / Edge.

With the help of instructions, creating a wallet will be easy, believe us! 

The only thing: MetaMask emphasizes this several times is not easy, and we will emphasize once more: remember the password and the secret phrase. Write it down somewhere in a safe place.

The next step will be to create an account on the OpenSea marketplace, where the registration process is intuitive. Here we will need to attach our wallet, whether it is Fortmatic, Coinbase Wallet, WalletConnect or MetaMask.

As soon as the wallet connection process is complete, you will be taken to the tab for creating your token.

What do we do here? We download the file to tokenize. Important: the size should not exceed 100 MB!

Be sure to come up with a unique token name. Then fill in other fields where you can write a description, either simple or with markdown syntax.

Interesting detail: we can choose a blockchain for our NFT: Ethereum or Polygon. It's your choice.

Then we just save and get the finished token in just 5 minutes. However, remember that it won't be sold immediately – you need to post it for sale using the Sell button. Here are some options to choose from. For example, the price is fixed or in the form of an auction, choose the term of trade or additional options, etc.

But another important nuance: nothing will work with a zero wallet. OpenSea withholds a fee, so you must deposit at least 0.02-0.05 ETH to start the sale.

Beeple
// Just for your inspiration

Sure, you have heard something about Beeple somewhere. A little bit earlier, we just wrote about his NFT, for which he received $69 million. Subtle hint: he is the most famous NFT artist in the world.

He works in Cinema 4D and uses Instagram and Twitter as an exhibition platforms. Have you ever heard of his daring project 'Every day'? He has been doing it for 14 years. Not missing a single day, no matter what the holiday it is – his wedding day or children's birthday.

But this project is not the only one. At the same time, Mike Winkelmann (*Beeple's actual name) started working on music videos that included so-called VJ Loops and visual effects with geometric shapes. After first similar works, he became seriously interested in the world of electronic music. For example, Mike designed the graphic series for concerts of One Direction, Katy Perry, Nicki Minaj, Eminem, and others.

In 2019, the demand for concerts fell. That's why he decided to make a profit from other sources – for example, from art, which he led in the right direction in 2020. Then, he sold 3 of his NFTs on the Nifty Gateway platform. And a year ago, he sold his work for $69m. The starting price was only $100. 

By the way, creating your own NFT marketplace like OpenSea is also a great idea, especially if you are not an artist. And our CGS-team is happy to help with the task as made here.