This ArtMakers introduction to NFTs covers the essential information you need to know about Non-Fungible Tokens(NFTs).
For the Pros and Cons of working with NFTs and a more detailed explanation of how to create an NFT join Artrmakers (ADD LINK).
For definitions of key terms see Jargon Busters below.
What is an NFT?
An NFT, or ‘non-fungible token’, is a unique, digital certificate that is stored on a blockchain and provides certain ownership rights in an asset, typically a digital one, such as a digital work of art. NFTs provide a powerful tool to establish and demonstrate ownership rights in the digital asset space where it is often hard to demonstrate such rights given how quickly and easily digital works can be replicated.
NFTs are described as ‘non-fungible’ because each one is unique and of different value. This is in contrast to ‘fungible’ assets such as dollars or Bitcoin, which are identical and interchangeable.
How are NFTs created?
NFTs are generated (or ‘minted’) using a ‘smart contract’, which is computer code stored on a blockchain. This includes a number of different fields such as the NFT’s unique identifier (typically referred to as a ‘TokenID’); the blockchain wallet address of the current owner; and an identifier of where the digital work of art associated with the NFT may be found.
Since blockchain transactions are fully transparent, anyone can view an NFT and its underlying information, including the blockchain address of the current owner and the blockchain address of each owner since the creation, or ‘minting’ of the NFT.
How are they Sold?
An NFT can be bought and sold like other pieces of property. A buyer purchases an NFT, via a blockchain. They must have a digital wallet to receive, access and transfer an NFT. These purchases and sales are created by transferring the NFT through a blockchain transaction from the seller to the purchaser.
Where are NFTs stored?
Each NFT is stored on a blockchain, which in most cases will be the blockchain on which it is first minted. For example, Beeple’s EVERYDAYS — THE FIRST 5000 DAYS was minted on the Ethereum blockchain.
Where is the digital artwork stored?
The digital work associated with an NFT is generally not stored on a blockchain — it is considered to be ‘off-chain’. Data in the NFT code includes a reference that ‘points’ to where the file is stored ‘off-chain’. For example, the digital work may be stored on a server controlled by a single party or on IPFS (interplanetary file system), a decentralised file storage network.
Do I have to create an NFT with cryptocurrency?
No, but you do have to pay via a crypto currency wallet.
Non-Fungible Tokens (NFTs) – Non-Fungible Tokens (NFTs) are unique, digital items with blockchain-managed ownership. Examples of NFTs include digital art, collectibles, virtual reality items, crypto domain names, ownership records for physical assets, and more.
What is a blockchain?
In general, a blockchain is a distributed ledger (or database) of transactions that is not controlled by a central authority. A blockchain relies upon a distributed peer-to-peer computer network to cryptographically validate and record transactions. This ledger, which includes the current holdings of each blockchain address as well as all transactions since the blockchain first launched, is viewable to anyone. Once transactions are added to a ledger, they are immutable, meaning they cannot be modified or erased.
Unlike the internet, there are many different blockchains that exist today and likely many more to exist in the future. Blockchains are not necessarily interoperable with one another. That means an NFT minted on a certain blockchain might not be transferable to a different blockchain.
Collection – A collection is a body of work, like a store or gallery. If you see someone refer to an OpenSea collection as a store or gallery, don’t get confused – it’s all the same.
Crypto wallet – A crypto wallet is an application or hardware device that allows individuals to store and retrieve digital assets.
Ethereum – Ethereum is a blockchain, and ETH is the currency used to make transactions on the Ethereum blockchain.
Gas fees – Think of gas fees as Ethereum blockchain transaction costs. OpenSea, one of the sites used to create NFTs, like all such sites, has no say in setting gas fees – they are determined by supply/demand across the network (blockchain).
Information about the digital work associated with an NFT, which could include its title and a link to where the digital work can be found.
What does it mean to ’mint’ an NFT?
‘Minting’ an NFT refers to the creation of an NFT and its recording on a blockchain. As the artist, the creator of the work associated with the NFT, you are the minter.
The third-party platform used by the seller to mint the NFT.
Secret recovery phrase – Your secret recovery phrase is a list of words that can be used to recover your crypto should you forget your password or lose access to your wallet. When you first begin trading with your wallet, find your secret recovery phrase and back it up somewhere safe, in multiple locations if possible. Don’t store your secret recovery phrase on an online cloud storage service and never share it with anyone.
Smart contract address
The blockchain address for the smart contract code that governs the execution of the NFT
The unique identifier number of the NFT. Smart contract code used to mint NFTs will typically assign a number to each unique NFT created by that code.
Wallet address – Your wallet address is a unique alphanumeric string of characters that is associated with and represents the on-chain address for a digital wallet. This information is frequently shared to identify the wallet address currently associated with an NFT.
It’s the address people will use when they are sending crypto-currency or NFTs to your crypto wallet.
I hope you have found this useful let us know what other information you would find useful.