What Are NFTs And How Do They Work?

There’s always something new in blockchain and that leaves you wondering “umm, what is this now?’. Trust me, you’re not alone, we all have been through that. So, you must have heard about NFTs recently. And you must have wondered what’s the buzz about and why is everyone talking about it. 

Is NFT the next big thing in tech? We’ll see that in this article today. I am going to explain what exactly NFTs are, how they work, and how you can buy them in Binance. So, let’s get started. 

What Exactly Is NFT?

NFTs

NFT stands for Non-Fungible Tokens. These tokens can be assigned to real-world objects, say music, art, or captured pictures. Think of them as a form of a digital certificate. But what’s so special about it? The NFTs contain distinguishing data that can make them different from any other NFT. 

NFTs make items “one-of-a-kind”. This makes the creation of fake copies of the original object will become infeasible as the data in NFTs will lead to the original item being traced back to the legitimate owner. So every NFT is different and that’s why it is preferable to assign it to your valuable items. 

For instance, you have made artwork and you want to assure your artwork to not be copied and sold commercially. So what we can do in such a situation is that an NFT can be assigned to your artwork which will give it a unique identity. Now as your artwork has become a unique item, no one can copy and sell the same artwork. The ownership of your artwork will always be with you. 

NFTs also can not be exchanged with one another. That’s why they have Non-Fungible in their name. Other assets like cryptocurrencies are fungible and thus can be traded. You can not do such transactions with an NFT. 

How Do The NFTs Work?

NFTs exist on a blockchain, ideally Ethereum blockchain. But it is worth noting that some of the other cryptocurrencies have also started to implement their own version of NFT on their blockchains. They are individual tokens with some extra information stored in them. So the creator of the NFT has the copyright over it. 

Anyone can create, and do any transaction of the NFT without any prior permission from any authority. The valuable assets are stored in an encrypted peer-to-peer network which can be accessed by the buyer and the seller, making it very unlikely to be attacked by any cybercriminal. 

NFTs And Cryptocurrencies Have Similarities But Are Different

NFT and cryptocurrencies are built using the same kind of programming. But that’s where the similarities end. As already mentioned, cryptocurrencies are fungible, meaning they can be used as a currency for trading. Since two same cryptocurrencies will have the same value like one bitcoin is worth the same as another bitcoin. This makes cryptocurrency a good medium for trade.

NFTs on the other hand, are different. Every NFT is unique and worth the difference. One NFT can’t be equal to another, even if the two are on the same platform. Each one has a digital signature which makes it impossible to be used for trading. Hence, non-fungible terms are used. 

Should You Buy NFTs As An Investment?

candlestick chart laptop and phone

If NFTs are available to buy, should you go out to buy them? Well, it’s a subjective question. NFTs can be a risky bet, especially when the crypto market is super volatile. We also don’t have a lot of history with NFTs to judge and predict their performance. But since these are a new thing, it may be worth spending a little and see how it performs. 

But also NFT’s worth depends on the buyer who’s willing to for it. Demand will raise its price rather than fundamental or economical factors. All this means is that NFTs are uncertain right now. You may lose all your money or it can become 10 times its value, you never know. It’s just like any other new crypto. So, do your own research, consider the risks, and only invest a little that you can afford to lose. 

How can you Buy NFTs?

NFTs are sold in Binance and other exchange platforms. There is a separate section in the Binance platform called the NFT marketplace. This is the best and safest place to buy NFTs. But you can not just use your credit card or online wallet to get an NFT. These are auctioned and the highest bidder gets the NFT. 

  • In the case of Binance, the prices will be in Binance USD (BUSD). Ethereum NFTs ideally use Ether (ETH). So here are the steps you have to follow. 
  • On the homepage of your Binance, click on the wallet and then choose the overview. (Present on the top right of the window)
Binance wallet overview
  • If you don’t have enough funds, click on “Deposit” and then choose any currency and choose a payment method. 
Binance Fiat and deposit

Note: Using bank transfer will take some time to deposit the fund in your Binance account. But you won’t be charged any fee. And using a debit/credit card you will have an instant deposit but you have to pay a smart percentage as a service fee. 

  • Now, in your wallet overview section, you have to convert the currency you bought to BNB. You can choose “Fiat and Spot” and click on “Convert small balance to BNB”
Binance Convert small balance to BNB
  • And then exchange your currency to BNB, according to what you’re willing to buy. 
  • Now look for an option called “NFT” on the top of the window and click on it. 
  • This will open the NFT marketplace where you can place your bids on different NFTs. 
Binance NFTs list
  • Click on the NFT that you want to buy and it will open the information page of that NFT. 
  • If you are willing to buy it, just click on “Place a bid”.
Binance place bid
  • It will open a popup to confirm your bid. Just click on “Place a Bid” again and you will be eligible to receive this NFT. 
Binance confirm place bid
  • If you win this bid, the specific amount will be deducted from your wallet and you will be able to see the NFT in your investments section. 

FAQs

Are NFTs worth it?

It is too early to predict, but I think NFTs have the potential to be the next big thing in the crypto world and can change investing forever. So, I think it may be a bit risky, but NFTs can be worth it if you buy the right one. 

Why should you buy a Non Fungible Token?

This question is too early to answer. NFT is a fairly new thing and we don’t have enough data to judge its performance. But to me, NFT has a lot of potential, so I think it will be worth spending a little on any NFT. This might be a risky bet, so always do your research before spending, and do not spend much on it. 

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Satish Shah
Member of Team TJ - Tech Enthusiast, and Programmer

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