What Are NFTs And How Do They Work?
Non-fungible tokens (NFTs) are a fascinating type of digital asset that are stored on blockchain technology. They can be traded just like cryptocurrency, but there are some significant differences that set them apart.
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NFTs are just pictures on the internet, Or are they?
You may have come across the term NFTs, which refers to those digital items that people buy and sell on the internet. But are they simply pictures on the web?. NFTs have been causing quite a stir in the digital realm, but there’s more to them than meets the eye. Come along as we explore the world of NFTs and discover why they’re causing such a sensation online.
What did you Say?
Before we proceed, it’s important for you to familiarize yourself with the NFT Lingo. This way, when you engage with NFT traders, you’ll be able to understand their conversations:
- NFT: Non-Fungible Token, a digital asset representing ownership or proof of authenticity of a unique item or piece of content.
- Wallet: A digital tool or application used to store, send, and receive cryptocurrencies and NFTs.
- Minting: The process of creating an NFT on the blockchain. Imagine it like creating a digital coin.
- Drop: When an NFT collection becomes available for purchase.
- Gas Fees: Fees paid to process transactions on the blockchain network, like Ethereum.
- Alpha: Valuable insider information about upcoming NFT projects.
- Roadmap: A project’s plan for future development and how they’ll utilize the funds raised through NFT sales.
- Doxxed: When the identities of the creators behind an NFT project are publicly known.
- Utility NFT: An NFT that provides additional benefits besides owning the digital asset, like access to exclusive events or content.
- Diamond Hands: Someone who holds onto an NFT for the long term, believing in its future value.
- Paper Hands: Someone who sells an NFT quickly for a short-term profit.
- Degen (Degenerate): Slang for a risky NFT trader who buys based on speculation.
- WAGMI: Stands for “We All Gonna Make It,” a positive outlook on the NFT market.
- NGMI: Opposite of WAGMI, stands for “Not Gonna Make It,” a pessimistic outlook.
- HODL: A misspelling of “Hold,” used to express commitment to holding an NFT.
- Smart Contract: Self-executing contracts with the terms of the agreement directly written into code. Smart contracts are often used to manage NFT ownership and transactions.
- DAO: Decentralized Autonomous Organization, a group of individuals who use blockchain technology and smart contracts to make decisions collectively.
- Whitelist: A list of approved users allowed to participate in certain NFT drops or events.
- Secondary Market: Platforms or venues where NFTs are bought and sold after their initial release or minting.
- Gas War: A competitive situation where users bid higher gas fees to ensure their transactions are processed quickly, often occurring during popular NFT drops or auctions.
- Generative Art: Art created by algorithms or code, often with unique variations in each NFT.
- PFP (Profile Picture): NFTs used as avatars on social media platforms.
- One of One (1/1): An NFT that is the only one of its kind in a collection.
- Floor Price: The lowest price at which an NFT in a collection has recently sold.
- FOMO (Fear Of Missing Out): Anxiety about missing out on a profitable NFT opportunity.
- FUD (Fear, Uncertainty, Doubt): Negative information or speculation spread about an NFT project.
- Moon: When an NFT’s value skyrockets.
- Rug Pull: When the creators of an NFT project abandon it and take the money with them.
- Flipping: Buying and selling NFTs quickly for a profit.
- Floor Sweeping: Rapidly buying a large number of NFTs from a collection’s floor price.
- LFG (Let’s Fing Go):* Expressing excitement about an NFT project.
- IRL (In Real Life): Refers to the physical world, outside of the digital NFT space.
- Discord: While a popular platform for NFT communities, be wary of scammers sending fake links or impersonating project admins.
Okay, so there you have the most common NFT phrases for when you have to interact with anything NFT related.
Security
Security is the utmost priority when it comes to crypto. Therefore, before diving into the world of NFTs and purchasing your first one, it is crucial to secure your crypto assets with a hardware wallet. In fact, even if you are only buying cryptocurrencies, having a hardware wallet is essential for their protection. Always keep in mind that if you leave your assets on online exchanges, they technically own your crypto, and in the unfortunate event of a hack, your assets could vanish into thin air. As the famous saying in the crypto space goes, “not your keys, not your coins.”
I would recommend the Ledger Nano X, Ledger is the market leader when it comes to securing your crypto and definitely something you should not go without.
I also recommend having two so you can have a copy and store both in to entirely different locations, that way if one is lost, stolen or damaged, you can seamlessly switch to your backup.
The NFT Marketplace
Now that you have your trusty Ledger by your side, you’re all set to explore the NFT Marketplace.
Among all the NFT marketplaces out there, Blur stands out as the most user-friendly option. It not only offers the lowest fees but also provides the best overview of what’s happening in the market. However, due to its low fee structure, many big NFT brands are starting to move away from Blur in order to maximize their profits. This decision is completely understandable, as every brand has its own running costs to consider.
On the other hand, there’s a new player in town called Magic Eden, and it’s quickly gaining popularity among the big brands. Magic Eden currently supports almost every Crypto network chain you can think of, and its interface is pretty decent. What’s interesting about Magic Eden is their unique reward system, where they issue rewards in the form of Diamonds. Only time will tell if this reward system will gain traction and become successful.
What NFTs to Invest in
Well, that’s the big question that everyone seems to have an answer to…
Personally, I wouldn’t advise going all out and investing heavily in NFTs unless you have some solid insider information on the specific NFT you’re interested in.
However, if you’re just dipping your toes into the NFT world, I highly recommend checking out Creepz by OVERLORD. They have some incredible plans in place and they’re executing them quite impressively.
Check them out on X:
The Final Word
As the market continues to evolve, NFTs offer a world of new opportunities for both investors and Degens. By grasping the fundamental concepts and approaching the market with a hint of caution, you can become a part of this thrilling technological revolution and potentially rake in a fortune along the way.