One of the more puzzling trends of 2021 is the emergence of NFTs. Seemingly out of nowhere, NFTs have quite literally taken the world by storm and have become one of the hottest commodities to own since beanie babies. Unlike those plush toys from the 90s, NFTs are much more robust in their value and in how they’re bought and sold. Here we outline what an NFT is, how they function, and how you can get your hands on one.

What Is An NFT?

An NFT – also known as a nonfungible token – is what’s known as a cryptoasset, a blockchain-backed symbol of something unique. In layman’s terms, an NFT is a digital asset that uses the same system as crypto in order to validate its unique authenticity, since much of an NFT’s value is derived from scarcity.  

Recent examples of digital assets that are authenticated on a blockchain include virtual basketball “trading cards” from NBA Topshot, artwork, music, and a slew of other creative mediums and industries that have traditionally been valued in hardcopy form or in the form of something tangible. NFTs, however, are not something you can hold in your hand without the aide of a screen – ie, a computer, mobile device, or some other technology that allows you to access the NFT with an Internet connection.

Where Are NFTs Located?

Just as cryptocurrency is located and “stored” on online, so too are NFTs accessed and stored using different online platforms. While crypto like EthereumMax is stored in wallets and accessed through exchanges, NFTs are stored on marketplaces that cater to specific types of NFTs. For example, NBA Topshot, which owns an exclusive NBA and WNBA license, is the platform on which you can purchase NBA “trading card” NFTs. While crypto is accessible across many various exchanges – such as Gemini, Binance, and Uphold – the purchase of NFT assets are exclusive to a solitary platform. If you’re looking to purchase digital artwork, you’ll want to peruse marketplaces like Opensa and Zora, whereas if you you’re looking to purchase digital real estate, markets like The Sandbox and Decentraland will be the sites to explore.

How Can I Purchase An NFT?

Once you’ve identified the type of NFT you’re interested in – digital artwork, digital trading cards, digital real estate, etc – the next step is to set up an account on the marketplace that hosts the kind of NFT you’re seeking. Once your account is created you’ll be able to link a bank account or credit card, fund your account, and start making purchases. Like with crypto buys and sells, all transactions are final. There’s no “reversing” a purchase or sale, so it’s imperative that you review the transaction before you finalize the buy and verify that you’re paying for the NFT you want at your desired price point. Nothing is more demoralizing than realizing you spent 1,000 on an NFT you were looking to spend $100 on all because you rushed through the purchase and didn’t catch the extra zero.

What Can I Do With An NFT?

Just like traditional collectibles, NFTs can be bought, sold, and held onto with the hopes of their value increasing over time. You can use the same platform and marketplace you used to purchase your NTF to also sell your NFT, with a commission usually being taken by the marketplace for helping execute the sale, much like how most crypto exchanges take a commission for executing the sale of cryptocurrency and the funds from your sale will transfer to the wallet used for your given marketplace. If you’re selling an NBA digital card via Topshot for example, funds will initially transfer to your Dapper Labs wallet, from where you’ll then have the option to transfer to your personal bank account. If you’re a frequent buyer and seller of NFTs on a specific platform, consider keeping your funds in your wallet instead of withdrawing them to your bank account. Doing so will save you a pretty penny in exchange fees over time.

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