It can feel daunting to figure out what an NFT is, how to buy an NFT, and how it connects to cryptocurrencies and blockchain technology.
Cryptocurrencies, Blockchain Technology, and NFTs: Explained
Let’s start with the basics. You have heard of cryptocurrencies, blockchain technology, and NFTs, but do you know? It’s essential to understand what you’re investing in before committing to digital assets. Read on for a brief overview of the most important topics to get started in NFTs.
What is Cryptocurrency?
First and foremost, you must understand what cryptocurrency is. Unlike fiat currencies, cryptocurrencies are digital currencies that circulate person-to-person. There is no central regulating authority like a bank or federal government with cryptocurrency. Cryptocurrency to purchase assets, just as you would use non-digital currencies. Additionally, you can invest in a cryptocurrency of your choosing and let that investment grow. So you have a choice; you can use your cryptocurrency as a non-digital currency to purchase assets or purchase crypto as an investment.
Blockchain Technology, Explained
Most Cryptocurrency networks use blockchain technology to record transactions or a ledger system that marks the asset’s transactional history as it is bought and traded. This ledger system is particularly useful – and secure– when purchasing and trading assets since the asset’s history cannot be changed.
In part, this ledger system helps digital assets like NFTs maintain authenticity and generates a system of accountability within cryptocurrencies as these ledgers are connected to a larger decentralized network of information.
NFTs, or Non-Fungible Tokens
So how do NFTs connect to cryptocurrencies and blockchain technology? NFT projects are built on blockchain technology. They
contain the same ledger system as a cryptocurrency that can mark transactional histories. However, NFTs, or non-fungible tokens, are different from cryptocurrencies in that each one is priced differently, and they stand as digital assets that can be purchased with cryptocurrency.
Most NFTs are digital art and media projects that can contain any number of real-world components, including access to additional NFT purchases or in-person events associated with an NFTs minting.
NFTs are listed on marketplaces, the biggest being OpenSea, and can be bought, sold, and traded between buyers for varying
prices. Everytime an NFT is sold, the digital ledger marking its transaction history notes that data and incorporates it into the assets history. As an NFT continues to be bought and sold, its virtual ledger reflects those transactional changes. After being purchased, NFTs are stored in digital wallets, either on- or offline. Some can be used in other digital spaces.
How to Buy an NFT
Trying to figure out how to buy an NFT? You probably have a brief understanding of what cryptocurrencies are, how blockchain technology works, and how NFTs connect cryptocurrencies through blockchain technology. However, suppose you’re looking to buy an NFT, the main components are ensuring that you have cryptocurrency. This digital wallet can store your cryptocurrencies and NFTs and is a preferred marketplace for buying and trading NFTs.
Several marketplaces sell NFTs, but OpenSea is probably the biggest marketplace. Ethereum (ETH) accepts dozen of other currencies as payment for NFTs. Consider it like any other investment when you think about buying an NFT. Conduct your research about what you want to invest in, how much you are interested in, and feel the return.
With some NFTs granting access to digital and in-person exclusive communities and events, additional sales and NFT mintings,
and other NFTs positioned solely as digital artworks, it’s essential to consider your investment priorities. Whether you are interested in an artwork or a connection to a community within a digital space, acquiring an NFT is fairly straightforward: load money into your digital wallet, connect your wallet to a marketplace and browse buy an NFT.
The Bottom Line
With so many new terms and excitement about the robust digital space of blockchain technology, it can feel like a daunting task to figure out the basics of buying NFTs. However, once you familiarize yourself with the market terminology and build general familiarity with cryptocurrencies, digital wallets, and blockchain technology, you should feel empowered enough to start looking to make an NFT purchase.
Select a digital wallet that makes sense for your security needs, a marketplace that you feel comfortable buying and trading in, and invest in assets aligned with your investment goals. The more you spend time with NFTs, the more comfortable you will be in understanding everything that goes into these blockchain-based assets.
