In addition to the proposed price of the NFT itself, when users first mint an NFT, they pay for both the NFT and the gas fee.Ī gas fee is an additional fee that a blockchain network charges for the use of its computational resources.Įthereum (ETH) is currently the largest network for NFTs, but there are other networks, such as Flow (FLOW), Cardano (ADA) and Solana (SOL), to name a few.Įach blockchain that supports NFT projects has its unique advantages and disadvantages, though. Either of these factors could hurt your investment. This can lead to copyright infringement or even fraudulent NFTs. On the other hand, anyone can hypothetically list anything on a decentralized marketplace. When a marketplace is centralized, Anthony Georgiades, co-founder of layer one blockchain Pastel Network says, “You’re not necessarily beholden as the user to ensure you aren’t infringing on a copyright.” Instead, the marketplace will take care of that for you. The key distinction between a centralized and decentralized marketplace is that a centralized one will set certain constraints on what you can do. There are two kinds of marketplaces for NFTs: centralized and decentralized. A given NFT is immutable on the blockchain, and everybody can see its transactions, Ozair says.Īlthough you could conceivably build your own blockchain for creating and minting NFTs, most users choose an NFT marketplace to mint their NFTs. NFTs have all the same features as other blockchain technologies. In this way, an NFT is a kind of non-fungible cryptocurrency. Minting is not the creation of the NFT and rather, minting activates an already created smart contract and places the NFT in a specific spot on the blockchain network. The first purchase of an NFT is called minting. Ozair defines a fungible object as something interchangeable or indistinguishable from something else.Ī bitcoin is a fungible token on a blockchain, and it doesn’t matter which particular one you own.Īn NFT, on the other hand, is a unique blockchain token that is not interchangeable with any other token found on that or any other blockchain. “The concept of fungible versus non-fungible has been in our lives for centuries,” says Merav Ozair, blockchain expert and fintech professor at Rutgers Business School. On the other hand, if you have a portrait painted by Pablo Picasso, exchanging that artist’s work for a picture drawn by a three-year-old isn’t the same. This means a one-dollar bill is a fungible asset. If I take your dollar bill and give you my dollar bill, we both still have the same thing. If you think about two separate one-dollar bills, they’re the same. Since then, NFTs have grown into a $1.8 billion market, according to data from CoinMarketCap.īut what exactly is an NFT? Perhaps the first thing to understand is how an NFT differs from a fungible token. When it was created in May 2014, it eventually sold for $4. The first known NFT, “Quantum,” was a video clip dubbed a monetized graphic. An NFT is something that can’t be duplicated-it’s the complete opposite of fungible.
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