Did you know that in March of 2021, a tweet fetched 2.9 million dollars? This jaw-dropping sale happened when Twitter's former CEO, Jack Dorsey, transformed his first-ever tweet to a Non-fungible token or NFT and put it up for bidding. On the tweet's 15th anniversary, the CEO of a blockchain company made the winning bid—and the rest, as they say, is history.

The popularity of NFTs is exploding and has piqued the interest of many investors. NFTs such as digital artwork by Beeple and pixelated portraits from CryptoPunk have been sold for millions of dollars. Even famous brands such as Taco Bell and Time magazine have hitched on the NFT bandwagon.

These historical events show that NFTs are taking the digital world by storm. It will soon enter the mainstream, so you must be ready to play the NFT game.

Understanding NFT

What is an NFT?

NFT stands for a non-fungible token, a digital certificate that guarantees ownership of digital assets such as artwork, items within a videogame, and musical composition. In some cases, buyers can also use NFTs to prove ownership of real estate properties, physical paintings, and other unique tangible assets.

These tokens utilize the blockchain system, the same technology used by cryptocurrencies, in creating and managing all transactions. Buying and selling of NFTs are usually based on the Ethereum network, but some tokens use other blockchains such as Polkadot and Solana.

NFTs allow artists to sell their work in the digital space without worrying about counterfeits. All digital assets are authenticated through blockchain, a digital ledger. On the other hand, some NFT owners also enjoy special privileges like access to exclusive events.

What's the difference between NFT and cryptocurrency?

Non-fungible tokens can't be replaced or traded with one another. On the other hand, you can exchange cryptocurrency without losing its value.

The demand for what the token represents dictates the price of an NFT. It can't be treated as a cryptocurrency since each token has a unique value making it non-fungible. On the other hand, cryptocurrencies such as Ethereum and Bitcoin hold equal value as any other ETH or BTC, hence, the term fungible.

Buying NFTs

NFTs may be confusing, especially for those relatively new to the cryptocurrency and blockchain space. However, buying and selling NFT can be pretty straightforward if you go beyond the jargon.

Here are the steps to help you buy your first NFT:

1. Buy Ethereum

As we've mentioned earlier, almost all NFTs use Ethereum-based tokens. Most NFT marketplaces accept only ETH blockchain payments. You need to have an Ethereum wallet where you can send cryptocurrency.

It would be best to create an account with a cryptocurrency exchange if you don't have one yet. Once you have an account, you can proceed to purchase ETH and send it to your wallet.

2. Connect your ETH wallet to an NFT marketplace

Every NFT marketplace has its special collectibles and its unique way of operating. However, one of the most frequented is OpenSea. It offers a wide variety of digital artwork and videogame items. Simply connect your Ethereum wallet to start browsing and bidding.

3. Buy your token

Once you've funded your account, buying your NFT will be an easy process. You place your bid, just like in any other auction. The token will be awarded to you if you're the highest bidder. Then, you pay for your newly acquired digital asset with Ethereum from your wallet.

How does blockchain currency affect an NFT's value?

The value of a non-fungible token generally depends on how much a buyer is willing to pay for it. So, rather than economic or technical indicators, demand more often drives the price. However, the dynamics of blockchain currency can also influence how an NFT is valued.

Since cryptocurrencies are used to buy these digital tokens, the price of NFTs gets affected by the price movement of a crypto's value. A decline in Ethereum's value, for example, may mean a negative net for a non-fungible token that you have bought with ETH.

Cryptocurrency's influence on an NFT market behavior is expected since, according to a study, "larger markets tend to spill over into smaller related markets." It would be best to invest with caution and understand the volatility of the crypto market and how it can affect the NFT's value.

Owning Your First NFT

Non-fungible tokens are already making strides in the gaming and luxury industries, and there's still more room for other sectors. It's also revolutionizing how artists create and sell their art in ways we have never thought were possible many years back.

However, as with any new development, there must be a thorough analysis of the benefits versus the risks. It would help if you do your homework and dive deeper into NFTs before buying your first NFT. Remember to diversify your portfolio so you won't experience a massive setback if the crypto market plunges.

It seems like NFTs, just like blockchain and cryptocurrencies, are here to stay. They're going to change the future of asset ownership and business operations. It's only a matter of time before they become a part of our lifestyle. So, are you ready to join the digital revolution?