Even if you lived under a rock for the past couple of years, you’ve definitely heard the term NFT since it has been thrown around quite a lot. This revolutionary technology allows people to own certain digital assets which can be anything from images, videos, audio files, in-game items, GIFs, and more.
However, since we talk about relatively new and still not fully explored technology, it is hard for people to understand what is actually an NFT and what will they get if they purchase one?
Let’s dig a bit deeper into the NFT universe and find out more about how the process works and what it means to own an NFT.
What is an NFT?
Before we go into the rabbit hole of how the process works, we have to be on the same page about NFTs. NFT stands for “non-fungible token” which represents a digital asset that can be transferred between individuals on the blockchain.
A non-fungible token means that each asset is completely unique and can’t be replicated or divided into smaller parts.
Since the technology that gives uniqueness to certain digital assets opens up a wide range of potential uses, like using it in games, as Wizardia demonstrates: https://wizardia.io/
NFTs can represent different types of assets. That’s why they have different rules attached to them. These rules are often referred to as Smart Contracts and are defined by their programming code.
Basically, each digital asset has its unique token with a Smart Contract (code) that represents certain things.
So, what does this mean for the NFT industry, and what does it mean to purchase an NFT?
Do you own the picture? The token? Or the actual rights of the digital asset?
Let’s find out.
What do You Own When You Purchase an NFT?
Many people are drawn to NFTs because of the art and currently, the image and gaming marketplace has the biggest trading volume. However, most people don’t know that even though they purchase an image from an NFT marketplace, they don’t actually pay for the image.
In fact, when you purchase an NFT, you are paying for a token that represents a unique item. In other words, you spend money on an extremely small digital record (on the blockchain) that often contains a URL or a serial number. This unique token is sent to your address on the blockchain. That’s it!
There are no images, videos, or audio files recorded on the blockchain. This means that when you purchase an NFT, you are only receiving a code tied to your address.
In order to see what you’ve purchased, you’ll need an NFT Marketplace like OpenSea that can display the digital form of the token you’ve purchased.
It is really important to understand that NFTs are not image file. It is only the record of ownership or authenticity that is stored on the blockchain. The image file can be hosted on a different platform as we mentioned.
Another thing to consider is that owning an NFT doesn’t guarantee you the rights to its intellectual property. In most cases, the original author of the work (a record stored in the NFT) retains ownership of the copyright.
However, the question of the copyright and intellectual property of the digital asset varies from project to project. Some actually hand out digital certificates and you can use the image or video of the NFT exclusively.
With that said, purchasing an NFT is only a process where you get a certificate of authenticity, which is a code tied to your wallet on the blockchain. So, in theory, if there aren’t any websites like OpenSea available, all the images tied to an NFT cannot be displayed, and you’ll only own the code.
It is really important to understand how the process works in order to create your buying strategy. As of now, the NFT marketplace is booming with images and videos that are selling for millions of dollars. However, most people don’t understand that they are actually paying for a piece of code that is tied to the blockchain without getting the actual digital asset.