Steemit Crypto Academy Contest / S2W4 - What are NFTs. by @koladammy

Goodday steemians and welcome to my publication. Today I have discussed nfts with respect to the questions drafted by the cryptoacademy season 2 week 4 task. Have fun reading :) ...

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Using your own words to define non-fungible tokens: NFT, and to show the difference between fungible and non-fungible tokens.

Introduction
Non-fungible tokens, or NFTs, are digital assets that are encoded on a blockchain with a unique identifying cipher. They are frequently used to represent real-world goods such as music and arts.

In the course of our daily transactions, we have all been involved in the purchase of digital goods. For instance, you might decide to buy the in-game tokens necessary to make the purchase of a rare skin or outfit in one of your favorite games. You buy digital goods each time you make a purchase similar to this.

A common misconception regarding NFTs is that. Some people believe if an NFT is perceived to have some worth then all they have to do is just screenshot and resell them.

Well, if you had that thought. You are mistaken, my friend. Since the term Non-Fungible refers to something that is unique and is codified on the blockchain, it implies proof of ownership, which means that because of this feature's uniqueness, NFTs cannot be duplicated or copied.

Difference between Fungible and Non-fungible tokens

The simplest definition of fungible tokens is that they are tokens or assets that are divisible and lack any distinctive characteristics. Bitcoin and traditional currencies are two good examples of this. Anywhere in the world, a dollar bill will always be worth a dollar, and a bitcoin will always be worth one bitcoin.

however

On the other hand, non-fungible tokens are singular and undividendable. One big difference between fungible and non-fungible tokens is the value that has been codified.
Major differences are outlined in the table below.

Parameters	fungible	non-fungible
Uniqueness	Fungible tokens are non-unique i.e using fiat currencies - A $100 bill in san Francisco would have the same value as a $100 bill in new jersey	Due to the specific data or value, there can't be others of the same type
Divisibility	Fungible tokens are divisible and can be broken down into smaller parts	non-fungible tokens are non-divisible, this is because the value is comprised of the whole
Storage content	fungible tokens are often used as a store of value in the real world	non-fungible tokens are mostly used to store data

Are NFTs interchangeable? What are the differences between an NFT and other currencies? Is there an NFT marketplace? And how to invest in NFTs

Are NFT's interchangeable?
As a result of the scarcity that exists in the digital world in comparison with the real world. NFT's are indeed not interchangeable. Unlike fungible tokens like Bitcoin which always represents the same value, each NFT's may pose as a different underlying asset and as such are not interchangeable.

IS THERE AN NFT MARKETPLACE
NFTs are traded on websites popularly referred to as marketplaces. It is here that the activity of buying, selling, listing, making offers and transferring NFT's takes place. In order to be able to perform activities on these marketplaces, there is the need to possess a digital wallet. A common example of such digital wallet includes metamask, walletconnect, trustwallet etc.

Users would be required to link their digital wallets to a marketplace in order to be able to use for transactionary purposes. Such examples of popular marketplaces include

• Opensea
• MagicEden
• Foundation etc.

NFTs can be purchased in one or more of these marketplaces. It's required to have some asset in the form of the underlying crypto for the chain to be able to transact effectively. It's also important to understand that some charges may be incurred by the marketplace for transactions. They are either in the form of gas fees or fees to trace and confirm ownership of original assets.

HOW TO INVEST IN NFTS
Just like cryptocurrency investments, investing in NFT's also comes along with some form of risks therefore it's very advisable to do the following when beginning your nft investment journey.

• Do adequate research - This is the foremost and most important thing to do. It's very important to carry out adequate research regarding a project before deciding to throw cash into it.

• Get a digital wallet and fund with crypto - Following thorough research, the next step is to obtain a digital wallet to facilitate asset storage online. Metamask, a web wallet extension, is a popular and widely used example of this.
  After that, transfer assets in the form of underlying crypto to a digital wallet.

• Choose a marketplace to trade in - There are a couple marketplaces for nfts to select from. Make a choice from the available options and connect your digital wallet (metamask etc..) to begin

How to create a new NFT and is it possible to have an NFT stolen? And why use a distributed file system like IPFS in this area?

HOW TO CREATE A NEW NFT

Creating a new nft is surprisingly very easy to do.
In order to create a nft, you have to go over the following steps

• Firstly, you would need a digital wallet to set up an account on any marketplace. There are couple of digital wallets out there e.g walletconnect, metamask, trustwallet etc. But for the purpose of explanation i'd stick with the popular metamask wallet extension.
  To set up this wallet, head over

To get set up with metamask, here are a few steps to follow.

Firstly, Head over to the metamask official website.

You can access it at Metamask.io
Upon loading the site, you should be greeted with an interface similar to this. Click the Download now button right under the description as indicated below.

Depending on your device. Metamask is made generally accessible. You can choose to download for chrome, IOS or Android. Either way linking of accounts is made possible across devices.
I'm using a PC now so I'd go ahead with the "install metamask for chrome" option which downloads as an extension to browser.

This comes in really handy. Or better still you can hear over to chrome web store and search for meta mask and add as extension to chrome, this webstore also works for Brave and Edge users.

When you're done installing the extension. You should get a start up message welcoming you to metamask.

If you're an existing user of meta mask. You can import your existing wallet using the 12 word mnemonic phrase (seed key). However for new users, you'd have to create a new wallet and seed phrase.

Upon clicking the "create a wallet" option you'll be presented with your secret backup phase. It's advisable to store these information securely. Tips on effective storage are also displayed. Personally, I usually divide the keys into two parts. Print each six of the twelve keys on a piece of paper and store them in different locations with a backup in my crypto floppy as I call it but you don't have to do that. Just ensure you store these keys securely as you'' need it again.

After this step you'll be required to to re-enter you seed phrase to gain access to your metamask account.

Note: Metamask cannot recover your seedphrase, therefore losing access to it invariably means losing access to your holdings/assets.

• Next Pick a marketplace to list your nfts in. Take opensea for example, go to opensea and click on the create icon to get started
  

  
  
  

• You'd be required to connect a wallet, click on metamask to connect your metamask wallet, sign the authorization and click continue.
  

  
  
  

• Next step is to create the item, fill in the info. Put your desired supply, set your rarity and pick an underlying blockchain to list on (ethereum, polygon, solana etc).
  

  
  
  

• Once the steps are followed, your nft should be created with ease.

IS IT POSSIBLE TO HAVE NFTS STOLEN

The short answer is yes!
However the only way this can happen is if an hacker or someone gains access to your digital wallet. Even centralized marketplaces like nifty are prone to hacks due to its possession of private keys.

The most common way through which NFTs can be stolen is through phishing. Users are convinced through deceptive tactics to click on a message or mail which redirects them to a site where they're required to connect their wallets. This eventually results in a loss of assets.

And why use a distributed file system like IPFS in this area?

IPFS stands for Interplanetary File System

This distributed system is decentralized and this proffers more security for tokens. Interplanetary File System also makes use of content-based addressing which allows for verification of contents. Also IPFS addresses a file by its content or what's codified in it, therefore, issues relating to the purchase of fake assets would significantly cease as the unique identifiers of tokens would be their content itself.

Also, these kind of files enable users to retrieve information on their assets using their registered fingerprints. This technology is made possible through a content identifier.

Therefore with the technology and inherent benefits this system possesses, it will greatly prevent stolen NFT's.

How are NFTs used in art, video games and collectible card games?

Art
NFT's have also been used to replicate famous arts for people to own, redirecting royalties to artist. Although this may not hold the same value as the original piece in the real world, they help to provide fair system of payments for artists by eliminating the red-tape involved in the revenue model whilst certifying ownership of such digital assets to purchaser.

Video Games
NFT's usage in video games has brought about a play-to-earn model where users are allowed to earn tokens from game hours. This p2e model of gaming is fairly new and a few of these games we have seen is the notable Axie infinity, Gods Unchained and WeSeeGhosts where customization influences value.

NFT's have also revolutionized and changed the traditional system of which in-game purchases were once carried out. Now assets and customizations can easily be bought,sold, and transferred by players in some game models.

Collectible Card Games
A popular example of this is the splinterlands game on the blockchain. NFT's have impacted collectible card games in a big way. Players seek out rarity cards encoded with some utility of the underlying project on which they are built. These cards can then be sold and transferred to others.

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NFT's AND REVOLUTIONIZING PROPERTY TITLES

NFT's aims to revolutionize property titles in the real world by using digital means. Think of nft as a proof of ownership just that in cases pertaining to properties. Instead of a signed piece of document or certificate, it would be a digital proof of ownership. It's already possible to perform transactions involving the exchange and sale of real estate holdings with one nft transaction in some states.

Artworks and music have also been sold and bought in the NFT marketplace, each having their own unique identifiers for tracking purposes.

How are NFTs regulated? And what are the solutions to the limits of NFT development?

Systematically speaking NFTs are not regulated and this makes traders in the marketplace susceptible to vulnerability in transactions. This is because of the difficulty in ascertaining the difference in cryptocurrencies such as stable coins.

However, under the U.S securities law, an nft can be subject to this law if it passes the Howey Test. Under the Howey Test an ...

Although, it still remains increasingly difficult to regulate nfts due to their unique nature. For example, if certain regulations are imposed on nfts then such non fungible tokens that serve some purpose such as trading cards would have their activities disrupted.

SOLUTIONS
Some solutions to limits confronting the development of nfts include:

• A workable standard for regulating nfts and marketplaces should be drafted.
• Means of ownership and identification of assets should be further improved for better security.
• There should be development of newer decentralized marketplaces for facilitating nft based transactions.
• Security measures and means of ownership should be improved upon through wide adoption of IPFS systems.

CONCLUSION

NFT's are fast rising and their explosive trading activity of late confirms it all. NFT's proffer a way to make huge profits in such a short while, at the same time it gives you a way to lose all your assets as fast as you can say mary had a little lamb. Therefore as explained in this publication, its very advisable to do adequate research and risk as much as we can afford to lose. Dont go all in trying to go to bed and wake up a new Elon Musk.

NFT's are still regarded as a fairly new concept although they have been existing for a long while. The mass adoption of its operations is what is considered fairly new. The major aim is to get into a project or purchase an NFT early enough at a low price and sell at a higher price. Other reason for purchasing nfts are utility based however its pertinent to note that investing in NFTs comes with a lot of risk due to the entirety of its concept or operations not being tied to any intrinsic value.

It's something for which the hype can just die out abruptly any day as prices are determined by the forces of demand and supply in the marketplace and an asset for which no one considers valuable anymore or for which (in the case of trending tokens) exists many holders and very few people willing to purchase and hold may experience decline in value.

Therefore i cant reliably state that investing in nfts is good due to the high risk involved and neither can i completely disregard it due to the profitability it offers. However, its advisable to do adequate research (DYOR) and never risk more than what you can actually lose.

You wouldn't wanna put in your college funds into that hype project just because jeff says it would blow over XD.

If you read this far, you're an absolute gem. Thank you for reading my publication. I invite @simonnwigwe, @patjewell @doppley to also join me in participation :) .