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I heard about blockchain and cryptocurrency but needed clarification about how they link with NFT. This guide is the right spot to understand the origin, behavior, and algorithm of NFTs. Let’s discover the non-fungible tokens most easily.
What is an NFT?
NFT is an example of blockchain. When we talk about blockchain, we can say that they are the coded chains to store data. It is a database replicating itself through a unique process each time it creates a block. Non-fungible tokens are one of the types of blockchains that usually represent digital data in the form of art.
How do NFTs work?
NFTs are created and positioned on the blockchain; they have a unique identity and are the property of someone who has made or bought it. As the name suggests, the word non-fungible means they are unique and irreplaceable. NFTs are authenticated with the unique signature of the owner.
In recent years, NFTs have been hyped, and we have seen a transition in people’s buying and investing behavior. People are more interested in investing in digital assets. Artists have also taken the path of NFTs to sell their art. Also, music and movies, metaverse art, video games, real-world assets, and virtual events are patented with NFTs.
Example
For example, actor William Shatner’s memorabilia was released as NFT. Twitter’s CEO, Jack Dorsey, sold his first-ever tweet on blockchain in the form of NFT. It is not always a form of art; it might be anything you consider unique and influential.
How is an NFT different from cryptocurrency?
NFT and cryptocurrency are both examples of blockchain creation. This can be understood very simply: You need money to buy gold, and money can be of any currency. Similarly, to buy NFTs, you need cryptocurrency, which can be in any form, like bitcoin and Ethereum.
Cryptocurrency can be exchanged with fiat money like dollars, euros, etc. In contrast to this, if you look at NFTs, they are unique and irreplaceable. Let’s look at the table to understand more:
| NFT | Cryptocurrency |
| Unique digital assets | Digital money to buy assets |
| Royalty to the owner every time they are sold | It involves trading like regular money |
| Involves Web 2 and web 3 | Based on web 2, some coins use semantic ways |
| Less volatile | Higher volatility |
Why would you buy NFT in Australia?
The NFT market is still saturated, and one side is in great demand, but some still think that NFTs and all blockchain investments must be clarified. NFTs have revolutionized the world’s ownership. Here’s why you should consider it a way of digital investment:
Ownership
Creating an NFT requires thinking and generating an idea that is only yours and can not be copied in the same form by others. NFTs are your property and are backed by a robust blockchain system to protect them from being replicated.
Investable asset
There are two types of assets, some can be owned, but others are investable. Being investable means that we have profitability prospects when investing in such investments. The prices would be higher with an increase in the demand for NFTs.
Empowerment
Artists have been the most ignored people in the world regarding monetary benefits. NFTs have given artists and digital creators a platform to own what they do and earn from it. Even the secondary sales of NFTs create royalties for the owner.
Social Platforms
Some of the owners have now created groups and communities for NFT holders. In this way, they have created digital communities where people can talk about the prospects of NFTs.
How to manage NFTs in Australia
Managing NFTs is more complex; owning this is the only drawback. For creating, you need a mind with unique ideas but storing, selling, trading, and buying are impossible without managing crypto accounts and currency. So, NFTs and crypto work hand-in-hand. Let’s find out step by step:
Get a crypto wallet
The first thing you need to do is, buy a crypto wallet to keep your cryptocurrency. You can easily purchase paper wallets, software wallets, and hardware wallets. Some of them, called hot wallets, are connected to the internet and are usually less secure. For additional security, it is better to use a hardware wallet.
Get crypto currency
Secondly, you need to buy crypto. You can buy any coins you like that enable you to trade in NFTs, but Ethereum is considered efficient if your sole purpose is selling NFTs in the blockchain market.
Find an NFT marketplace
Many famous marketplaces like OpenSea, Rarible, and SuperRare trade NFTs. If you are new to minting NFTs (publishing on blockchain for trading), you must be careful while looking for transaction fees (gas fees), royalties, and extra charges, charged every time you mint NFT.
You can also take help from different on-chain payment methods to make you understand and get your royalty on time.
Mint your NFT
Once registered on the marketplace, it’s time to mint – publish your NFT.
Buy or sell NFT
To buy a non-fungible token, you need to bid to wait for the auction to end. If your bid is the highest, you get the rights of ownership. Secondly, if you want to sell your NFT, you will set up an auction in the marketplace, and different buyers will bid for that.
Learn more: How to buy and sell NFTs online safely.
Is NFT a good investment
NFTs are considered a safe way to invest and have good returns. With a rise in technologically backed investments and money, NFTs are a breakthrough. They are easy to invest in. They offer security backed by blockchain. The market is volatile, though, but the aspect is safe with ease.
Is NFT taxable
Every country has different tax laws. Applying tax laws to blockchains is complicated. When it comes to NFT holders, the profit they gain is considered their income. Hence they fall under regular tax brackets. Still, the stance could be more evident as this is based on the country’s regulations.
Common NFT scams you should know about
Fraudsters are always in search of weak ends. Once they find you insecure while dealing with your NFTs, they attack you differently. Let’s discuss potential NFT scams you can get exposed to:
Bidding
The scammers bid you the highest price and set means of payment for that. Once they pay, they change the coins to less valuable ones. In this way, you end up at a loss.
Pump-and-dump
The scammers pump NFTs and then dump them when the hype is created. The investors, in this way, end up holding bogus NFTs.
Plagiarism in NFT
Non-fungible tokens are unique assets. Scammers sell someone else’s property through different means.
Rug-pull scam
This happens when scammers create hype about NFT, just like in pump and dump. This is done on large platforms where many investors are dodged.
Phishing
This happens when hackers get hold of your wallet and, ultimately, all your NFTs by sending invites and links to click.
Is it safe to trade NFTs?
Trading NFTs is usually safe because blockchains track metadata from the time of NFT creation. Some of the things that should be kept in mind while trading NFTs are:
- Keep your digital wallet critically safe, and never share it with anyone.
- Try using a hardware key to save your seed phrase or passwords to avoid hacking
- Never open an unknown file during a transaction
- Never accept a free NFT from an untrusted source, even if it is promotional
- Use a VPN (recommended PureVPN) to encrypt your data while trading NFT
Wrapping up
NFTs are the present-day financial backup. Some might think of them as volatile and unpredictable, but some people trust NFT trading completely. Whatever mindset an investor has, it is always prudent to double-secure your investments.
NFTs are prone to scams more often as they are irreversible and, once deceived, will not return to the holder. It is always advisable to use a VPN for NFT trading.
PureVPN, with its AES-256-bit encryption, will ensure that intruders never crack your transactions. With its unique features like dedicated IP and split tunneling, you can get dual security against phishing and fraudulent traffic to your digital wallets.
Frequently asked questions
How do beginners invest in NFTs?
If you are a beginner, you must have a digital wallet.
- After that, you need to buy crypto from any exchange.
- Later, get an account on an NFT marketplace like OpenSea
- Check out different NFTs to buy, or create your own to sell through bidding.
What can you sell as an NFT?
Any piece of art which is unique and can be kept digitally can be sold as NFT.
What’s the best app to buy and sell NFTs?
Exchanges like Binance and Coinbase have trusted sources for buying NFT. OpenSea, CryptoPunks, and Sorare are some apps to buy NFTs.
Is it safe to connect your crypto wallet to OpenSea?
OpenSea has a history of data breaches, so to connect your crypto wallet with it, you can use PureVPN to ensure reliability.
Who can see your NFT?
People in the marketplace will be able to see your NFT.
Are NFTs private?
No, they are public and can be hacked. The wallets can also be exposed. Therefore a VPN is there to help you keep your identity and wallet safe.
Can NFTs be hacked?
Yes, NFTs are usually hacked. A VPN can be used to protect NFT from being stolen.
How do I sell an NFT with a secure transaction?
Although NFTs are said to be secure when built, there is always a chance of phishing or email hacking. To ensure that this does not happen, VPNs are used for better security. We recommend using PureVPN for these safe transactions.
PureVPN
March 16, 2023
1 year ago