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What is NFT and How it Works? | Non Fungible Token | NFT Explained for Beginners

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Welcome to whiteboard programming, where we
simplify programming with easy to understand whiteboard videos and today, I'll be giving
you a brief introduction of what is NFT and how does it works so lets get started Well,
NFT stands for ‘non-fungible token’. This full form itself has 2 parts to it….
one being ‘non-fungible’ and other being ‘token’. Here, by non fungible, we mean that its unique
in its nature unlike something that is fungible like bitcoin or Ethereum… a perfect example
of a nonfungible item would be mona lisa painting and by token, we refer to its digital existence
and the fact that it is protected using blockchain technology. To break it down even further, we can state
simply that an NFT is just a digital asset that, because of its existence on a blockchain
can’t be replicated Further, the most common example of NFTs today is digital artwork,
but it could be a whole lot of other things as well, like GIFs, songs, videos, tweets,
digital skins for games or even digital counterparts part of real paintings and the best part about
this is the fact that you are recorded as the owner of that product in the blockchain,
which is more secure that any physical counterparts Lastly, a few well-known examples of NFTs
include Bored Ape Yacht Club, CryptoPunk and Axie Infinity.

Next, as you've got a fair understanding of
what is NFT, lets discuss how does NFT work to put it simply, an NFT relies on two pieces
of technology – blockchain and cryptocurrencies blockchain, as we all know, is a distributed
digital ledger, or in other words a shared electronic database. And you need a cryptocurrency to buy NFTs… The most common one used is called Ether which
uses the Ethereum blockchain. However, there are other digital currencies
on different blockchains that can be used, depending on where you plan purchase your
NFT or what is your operating platform. To understand its working here, by spending
your Ether on an NFT, your purchase is added to the blockchain. Because no one else can change this, there
is a clear piece of proof that you own the NFT in what is known as a ‘smart contract’,
which is, another piece of data that shows ownership, how it’s been transferred, licence
fees and other key pieces of information. If you'd like to learn more about smart contracts,
I'll recommend you to watch this video, link for the same is given in the description below.

So you’ve got some Ether (or any other cryptocurrency
for NFTs, lets say), Now, where do you go to make a purchase? or Where to buy NFTs? Well, to be honest, there are only a handful
of legitimate places you can go to make a purchase without being ripped off… and a
few I can recommend include OpenSea, Rarible, Binance NFT, and SuperRare If you ask me,
my personal favorite of them all is OpenSea also, it's worth noting that, as with physical
art, a NFT is only worth as much as its perceived value, which can change dramatically, with
respect to market conditions. So if you buy an NFT artwork today for $1000
it may not be worth that tomorrow much. While there might be gains, there's also a
possibility of making losses. Now, I'll be answering a few most asked questions
in the NFT space, to help you get a grab of the concept Starting with the biggest one,
Are NFTs a scam? Well, while the core concept of an NFT isn’t
a scam and the large majority are very much legit, that doesn’t mean that they are all
safe.

By safe, I mean the worth that they claim
on marketplaces like OpenSea. The technology behind NFTs is new and somewhat
complicated and there are people looking to capitalize on this confusion. So, before investing, its always better to
do your own research and find about the vision of the project and maybe, even join their
discord channel to see what other people are saying about it. Next, Does an NFT grant copyright ownership? So sorry to break your heart, but when you
purchase an NFT, you might not be buying the complete ownership of that product. Yes, you do become the owner in the sense
that it is now your property, and the ownership is traceable on the blockchain, but that isn’t
always accompanied by the laws of copyright in your country.

This means you might not have permission to
reproduce it – for example, putting it on a T-shirt. Next, Are NFTs bad for the environment? This is a little harsh one… and to be honest,
a large number of NFTs carry a pretty huge carbon footprint, to talk about ethereum alone,
it uses more energy than the Netherlands, which is over 100TWh (Terawatt-hour) per year
So, yes, NFTs are causing harm to the environment But Ethereum is working to solve this. How? As we all know that Proof of work and stake
are the two ways a blockchain transaction can be verified.

And while Proof of work is an older and more
energy intensive version, Proof of stake is newer, and less energy-intensive and is the
option most cryptocurrencies are moving to, including Ethereum, with their launch of Ethereum
2.0. Next, What can an NFT be used for and what
is the future? Right now, most of the examples we see on
the internet are art NFTs. These can be pictures, illustrations, GIFs
or other pieces of art people have created, but that isn’t the only form an NFT could
take. To be honest, The power of NFTs is the authentication… In the traditional world, we use all kind
of intermediaries to authenticate any form of information or transaction, whether you’re
an artist trying to get authentication that your work is the original, or a bank making
a payment, or even, a marriage license – all of these situations need a third party to
declare their authenticity. And if you think about it, everything in our
economy that is transaction-based, can be linked with a equivalent use case.

With that, I hope this video was helpful to
you and served value, if you love my content, feel free to smash that like button and if
you haven't already subscribed to my channel, please do as it keeps me motivated and helps
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