A guide to Non-Fungible Tokens (NFTs), 2023 - Flipbook - Page 9
To buy or sell an NFT, it is essential to have a crypto wallet. A crypto wallet
is a storage facility. The wallet does not store the NFT itself, as this exists
on the blockchain, but instead stores the private “key” to the NFT. This is
an alphanumerical password which stores the address of the NFT on the
blockchain and allows the owner to sign transactions in relation to the NFT, and
therefore control it.
Every transaction on the blockchain attracts fees, known as “gas”. The gas pays
for mining, the process by which the transaction is autonomously verified and
recorded on the blockchain by validators. Once validated the block is added to
the chain. Some minting platforms, such as OpenSea and Rarible, have “lazy”
minting systems which means that the NFT is minted off the blockchain so
no gas fees are payable at the time of creation. The gas fees that would have
been attributed to the minting process only become payable when the NFT is
sold, so it is the buyer who must take responsibility for these. At this point, the
gas fees for the original minting as well as for the sale process are added to
the purchase price paid by the buyer, and it is only then that the NFT is entered
onto the blockchain. This allows creators to avoid paying gas fees for NFTs that
might never sell.
Uses of NFTs
NFTs are most well-known as a vehicle for digital art and media, with
image- or sound-based files frequently being the underlying asset.
This lends itself to a number of markets, not just art but also music, fashion
and gaming.
However, as the technology and market develops, NFTs are increasingly being
used to represent a wider range of assets. Indeed, the utility of this technology
has already been recognised by regulatory bodies, leading to their categorisation
as “utility tokens”.
