What Are NFTs? And How Do They Work?

min read
A 3D computer chip labeled “NFT” set in a painting frame against a background resembling a digital circuit board.
BetMGM Mar 27, 2023, 4:17 AM

You probably heard something about NFTs in 2022, but because you were enjoying online casino games so much, you didn’t pay too much attention to all the hype. If you’re now curious about them and you’re wondering about the state of the market, don’t worry. Even though the NFT craze may have come and gone, many people still buy and sell these unique digital assets. In fact, the Axios article “NFTs are down, but they’re not dead,” reports that almost half a billion dollars worth of NFT transactions took place between late January and February 2023. 

So, if you missed the NFT madness the first time around, we answer many important questions here about these crypto items, including what is an NFT, how do they work, how can you buy them, and which NFT marketplaces you may want to use. 

What Are NFTs?

NFTs, or non-fungible tokens, are defined by Investopedia as “assets that have been tokenized via a blockchain.” 

Firstly, we have to explain what the terms fungible and non-fungible mean. Fungible means that an item can be replaced by another identical item. For example, if your microwave or a part in your car broke, you could get an identical replacement. On the other hand, non-fungible means that an item is unique and cannot be replaced. For example, there is only one original Mona Lisa. Though there may be many photos and prints of it, as indeed there are, there is only one singular painting by Leonardo da Vinci.

What about tokens? Tokens, or more specifically crypto tokens, are a representation of an asset on the blockchain, which is not to be confused with cryptocurrencies as a payment method. There are some other key differences. Unlike cryptocurrencies, you’ll find that crypto tokens are built on top of existing blockchain networks that can provide a variety of other functions, such as utility or security services, which cannot be mined.

So, in short, a non-fungible token is a unique asset that exists on the blockchain.

How Do NFTs Work?

As we’ve already mentioned, NFTs are unique crypto assets which exist on a blockchain. Most NFTs use the Ethereum network, although there are other smaller networks like Flow and Cardano. 

Since they are unique, their cost is affected similarly to how a physical asset’s cost goes up when demand is high and down when demand is low. 

The Different Types of NFTs

There are many different types of NFTs because you can use an NFT to represent different types of assets such as art, music, digital trading cards, video game items, real estate and even poker NFTs

For example, you may have seen the explosion of headlines about NFT art in the news and seen the incredible amount of money celebrities and crypto traders have spent on these digital art items. While there is still much debate about whether or not NFT art has meaning considering its digital nature, it has been demonstrated that there could be incredible potential in the digital medium for many different types of NFTs, even if the value of many NFT art items declined along with the hype. 

Where Can I Buy NFTs?

If you’re interested in buying NFTs, you can find them for sale on any number of NFT marketplaces that allow you to buy and sell NFTs using money or cryptocurrency. 

How Do NFT Marketplaces Work?

As on many other online marketplaces, including Amazon, you need to register an account to buy and sell NFTs through these platforms. Each of these NFT marketplaces has their own rules and regulations concerning what NFTs you can buy and sell, how much you’ll be charged and a variety of other rules. So, be sure to check what you’re signing up for before you hand over any of your information.

As with any traditional online marketplace, buying and selling work differently. Let’s say you’re interested in buying an NFT. 

First, you need to find a marketplace that offers the NFTs you’re interested in and which is also a legitimate service provider. Once you’re happy with your choice of NFT marketplace, you can register on the platform and create a wallet. You’ll then need whichever cryptocurrency the marketplace supports, whether bitcoin, Ethereum or any other type of crypto. However, you don’t always have to purchase with crypto. Some marketplaces support credit cards as well, so you can make your purchase directly using your credit card. Once you’ve registered and have a payment method ready, all you need to do is browse and buy an NFT, see if it’s listed at a fixed price or join an auction if other buyers are bidding for it. It will then be added to your wallet to keep or sell once the sale has concluded. 

Now let’s take a quick look at how things work if you are interested in selling on a marketplace. 

As with buying, you first need to find a marketplace that is trustworthy and meets all your needs. Again, you’ll need to register and create a wallet. However, if you want to sell your NFTs you’ll first need to price the NFT and then create a listing on the marketplace. You can then choose to sell it at a fixed price or auction it off. If a purchase is made at a fixed price, you’ll automatically receive payment. However, auctions are a bit more hands-on and you’ll need to keep an eye on your notifications and offers so that you can accept a price and conclude the sale.

Popular NFT Marketplaces

The Forbes article “Top NFT Marketplaces Of March 2023” lists the following as sites that offer NFTs:

  • OpenSea
  • Rarible
  • NBA Top Shot
  • Binance
  • Nifty Gateway
  • SuperRare

But this is just a short list of all the great NFT marketplaces you can find online. Be sure to do your own research to see what other great NFTs you can find on the internet. Just be careful to ensure they’re trustworthy before you part with your hard-earned cash or crypto.

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Our BetMGM editors and authors are sports experts with a wealth of knowledge of the sports industry at all levels. Their coverage includes sports news, previews and predictions, fun facts, and betting.

Our BetMGM editors and authors are sports experts with a wealth of knowledge of the sports industry at all levels. Their coverage includes sports news, previews and predictions, fun facts, and betting.