So, you’ve heard of NFTs. Perhaps, you’re wondering why NFTs are such a big deal… here’s the lowdown:
An NFT is a digital asset stored on the blockchain. The term itself, NFT, stands for non-fungible token. To be non-fungible means that an asset is unique and non-interchangeable. This means that every NFT is a 1/1, a uniquely identifiable asset with a visible history of ownership. If I purchase an OG Flowers NFT, for example, that digital image is added to my Solana wallet and I have verifiable ownership of it. Someone could right click and save it but no-one owns the rights to the original, a unique instance on the blockchain, besides me.
You’ve probably seen some popular collections of NFTs, most of which look like a jpeg. Not all NFTs are images though! The NFT itself is a customizable unit - NFTs can contain any digital file format including photos, videos, gifs, audio, and even documents.
Data storage on the blockchain is quite expensive, so the files for most NFTs are actually stored off-chain through a system called IPFS. IPFS (interplanetary file system) is a peer-to-peer hypermedia protocol that stores files in a secured and distributed manner. When an NFT is minted, the ID that points to this file on IPFS will be stored on-chain.
When an NFT is listed on Magic Eden, a user transfers their NFT to Magic Eden’s smart contract which then handles the buying and bidding functionality.
On a fundamental level, NFTs are valuable because they are non-interchangeable. When it comes to pricing, it all comes down to the perceived value given to an item by prospective collectors. For example, certain NFTs are more rare than others, which can lead them to trade at higher prices than other items in the collection. Some NFTs grant access to unique opportunities that make them more valuable.
To the creator, NFTs are valuable because they allow them to create and share their work in a way that gives them both credit and rightful commission for their sales. An item’s royalty percentage can be built into its smart contract, which guarantees that the creator will automatically and perpetually receive a royalty every time that NFT is traded in its original marketplace. On Magic Eden, this royalty amount is set by the creator and can vary by item.
Collectors have all sorts of different motivations for purchasing an NFT. Here are a few reasons:
Now, go on and browse Magic Eden. Find an NFT project that excites you!