Image courtesy of PixabayIn the not too distant future, Non Fungible Tokens (NFTs) are likely to be part of your life in more ways than you can imagine today. It is more secure, efficient, and cost-effective to manage art, music, property titles, and other assets as NFTs on the blockchain.According to a report by Jefferies, a New York City headquartered multinational investment bank, the NFT market capitalization will surpass $80 billion by 2025.At the moment, though, the most popular NFTs are digital art, basically paintings on a computer screen. Still, there is a growing effort to give even this category of NFTs some utility value.For example, Twitter has just made it possible to use an NFT as a profile picture.But what exactly is an NFT?A non-fungible token (NFT) is an image, digital art, video, audio, video game skin, or any other digital asset or file stored on the blockchain.Indeed, simply uploading a digital file on the blockchain turns it into an NFT. However, the outcome of that seemingly simple process is extremely consequential.While the basic nature of the digital asset does not change much by putting it on the blockchain, there is a major shift in how it is stored, owned, shared, and used.Why do NFTs have to exist on the blockchain?The blockchain makes a digital asset inherently non-replicable.What does that mean?When you take a picture with your smartphone and send it to someone, you always remain with a copy unless you choose to delete it. The person you send the image to can also send it to others and retain a copy. This process can continue to infinity.A viral photo can easily end up having millions of copies in circulation. It is near impossible to tell which of those is the original one. The ability to duplicate or make copies of a file is known as replication.It is helpful that a poster can be replicated into many copies. However, it would be counterproductive if the Monalisa or Salvator Mundi was generated into many copies, and it is impossible to tell which is the original.The blockchain makes it possible that when you send a digital asset like an image, you can’t retain a copy. That creates scarcity and makes it possible to have a digital Monalisa or Salvator Mundi.If you pay $450 million for it, you are assured you are the only one with a copy, or at least it can be proven that you have the original copy.But is this not possible to implement on a centralized system?Yes, it is possible to manage digital assets in centralized systems in such a way that we can limit the number of copies. That is what has been happening in the video gaming space.As a player, you can acquire rare weapons and skins even though they don’t exist on the blockchain. These assets are often deemed valuable because of their rarity.However, what blockchain does differently is that it takes the responsibility of preventing replication of a digital asset from a company and gives it to a protocol on the internet. The protocol is not owned by any single entity but by all those that use it.The NFT capability on the blockchain creates true ownership of the digital assets. For example, when you buy music on Spotify, you get only the right to listen to it. However, when you buy it as an NFT, you own the actual file as a collectible.Since the blockchain is a secure public ledger managed through consensus, nobody can confiscate your digital assets. That is because nobody has any control over your assets except you, as the one who minted or bought them.There is no middle person parse when it comes to trading NFT assets. Also, the physical boundaries are irrelevant. People from all parts of the world can transact directly with one another. It also makes art more accessible to everyone.The blockchain also offers immutability. Ordinarily, it is easy to edit or change the nature of digital files. However, changing them arbitrarily is significantly limited when they are uploaded onto the blockchain.The blockchain also creates other possibilities, such as automating the payment of royalties.For example, NFT can be uploaded with a smart contract that stipulates that 10% of the price paid goes to the creator every time it is traded. Since the NFT and the smart contract are immutable on the blockchain, the artist is assured that the terms will not change in the future.The NFT blockchainsNot all blockchains support the creation and trading of NFTs. Those that do are of a particular kind. For example, except through special modifications known as coloured coins, the Bitcoin blockchain does not support the creation of NFTs.The blockchains that support NFTs have three primary characteristics:● They have smart contract capability● They have clear NFT standards, e.g. ERC-721 for Ethereum, BEP-721 for BNB Chain, CIP-721 for Cardano, etc.● They are virtual machines.Meanwhile, the most important characteristics an ordinary user should consider before choosing a blockchain to mint NFTs on are:The speed of confirmation. This is influenced by the number of transactions the blockchain can process in a second. The more transactions per second, the better.The cost of minting and transacting. Of course, the lower, the better. Generally, Ethereum charges higher gas fees as compared to other NFT blockchains.The consensus mechanism. Those that use Proof of Stake (PoS) consume less energy than those that use Proof of Work (PoW). Therefore, the PoS blockchain is more environmentally friendly.Decentralization of the blockchain. The more decentralized the network behind the blockchain is, the more secure it becomes. Decentralization is mostly dependent on the number of nodes on the network and the architecture.The list of blockchains that support NFTs include:EthereumThe Ethereum blockchain, launched in July 2015, was the first blockchain to host NFTs. Today, close to 80% of NFT activity happens on the Ethereum blockchain.The major issue many people have with using Ethereum to mint and trade NFTs is the gas fees. It is extremely expensive to upload even a simple JPG file onto the Ethereum blockchain.It costs as high as $100 to mint an NFT on the blockchain. It costs almost the same amount to send an NFT from one address to another.The other issue some people have with Ethereum is that it uses the proof of work consensus mechanism, which consumes much electricity. The Ethereum network consumes energy enough to power a sizable country like New Zealand.The community is working towards transitioning into proof of stake, which consumes a negligible amount of energy. This will make the network, as well as the NFTs, minted on it environmentally friendly.The blockchain has also faced scalability issues. When Cryptokittities, the first viral NFTs, was launched, the entire network clogged, and users had to wait sometimes for hours for their transactions to be confirmed.The initial Ethereum capacity is 15 transactions per second with an average confirmation wait time of 5 minutes.The community is working on various scaling solutions to increase its capacity.SolanaThis blockchain is in many ways similar to Ethereum. However, it is a proof of stake (PoS) blockchain.The fees to mint and move NFTs on the Solana network are negligible. You can pay as low as $0.00025 to mint or send an NFT.Solana is designed with a capacity to process up to 65000 transactions per second, which is quite high. It has near-instant confirmation.However, the Solana network is not considered as secure as the Ethereum network, and that is because the community is relatively still a small one, and therefore it is less decentralized. That could, however, change over time with more people choosing to use it.Solana does not come with as much technical documentation as Ethereum has. That means developers struggle a little to build dApps or smart contracts on top of it. That too could change as a community grows around it and improvements happen.FlowThe Flow blockchain is a PoS blockchain launched by Dapper Labs, the Canadian company behind CryptoKitties, the first NFTs on the Ethereum blockchain. It is designed with more focus on supporting gaming and collectable NFTs.The project is an attempt to overcome the major weaknesses of the Ethereum blockchain. Notably, the Flow blockchain network can process over 10,000 transactions per second.It also charges as low as 0.000001 FLOW to mint or transacts an NFT. A FLOW is the native coin of the blockchain, and one is worth about $6.BNB ChainBNB Chain was launched by the Binance crypto exchange. It uses the PoS consensus mechanism. This makes it environmentally friendly.The BNB Chain network can process up to 100 transactions per second. Meanwhile, to mint or transact an NFT on the chain will cost you 0.005 BNB (around $4).Many have a major concern with the BNB Chain is that its network is not as decentralized as that of Ethereum. The Binance exchange and its founders seem to have much sway as to how the platform works.CardanoCardano is another PoS blockchain. It can process over 250 transactions per second. With a Layer 2 scaling protocol called Hydra, it is expected that the network can process up to 2 million transactions.It costs about 0.16 ADA, which is below a dollar, to mint and transacts an NFT on the Cardano blockchain.Some have a concern about using Cardano because it is not as decentralized as Ethereum, and it also does not have robust documentation developers can use.EOSMany remember EOS as the project that raised over $4 billion in an initial coin offering (ICO) in 2017. The EOS network uses delegated proof-of-stake (DPoS) consensus algorithm.The EOS network can process up to 4,000 transactions per second. The average confirmation is 0.5 seconds.When it comes to fees for minting and transacting NFTs, the EOS network does not charge any. However, one must stake some EOS coins to mint or trade NFTs.WAXWorldwide Asset eXchange (WAX) was launched in 2017. It uses the delegated proof-of-stake (DPoS) consensus, which according to its founders, consumes 125,000x less energy per transaction than Ethereum.The network can process about 8,000 transactions per second. The network charges 2% transaction fees based on the value (or assigned price) of the NFT.AlgorandThe Algorand blockchain makes use of the Pure Proof-of-Stake (PPoS) consensus. Its network processes over 1,000 transactions per second with an average confirmation time of 5 seconds. To mint or transact an NFT on the blockchain, you pay a fee of 0.001 ALGOs. One ALGO is about $1.TezosTezos blockchain runs on the unique liquid proof-of-stake (LPoS) consensus mechanism. Its network can execute about 40 transactions per second with an average confirmation time of 15 minutes.To mint or transact an NFT on the blockchain, you pay a fee of about 10 cents.TronThe Tron blockchain network uses the delegated proof-of-stake consensus (DPoS). It can process about 2,000 transactions per second with an average confirmation time of 1 minute. It charges less than a dollar to mint or send an NFT.The standard that guides NFT minting and trading is known as TRC-721 and is fully compatible with ERC-721. Indeed, smart contracts that work in the Ethereum environment can be implemented on the Tron network.AvalancheThe Avalanche blockchain network uses the Direct Acyclic Graph Tangle (DAG) consensus mechanism. This consensus does not consume a significant amount of energy. The network can process up to 4,500 transactions per second.To mint an NFT on the Avalanche blockchain costs 0.001 AVAX. It costs the same amount to send the NFT from one address to another. One Avax is about $100.Most notable and highly valued NFTsOn every blockchain, a few NFT projects stand out primarily based on their prices and popularity.It is important to point out that as someone starting, it might not be ideal to buy the most popular NFTs. The cost might hinder you. It is okay to sample from the least known but from established creators.EthereumOn the Ethereum blockchain, the following are some of the notable NFTs.● CryptoKitties● CryptoPunks● Bored Ape Yacht Club● Pudgy Penguins● Decentraland● Doodles● Azuki● Autograph.io● The Galaktic Gang Collection● World of women● MeebitsBNB ChainOn the BNB Chain, the following are notable:● Lucky Block NFTs● NFT Bakery Combos● Battle petsCardanoOn the Cardano blockchain, the following are some of the NFTs that stand out:● Spacebudz● CardanoKidz● Professor Cardano● CryptoMayor● Crypto KnittiesSolana● Degenerate Ape Academy● Solana Monkey Business● SolPunks● Frakt● Bold Badgers● SollamasEOS● AtomicMarket● Upland● Crypto Dynasty● Blockchain CutiesWAX● Alien Worlds● R-Planet● Farmers WorldTron● TPunks● TronMeebitsNFT marketplaces and how they work.As an ordinary user, you might be asking yourself the following questions; how do I get NFTs? Where can I buy NFTs? Where can I sell NFTs?You can get NFTs either by minting them yourself or buying those others have minted. You need to use a user interface for both these options, basically a website or mobile app. This user interface connects to the blockchain of your choice.The user interfaces (websites and mobile apps) that facilitate the creation and trading of NFTs are known as marketplaces. When it comes to trading, the creators of a particular collection of NFTs might design their own marketplace through which the public can buy and sell it.For example, Doodles, an NFT on the Ethereum blockchain, can be bought through third-party marketplaces like OpenSea. However, you can also buy them through the Doodle.app website.Marketplaces are similar to crypto exchanges. They are platforms set up and run by companies or communities. They connect to whatever blockchain supports NFTs. However, unlike exchanges, NFT marketplaces allow you to create your own assets.Some NFT marketplaces support only one type or collection of NFT, for example, the doodles.app. Others support different collections of NFTs but only from a single blockchain. For example, Nifty Gateway supports only NFTs on the Ethereum blockchain.Some can support NFTs from many blockchains. For example, OpenSea supports NFTs on Ethereum, Polygon, and Klatyn. When minting through such a marketplace, you have to select the blockchain on which you want your NFT to exist.The minting process is as simple as uploading a file onto the marketplace. When you do that, the marketplace automatically uploads it on the blockchain and creates a special public address.To use a marketplace, you need to sign up using a crypto wallet such as Metamask. Even if the marketplace shuts down, you still have control over your NFTs through the wallet.Indeed, through your wallet, you can move your NFTs from one marketplace to another, as long as they support the blockchain on which your NFT exists.Centralized and decentralized NFT marketplaces.Like crypto exchanges, some NFT marketplaces are centralized, and others are decentralized.The centralized marketplaces are set up and run by private companies. Examples in this category include Nifty Gateway, OpenSea, and Rarible.Meanwhile, decentralized marketplaces are run through decentralized networks with a DAO governance structure. That means the platform users own it and make decisions through voting on a blockchain.On the decentralized marketplace, the fees users pay to go into a treasury are used to fund critical operations.An example of a decentralized NFT marketplace is SuperRare.The following are the most popular marketplaces on the different blockchains.Ethereum● OpenSea● Rarible● Nifty Gateway● KnownOrigin● SuperRare● Decentraland.Solana● Solanart.io● DigitalEyes.market● Solsea● MetaplexFlow● NBA Top Shot● TuneGO● BloctoBay● xtingles.BNB Chain● BakerySwap● Battle Pets● PancakeSwap.Cardano● Somint● Cadalabs NFTsWAX● NeftyBlocks● AtomicHubAlgorand● ANote Music● ALGOeggs● Dahai● Opulous.Tezos● Kalamint● Hic et Nunc● Bazaar Market● OneOf● ObjktTron● Kraftly● NFTOne.How are NFTs minted?Again, for the artist or creator, minting an NFT is not complicated. All one needs to do is to sign up on an NFT marketplace using a wallet like Metamask and, through your account, upload the file you have prepared.The MetaMask wallet is accessible as a Google Chrome extension. Once you have it set, visit the marketplace you want to use and click ‘sign up.’ You will be prompted to link the wallet.Minting an NFT is the easier part. Designing it, such as painting the image or composing the music, is more difficult. Also, marketing and creating hype around an NFT is often challenging work.It is important to point out that some marketplaces restrict who can mint NFTs. For example, to mint on Nifty Gateway, you first need to be vetted by the platform admins before being given the right. For other marketplaces, for example, OpenSea, anyone can sign up and mint an NFT.NFTs can be minted in one of three volumes:Single copyThe single-copy means only one NFT of the kind is minted, and only one person can own it. Single copy NFTs can be extremely expensive. Examples of single copy NFTs include Everydays — The First 5000 Days by Beeple and The Merge by Pak.Limited editionThis could be two or more copies of the same NFT but with a defined total. The more copies are available, the less expensive the NFT is likely to be.Unlimited editionThis is where there is no defined number of the total number of copies of the NFT that can be minted and sold. NFTs sold under this arrangement tend to be the cheapest. An artist can sell their music as an unlimited edition if their goal is to sell as many copies as possible.NFT collectionA collection means there are several NFTs that look near the same sold by the same artist or production house.For example, cryptoPunks, Bored Ape Yacht Club and Mutant Ape Yacht Club are sold as collections with up to 20,000 unique NFTs.Types of NFTsNFTs are of different kinds and are minted for different reasons.Art piecesThese are the most popular. They are mostly digital versions of paintings. Also in this category are videos, memes, music and virtual fashion.Utility NFTsThose in this category are designed to be of use beyond their artistic value. For example, a land title could be minted as an NFT, which means the ownership of the land it represents changes hands as the NFT itself.A weapon in a video game falls into this category. While it is collectable, it also performs.Other NFTs that fall in this category include tickets and domain names.CollectablesThese are NFTs that, besides being interesting to look at or listen to, are also valued for the emotion, particularly the nostalgia they evoke.The NFTs in this category include big sports match moments captured in pictures and short videos. For example, an image of LeBron James scoring has been sold for more than $21 million as an NFT known as the ‘Statue of LeBron.’How to display NFTsFor most artistic NFTs, it is important that the person who owns them can display them to others. Traditional physical paintings can be displayed in galleries. The same can be done with NFTs.Marketplaces like OpenSea have developed the capability that NFT owners can display their art pieces on screens such as smartphones and TVs.There is also the ability to share the NFTs as profile pictures on various platforms. Already you can display your NFTs on OpenSea on your Twitter profile.NFTs of other kinds, such as music, can be consumed through centralized and decentralized applications that function similarly to Spotify.Meanwhile, with the emergence of metaverse, one can display their NFTs to others in the virtual world as they can physical art in the physical world.NFT copyrights and legalityNFTs are digital assets, and the existing copyright laws can guide their ownership.It is, however, not automatic that when you buy an NFT, the copyright follows the ownership. That is because the concept of NFT is completely new to law. It might take time before the laws are changed to align the NFT ownership with copyright ownership.By and large, however, NFTs are legal around the world. They are considered just like other forms of art. They don’t face the same issues that cryptocurrencies face.NFTs in video gaming and metaverseOne of the most promising applications of the NFT concept is in the gaming industry. Gamers are already exposed to the idea of owning valuable digital assets in the form of skins, weapons, virtual real estate and other items.Some of these gaming assets are priced high based on how rare they are. These assets can easily be transferred onto the blockchain, which makes their existence independent of the gaming platform and secures their rarity and makes it easy to prove it.The rise of metaverse is expanding the virtual world’s idea and merging it with the real world. The assets in the virtual world can have more stability if they exist on the blockchain as NFTs.The source of NFT valueIf you are new to NFTs, you likely have the following questions; where does the value of NFTs come from? How much is my NFT worth? Why are people buying NFTs? Why are NFTs so expensive? Why are some NFTs priced so high?The value of NFTs is based on the following:SpeculationMost NFTs are priced high simply because someone offered to pay high, hoping they will sell it at an even higher price.This speculation is driven by the hype around the concept of NFTs and the particular NFT you are interested in.AttractivenessSome NFTs are priced high because they are interesting to look at or listen to, just as is the case with physical art and music.SentimentalismSome NFTs are found attractive because of the emotional effect on those who look at them or listen to them. For example, big sports moments caught on camera.UtilitySome NFTs are valuable because they perform certain functions. For example, an NFT with a land title is valuable because it represents a piece of land in the real world. An NFT ticket is valuable because it represents the entry fee and manages attendance.Rarity/scarcitySome NFTs are valuable because they are rare. For example, if a musician produced an album and sold it as a single copy, it would be more expensive than an album released with a limited edition or one with no limit at all.Are NFTs a good investment?How do you make money with NFT?The ideal reason for acquiring an NFT shouldn’t be as an investment, but as a piece of art or utility digital asset you like or need, just as is the case with traditional art like paintings and sculptures.With that stated, many people are buying NFTs as a form of investment.Whether an NFT is a good investment depends on whether you can sell it at the same price you bought it or higher.The factors that affect the investment quality of an NFT include:The artistNFTs by renowned artists are more likely to get buyers later and even increase in value than those by little known creatives.The utility valueIf an NFT is designed to perform a critical function, such as being a title for real estate or a weapon in a popular video game, it is likely to get a buyer when you decide to sell it later.The hype around the NFTWhen everyone thinks NFT is the future, the assets can see their prices rise. Also, if a creator of an NFT has a great marketing strategy, then it is likely to bring at least those who acquire it returns.NFT Impact the environmentWhat makes some NFTs harmful to the environment and others not?One of the major concerns about NFTs is that they contribute a lot to the emission of greenhouse gases.This is true, but not entirely. It all depends on the blockchain on which the NFT is minted. It depends on the consensus mechanism the blockchain on which the NFT exists uses.Ethereum is the only NFT blockchain that uses the energy-intensive proof of work consensus mechanism. However, it is transitioning to proof of stake, a consensus mechanism that consumes a negligible amount of energy.All the other NFT blockchains are designed to use consensus mechanisms that consume negligible energy.Why NFTs are the future.NFTs offer numerous opportunities, especially to artists.It is now possible for artists to sell their work directly to a global market. They do not have to go through intermediaries who take a significant chunk of the price paid by the end consumer.To illustrate this, the rapper Haleek Maul, has been reported to have made over US$226,800 in a year by selling his music as NFTs on Catalog, a marketplace. In the same period, he earned $178 on Spotify.Check out our new platform 👉 https://thecapital.io/https://twitter.com/thecapital_iohttps://medium.com/media/3b6b127891c5c8711ad105e61d6cc81f/hrefA Comprehensive Introduction to NFTs was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.