HOW DOES NFT WORKS !!!

How does an NFT work?

NFTs are created, or “minted" on the ERC-721 protocol on the Ethereum blockchain, which makes them unique.

When someone purchases an NFT, they have exclusive ownership rights to it, as NFTs can only have one owner at any given time. This ownership is managed through a unique ID and metadata, which cannot be replicated by any other token. 

NFTs are minted through what’s known as a smart contract. These smart contracts allocate ownership and control the transferability of non-fungible tokens. When a person mints an NFT, they implement code stored in smart contracts that follow different standards, such as ERC-721. This data is then added to the blockchain through which the NFT is managed.

Additionally, the original creator or owner can store specific information within an NFT’s metadata. An artist, for example, might also include their signature within their artwork’s NFT as a method of signing their work.

When someone creates or mints an NFT, the token goes through the following steps:

- A new block is created

- Information is validated

- Information is recorded into the blockchain managing the non-fungible token

NFTs also have special qualities, which make them unique from other digital assets:

- Once minted, a non-fungible token is assigned a unique identifier that is directly linked to a single Ethereum address

- They cannot be directly interchanged with other tokens. This makes them different from cryptocurrency, for example, where 1 ETH is equal to 1 ETH

- Each NFT contains an owner, which is easy to verify

- Because they live on Ethereum, they can be purchased and sold on any Ethereum-based NFT marketplace

As an owner of an NFT:

- The ownership of an NFT’s unique token is transferred to your wallet via your public address

- This unique token proves your copy of the digital file is the original, while your private key is proof of ownership of the original

- The content creator's public key acts as the certificate of authenticity for your NFT’s digital asset

- No one can alter or tamper with your NFT in any way

- You can choose to sell or hold onto your NFT for as long as you like

As a creator of an NFT:

- You can sell your NFT on any NFT marketplace or through peer-to-peer methods

- You earn royalties every time your NFT is sold

- You can easily prove you’re the creator through your NFT’s public creator key

- You determine how rare your NFT is either by creating only one version of it, numerous replicas of it, or multiple different variations of it, thus determining its worth

- Even if several thousand replicas of your asset exist, each NFT still has its own unique identifier and ownership

The scarcity, or rarity, of an NFT is an important element for the creator to decide. It is this scarcity that gives a non-fungible token its value.

A creator might want to mint just one version of their digital art, for example, so it remains a rare collectible piece. Alternatively, a creator might choose to mint several replicas of their digital art for circulation. Either way, each NFT would still have a unique identifier attributing it to only one owner. An NFT's scarcity is also public information.

Many marketplaces, such as Foundation, allow royalties to be programmed into NFTs, helping creators automatically earn a specified amount as their work is sold from owner to owner. Currently, this is a developing concept, as the process can be inaccurate and tricky to set up. Royalties carry great significance for NFT creators, however, allowing them to maximize their earning potential.