NFTs Trading Explained: What Are NFTs & How Do You Trade Them?

Despite the drops in NFT trading activity in 2024, overall, NFTs have repeatedly succeeded in making the headlines over the past couple of years. For example. in 2022 alone, trading in the NFT market spiked by a whopping 21000% and hit $17.6 billion. 

Additionally, many renowned brands, like Nike, Adidas, and Disney, have embraced NFTs, expressed interest in them, and made serious moves to invest in this sphere.  

It is, therefore, highly likely that you’ve heard of or read about the world of NFTs one way or another, but did you ever actually delve deeper into what they are and how you can gain exposure to them? Let’s take a closer look:

What Are NFTs?

NFTs or Non-Fungible Tokens are cryptographic assets that digitize real-world objects. In other words, NFTs take tangible and non-tangible objects that are often encountered in real life, like real estate, music, GIFs, collectables, avatars, designer sneakers, clothes, art, in-game videos, and even tweets, and turn them into digital assets; the possibilities are endless. The digital assets are then usually traded online and are often purchased and sold using Cryptocurrencies.

NFT Minting: How Do NFTs Function?

NFT minting involves creating a unique digital asset on a blockchain and turning digital files into Non-Fungible Tokens (NFTs). 

This process ensures authenticity and ownership by recording the file in a secure, tamper-proof ledger. 

Once minted, NFTs can be sold, traded, or retained, with their uniqueness and value guaranteed by the blockchain.

NFTs and Cryptocurrencies: What’s the Difference 

Meanwhile, NFTs, like Cryptocurrency, are supported by blockchain technology and are decentralized, but the two have no further similarities. 

While Cryptocurrencies are fungible and can be exchanged for one another, NFTs, as their name suggests, are not. This means that while you can replace one Bitcoin with another as it can retain the same value, NFTs cannot be traded for one another or duplicated. This is because each NFT has a personalized and special digital signature that makes it hard to replicate. The digital signature is essentially proof of the authenticity of the NFT as each NFT creator can sign their NFT with their own special signature and authorize it. For example, if someone intends to sell a copy of an NFT, it is highly unlikely that it will be sold because the NFT’s original owner did not authorize the copy. Unauthorized copies do not have the creator’s digital signature, and the digital signature is what shows its authenticity. 

Nonetheless, NFT files can be copied and distributed, which might make the prospect of them being “non-fungible” sound like a paradox. Despite that, they actually still retain their individuality. The reason for this is that, even though they can be copied, they cannot be duplicated which means that they get to obtain their originality - This is the trait that made them popular to begin with.  

Indeed, this might seem a bit confusing, so to better understand what might seem like a contradictory idea, one can look at NFTs like famous art pieces or collectables. For example, while there are multiple copies of Leonardo Da Vinci’s famous painting “The Mona Lisa,” the original and only painting (as far as we know) is presented exclusively at the Louvre. This element of exclusivity and non-fungibility is translatable to NFTs and is arguably where they derive their value from. Furthermore,  NFTs are also considered extensible, which means that you can merge one NFT with the other to create a third kind of NFTs.

NFT History: When Were NFTs Created?

To truly understand the history of NFTs, it is important to familiarise oneself with the history of blockchain technology. This is important because NFTs are supported by blockchain technology. 

• 2008: Satoshi Nakamoto, the inventor(s) of Bitcoin, launched blockchain technology to the world.

• 2014: Quantum, the first and the only NFT to have been created on the Bitcoin network, emerged. It was launched by Kevin McCoy. This NFT has supposedly “revolutionized” art ownership and reshaped the art world.

• 2017: This year was a key one for the NFT market. Many unique NFTs built on the Ethereum blockchain emerged, putting NFTs on the public's radar.

• 2021: A surge in NFT trading materialized with the launch of projects like CryptoKitties and CryptoPunks, along with the advancement of the metaverse. 

• 2024: Whereas, overall, the NFT market had a less-than-optimistic year in 2024 as trading activity experienced a notable downturn, on October 11, it was announced that Solana's on-chain NFT trading revenue was $21,300 accounting for 32% of total NFT trading revenue, surpassing other blockchain networks in NFT income.

What’s Next?

While NFTs certainly made a buzz in 2021, the NFT marketplace has been experiencing a downturn in the past couple of years. 

Nonetheless, while this niche market is experiencing a downtrend, some experts believe that the future for NFTs is bright and is expected to increase to $80 billion by 2025.

Moreover, traders may also be eager to see how Donald Trump’s re-election could influence the NFT market, especially since he sells and buys NFTs. (Source: EuroNews)

Traders and investors alike might have to wait and see for themselves what the future holds for this burgeoning space.

Trade NFT-related products like Cryptocurrencies with Plus500’s Cryptocurrency Futures contracts.

NFTs FAQs:

What is an NFT?

An NFT (Non-Fungible Token) is a unique digital asset that represents ownership of a specific item or piece of content on a blockchain.

What is the first NFT?

The first NFT is widely considered to be "Quantum" by Kevin McCoy, created in 2014 on the Namecoin blockchain.

What is the difference between NFTs and cryptocurrencies?

NFTs are unique, non-interchangeable digital assets representing ownership, while cryptocurrencies are fungible digital currencies used for transactions and as a store of value.