A NFT (non-fungible token) is data added to a file that creates a unique signature. It can be an image file, a song, a tweet, a text posted on a website, a physical item, and various other digital formats.

This basically means that someone can own a digital file (and that it’s marked with code to differentiate it from any digital replicas).

How do NFTs work?

At a very high level, most NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency, like bitcoin or dogecoin, but its blockchain also supports these NFTs, which store extra information that makes them work differently from, say, an ETH coin. It is worth noting that other blockchains can implement their own versions of NFTs. 

Although that may be far from simple for the uninitiated to understand, the payoff has been huge for many artists, musicians, influencers and the like, with investors spending top dollar to own NFT versions of digital images. For example, Jack Dorsey’s first tweet sold for $2.9 million, a video clip of a LeBron James slam dunk sold for over $200,000 and a decade-old “Nyan Cat” GIF went for $600,000.

How to buy NFTs?

Essentially, any digital image can be purchased as an NFT. But there are a few things to consider when buying one, especially if you’re a newbie. You’ll need to decide what marketplace to buy from, what type of digital wallet is required to store it and what kind of cryptocurrency you’ll need to complete the sale.

Lear more on NFT Marketplace

What Are NFTs Used For?

Blockchain technology and NFTs afford artists and content creators a unique opportunity to monetize their wares. For example, artists no longer have to rely on galleries or auction houses to sell their art. Instead, the artist can sell it directly to the consumer as an NFT, which also lets them keep more of the profits. In addition, artists can program in royalties so they’ll receive a percentage of sales whenever their art is sold to a new owner. This is an attractive feature as artists generally do not receive future proceeds after their art is first sold.

What’s stopping people copying the digital art?

Nothing. Millions of people have seen Beeple’s art that sold for $69m and the image has been copied and shared countless times.

In many cases, the artist even retains the copyright ownership of their work, so they can continue to produce and sell copies.

But the buyer of the NFT owns a “token” that proves they own the “original” work.

How to create your own NFT?

How to make and sell an NFT is a question on many artists’ minds at the moment.

Pick your digital file

The first thing you have to do is to pick the artwork. Non-fungible tokens can represent any digital file. You can make an NFT of a digital painting, a text, a piece of music, a video. Literally, anything that can be reproduced as a multimedia file. 

Choose a NFT marketplace

Now that you’ve got everything in place, you need to pick a marketplace where you will physically (virtually?) create and then list your NFT. 

The most popular ones are Mintable, Rarible or OpenSea.

Create the NFT

Once you’ve connected the ETH Wallet to OpenSea, you can go on and create your first NFT. Click on Create in the top menu, and create a collection.

The Basics for a New User As a new user, diving into Bitcoin doesn’t require mastering the technical nuances. Upon installing a Bitcoin wallet on your device, it generates an initial Bitcoin address, with the option to create more as needed. You can share your addresses with friends for payments, much like email, with the main difference being Bitcoin addresses are ideally single-use.

Key Takeaways

• Since its 2009 inception, Bitcoin has become the most significant cryptocurrency by market cap.
• Distinct from fiat currency, Bitcoin operates on a decentralized blockchain ledger.
• Bitcoin’s valuation has seen dramatic fluctuations, peaking at about $20,000 per coin in 2017, then dropping below half that value in subsequent years.
• Pioneering the crypto space, Bitcoin paved the way for numerous other digital currencies.

Balances and the Blockchain The blockchain serves as a collective public ledger, foundational to Bitcoin’s network, recording all confirmed transactions. This ledger enables wallets to verify spendable balances and confirm new transactions, ensuring ownership and security through cryptographic enforcement of the blockchain’s integrity and sequence.

Transactions and Private Keys A transaction represents a value transfer between Bitcoin wallets, recorded in the blockchain. Wallets secure a confidential data piece, known as a private key or seed, to sign transactions. This signature verifies the transaction’s origin and prevents post-issue alterations. Transactions are broadcast to the network and generally start confirmation within 10-20 minutes via mining.

Processing through Mining Mining is a consensus mechanism that validates transactions for inclusion in the blockchain, maintaining chronological order, network neutrality, and system state agreement among computers. Transactions must comply with stringent cryptographic standards for network verification, ensuring the immutability of preceding blocks and the chain’s integrity. Mining essentially stages a competitive selection process, deterring consecutive block additions by any single participant or group, thereby preventing blockchain manipulation or transaction reversals.

Steps to Buy Bitcoin

1. Digital Wallet

In order to conduct transactions on the bitcoin network, participants need to run a program called a “wallet.” Bitcoins are not technically “coins” in the traditional sense, so it only seems right that a bitcoin wallet would not actually be a wallet. Your Bitcoin wallet that you will be assigned by an app or service provider is essentially an alpha-numeric string of random letters and numbers — but you can think of this Bitcoin “address” as your “bank account number.”

Bitcoin balances are maintained using public and private “keys,” which are the names for these long strings of numbers and letters linked through the mathematical encryption algorithm used to create them.

The public key represents your “bank account number”, and is the location where transactions are deposited to and withdrawn from. This is also the key that appears on the blockchain ledger as a user’s digital signature, not unlike a username on a social media newsfeed. The private key is the password required to buy, sell, and trade the bitcoin in a wallet. A private key should be a guarded secret and only used to authorize bitcoin transmissions. Some users protect their private keys by encrypting a wallet with a strong password and, in some cases, by choosing the cold storage option; that is, storing the wallet offline.

Note that there are several different ways to maintain a Bitcoin wallet and the private keys associated with them. A hosted wallet service, such as Coinbase or Blockchain.info, will provide you with web or app access and act as custodian of your private keys. If you lose your account log-in information or password, you can use that service to reset your password and get back in. However, with such a wallet you do not actually control your private keys, and may not even be able to access them in some cases. If you download a standalone wallet on your PC or mobile device, you will fully control your private keys, but if you forget your password or lose your private keys, your Bitcoins are lost forever. Thus, there is a trade-off between privacy & security and being able to recover your coins if you are forgetful.

A bitcoin wallet should not be used for long-term storage. Bitcoin or its key should be stored in a secure wallet, such as one that uses a multi-signature facility for security.

2. Personal Documents

The U.S. Securities and Exchange Commission requires users to verify their identities when registering for digital wallets as part of its Anti-Money Laundering Policy. In order to buy and sell bitcoin, you will need to verify your identity using several personal documents including your driver’s license and Social Security number (SSN).

3. Secure Internet Connection

If you choose to trade bitcoin online, use discretion about when and where you access your digital wallet. Trading bitcoin on an insecure or public wifi network is not recommended and may make you more susceptible to attacks from hackers.

4. Bank Account, Debit Card, or Credit Card

Once you have a bitcoin wallet, you can use a traditional payment method such as a credit card, bank transfer (ACH), or debit card to buy bitcoins on a bitcoin exchange.⁷ The bitcoins are then transferred to your wallet. The availability of the above payment methods is subject to the area of jurisdiction and exchange chosen. Below is a screenshot of the bitcoin interface on Coinbase showing how to buy and sell bitcoin and also Bitcoin Cash, Ethereum, and Litecoin​, which are other popular virtual currencies. The user clicks the “Buy” tab to buy digital currency and the “Sell” tab to sell digital currency. You select which currency you are buying or selling and which payment method (your bank account or credit card) you want to use.

Depending upon the exchange, there may be benefits and disadvantages to paying with cash, credit or debit card, or bank account transfer. For instance, while credit and debit cards are among the most user-friendly methods of payment, they tend to require identification and may also impose higher fees than other methods. Bank transfers, on the other hand, typically have low fees, but they may take longer than other payment methods.⁸

5. Bitcoin Exchange

After you’ve set up your wallet with a payment method, you’ll need a place to actually buy bitcoin. Users can buy bitcoin and other cryptocurrencies from online marketplaces called “exchanges,” similar to the platforms that traders use to buy stock. Exchanges connect you directly to the bitcoin marketplace, where you can exchange traditional currencies for bitcoin.⁷

Remember that the bitcoin exchange and the bitcoin wallet are not the same things. Bitcoin exchanges are similar to foreign exchange markets. The exchanges are digital platforms where Bitcoin is exchanged for fiat currency—for example, bitcoin (BTC) for U.S. dollars (USD). While exchanges offer wallet capabilities to users, it is not their primary business. Since wallets must be secure, exchanges do not encourage storing large amounts of bitcoin or for long periods. Therefore, it is advisable to transfer your bitcoins to a secure wallet. Because security must be your top priority when choosing a bitcoin wallet, opt for one with a multi-signature facility.

There are many well-established exchanges that provide one-stop solutions with high security standards and reporting, but due diligence should be exercised when choosing a bitcoin exchange or wallet. Besides Coinbase, other popular exchanges include Coinmama, CEX.IO and Gemini.

How to Buy Bitcoin

Alternate Ways of Buying Bitcoin

While an exchange like Coinbase remains one of the most popular ways of purchasing bitcoin, it is not the only method. Below are some additional processes bitcoin owners utilize.

Bitcoin ATMs

Bitcoin ATMs act like in-person bitcoin exchanges. Individuals can insert cash into the machine and use it to purchase bitcoin that is then transferred to a secure digital wallet. Bitcoin ATMs have become increasingly popular in recent years; Coin ATM Radar can help to track down the closest machines.

P2P Exchanges

Unlike decentralized exchanges, which match up buyers and sellers anonymously and facilitate all aspects of the transaction, there are some peer-to-peer (P2P) exchange services which provide a more direct connection between users.Local Bitcoins is an example of such an exchange. After creating an account, users can post requests to buy or sell bitcoin, including information about payment methods and price. Users then browse through listings of buy and sell offers, choosing those trade partners with whom they wish to transact.

Local Bitcoins facilitates some of the aspects of the trade. While P2P exchanges do not offer the same anonymity as decentralized exchanges, they allow users the opportunity to shop around for the best deal. Many of these exchanges also provide ratings systems so that users have a way to evaluate potential trade partners before transacting.

No one knows who invented bitcoin, or at least not conclusively. Satoshi Nakamoto is the name associated with the person or group of people who released the original bitcoin white paper in 2008 and worked on the original bitcoin software that was released in 2009. In the years since that time, many individuals have either claimed to be or have been suggested as the real-life people behind the pseudonym, but as of January 2021, the true identity (or identities) behind Satoshi remains obscured.

Although it is tempting to believe the media’s spin that Satoshi Nakamoto is a solitary, quixotic genius who created Bitcoin out of thin air, such innovations do not typically happen in a vacuum. All major scientific discoveries, no matter how original-seeming, were built on previously existing research.

There are precursors to bitcoin: Adam Back’s Hashcash, invented in 1997, and subsequently Wei Dai’s b-money, Nick Szabo’s bit gold, and Hal Finney’s Reusable Proof of Work. The bitcoin whitepaper itself cites Hashcash and b-money, as well as various other works spanning several research fields. Perhaps unsurprisingly, many of the individuals behind the other projects named above have been speculated to have also had a part in creating bitcoin.

There are a few possible motivations for bitcoin’s inventor deciding to keep their identity secret. One is privacy: As bitcoin has gained in popularity—becoming something of a worldwide phenomenon—Satoshi Nakamoto would likely garner a lot of attention from the media and from governments.

Another reason could be the potential for bitcoin to cause a major disruption in the current banking and monetary systems. If bitcoin were to gain mass adoption, the system could surpass nations’ sovereign fiat currencies. This threat to existing currency could motivate governments to want to take legal action against bitcoin’s creator.

The other reason is safety. Looking at 2009 alone, 32,489 blocks were mined; at the reward rate of 50 bitcoin per block, the total payout in 2009 was 1,624,500 bitcoin. One may conclude that only Satoshi and perhaps a few other people were mining through 2009 and that they possess a majority of that stash of bitcoin.

Someone in possession of that much bitcoin could become a target of criminals, especially since bitcoins are less like stocks and more like cash, where the private keys needed to authorize spending could be printed out and literally kept under a mattress. While it’s likely the inventor of bitcoin would take precautions to make any extortion-induced transfers traceable, remaining anonymous is a good way for Satoshi to limit exposure.