What is an NFT?

NFTs, or Non-Fungible Tokens (also known as "Nifties"), are digital assets tracked on a blockchain like any other token. The term "non-fungible" means that each token is unique. Practically speaking, an NFT and its trading history can be tracked on the blockchain. Unlike Bitcoin, where each BTC is valued the same as any other BTC, NFTs can have different values depending on their attributes, and depending on their unique demand from the market.

NFTs come in all shapes and sizes, but all of them have two key linked properties:

1. They are linked to actual assets - either physical or digital. Effectively, NFTs express the immutable right of possession. This right is cryptographically fixed in a blockchain as an advanced digital version of a 'certificate of ownership'.
2. They are tracked on the blockchain so that ownership history is always able to be verified. This means that not only digital items can be tracked, but physical items can also be tokenized and represented as an NFT as well.

This opens a wide range of use cases for NFTs:

Art: Both digital and physical art can be tokenized, traded, and tracked via the Blockchain. In a famous example, in March 2021 a JPG image produced by digital artist "Beeple" fetched $69 million (lol) in an auction run by famous auction house Christie's. Other high-profile artists, musicians, and creators are creating new art, as well as tokenizing their historical catalogs.

Plane Tickets: Yes, plane tickets (in fact tickets of all kinds) can be issued, tracked, transferred, and even bought and sold, possibly with a percentage of the ticket price going back to the original issuers.

Baseball Cards: Cards and other collectibles, including limited edition items, can be registered, traded and collected.

Real-world physical assets: Real-world valuable assets like diamonds or real estate can also be tokenized, and then traded! As long as there is clear provenance (a known source, or history of ownership) for the physical items, they can easily be traded on a global market, once they are registered as NFTs.

As for the future of NFTs, there are some incredible possibilities for how Smart Contracts will increase the utility of NFTs even more by supplementing them with real-world, dynamic data. Just consider the possibilities for NFTs beyond their usual function (serving as a record of the chain of custody and ownership): GPS location data can show the physical location of an NFT-tokenized object; real or virtual sports outcomes can offer additional token "rewards" to NFT owners; economic data could be used to automatically modify interest rates used for NFT-tokenized mortgage agreements. A dynamic NFT becomes a trackable asset that can be used for various contractual relationships besides just collectible trading.

How are NFTs different from Cryptocurrency?

Most NFTs live on the Ethereum blockchain, although some other blockchains offer NFT support. Unlike cryptocurrency coins like Ether, which are interchangeable with other coins of the same type (fungible), NFTs are unique (just like snowflakes)! So what gets tracked on the blockchain for any given NFT captures its unique properties, as well as its trading history.

How do I create an NFT?

To create an NFT, first, choose a blockchain network - Ethereum has the widest range of NFTs today, but some other blockchains that support NFTs include Finance Smart Chain, Flow by Dapper Labs, Tron, Polkadot, Tezos, Cosmos, and WAX, to name a few. Your choice of NFT blockchain network will determine which exchanges and crypto wallets can interoperate with your NFT.

If you choose to use Ethereum for your NFT, you will need a crypto wallet that supports the ERC-721 standard. Examples of these are MetaMask, Trust Wallet, Coinbase Wallet, or Rainbow. In addition, you will need some funds in Ether (ETH). All Ethereum transactions will cost a transaction processing fee (also called a "gas" fee).

The platforms that enable you to create NFTs include OpenSea, Rarible, and Mintable. To use these NFT platforms, connect your crypto wallet to the platform, click the "Create" button, upload your digital art or other NFT format, and accept the contract terms and details. Once your NFT is signed with your wallet, your NFT is ready to go and can be listed on the blockchain.

How do I buy an NFT?

There are lots of sources to buy NFTs, and there are more coming online every day. The most popular platforms include:

• OpenSea
• Nifty Gateway
• Rarible
• SuperRare
• Foundation

Here's a livestream of the first-ever authenticated Banksy art burning:

How do I secure, protect and backup my NFTs?

NFTs are registered on the blockchain and linked to your wallet address, so backing up your NFTs includes the same process as backing up a wallet's seed phrase.

If you own the digital art source file itself (regardless of its format), you can also back this up in a Digital Vault. This ensures that your copy of the art is also protected from being accidentally deleted or lost. This is especially important for NFT art that may happen to pass through many hands (e.g., auction houses), and is also important for insurance purposes.

Read on for step by step instructions on how to protect your NFTs and original artwork using Vault12.

Backing Up from an NFT Platform

Once a creator or developer has created an asset it needs to be "minted" on an NFT platform, this is the process of registering the asset on the blockchain and activating the smart contract that governs the NFT (e.g., these terms can include what percentage of future sales are credited back to the creator). Once minted, the NFT can be made available for purchase. Buyers will purchase from the NFT platform directly, using their crypto wallet.

NFT Platforms support wallets in different ways, some wallets can display NFT records, others cannot (we're still in early days of this technology).

In this example, we will use Opensea.io (a leading NFT platform), and the Metamask mobile wallet:

With NFTs (as with standard cryptocurrency) the wallet seed phrase becomes the most important piece of information to back up and secure.

Here's how to reveal the seed phrase in our Metamask Wallet so that it can be backed up:

Backing up your Crypto Wallet

Once you have access to your seed phrase, you can back it up with a Digital Vault from Vault12.

In the following sections, we will demonstrate how owners of NFTs, as well as creators, can utilize a Digital Vault as the mechanism to store seed phrases, as well as secure the original asset.

Owners: Using a Digital Vault to back up NFTs

A Digital Vault has the advantage of being focused on a singular purpose: securely storing digital assets for long term use. While there are many types of 'digital vaults' available for cryptocurrency storage, for NFTs it is better to use something that is independent of any one blockchain and can store any type of digital asset.

Here we will use Vault12 to demonstrate how an NFT can be backed up and how digital assets can also be stored in a Vault:

Step 1: Create and configure a Digital Vault

Step 2: Add your NFT Wallet Seed phrase. This can be done in multiple ways: (a) Enter a Note in the format of a seed phrase, or (b) enter a Note in free format text.

See the following steps below:

Open your Vault and click on "Add an Asset" (via the File icon).

Unlocking NFT assets from a Digital Vault

When you need to access the seed phrase associated with your NFT wallet, just select the asset in your Vault and press "Unlock Asset."

Creators: Using a Digital Vault to back up NFTs and original artwork

For creators, in addition to backing up wallets that contain NFT collections, there's also the option to back up the original artwork itself - this could be the form of an image, video or some other file format.

To add artwork to your Vault, simply tap the "Add Asset" option in your Vault (via the File icon).

Unlock and access Creator assets

To gain access to your asset or artwork, select the asset in your Vault and tap the "Unlock Asset" option:

The NFT market is new and constantly evolving: there have already been hacking attempts on several platforms where owners and creators ended up having their accounts drained. Please make sure that you are using well-known and highly trusted wallets to associate with your collection of NFTs. Follow the guidelines laid out in this article to make sure you are able to robustly secure and back up your NFTs - whether you bought them or if you created them yourself.