So you’re interested in buying your first NFT. But what are you actually buying and what decides the value of that particular NFT?
So what am I actually buying?
As explained, each NFT (referred to as tokens) are a unique digital asset. These digital assets can come in the form of image JPEGs, video files, music files, domain names and more. For the purchases of this educational resource, however, we’ll focus on NFT tokens as JPEG image files to keep things simple.
So you’re about to buy your first NFT JPEG. But are you really?
The simple answer is yes, you’re simply buying a JPEG image for potentially a lot of money. But there’s much more involved.
The JPEG image is just a representation of the non-fungible asset you are acquiring. But anyone can just right click and save that JPEG, right? So why spend money on it?
Great question, yes this is 100% correct, you could do that. However, by saving an NFT image to your computer, gives you no intellectual property or evidence of ownership. You’ve basically just saved an image from a website to your computer. You have no way of proving ownership.
By purchasing an NFT via the blockchain, digital proof of ownership is transferred to you, the wallet owner. You now have publicly accessible ownership proof that you own this said JPEG image. So, proof of ownership is one of the major components of why NFTs have value, alongside the rarity of an item, the brand/artist involved, and the price someone is willing to pay.
Think of owning an NFT on a blockchain, the same as holding a contract for a house you just purchased. In this example, the house itself represents a unique, non-fungible asset (the JPEG). And the contract you signed to buy that house (the proof of ownership).
This proof of ownership now lives on the blockchain, where it’s accessible to anyone with a computer and an internet connection.