What is NFTs and why are they worth the money paid for it, or is it just based on the hype?
Let’s find out.
This year, Non-fungible tokens (NFTs) seem to have exploded out of the bloom.
Although, some experts see NFTs as a failure.
These digital assets known as NFTs are selling like 17th-century exotic Italian wine for millions of dollars.
Others believe the NFTs market is here to stay, and that they will change the investment method forever.
What are NFTs?
NFT are digital assets that represent real-world objects like art, in-game items, music, and videos.
You can buy and sell NFTs online, with cryptocurrency
NFTs has the same encoded nature as many Cryptocurrencies.
The NFT Market has been around 2014.
Because they are now gaining wide acceptance and popularity, NFTs are now becoming an increasingly popular way to buy and sell your digital asset
NFTs are also one of a kind, and one of a very limited run that has unique identifying codes.
The iconic video clips from NBA games or versions of digital art floating around on Instagram that is securitized.
Many NFTs, have been known as digital creations that already existed in some from elsewhere in the world.
You may now want to ask why are people willing to spend millions on something or a piece of artwork they could easily screenshot or download?
Can anyone have access to view the individual image or even the entire collage of images online for free if they choose to?
The reason is that an NFT allows the buyer to own the original item.
Apart from owning the original item, it contains a built-in authentication, which automatically shows as proof of ownership.
All collectors mostly value those “digital bragging rights” more than the item itself.
Is Cryptocurrency Different from NFTs?
NFT is short for non-fungible token.
NFTs are built with the same programming language as cryptocurrency.
Just like Bitcoin or Ethereum as we popularly know, but that’s the only similarity they possess with cryptocurrency.
Here is a distinct explanation.
Cryptocurrency is fungible because it can be traded or exchanged for another.
One dollar will always be worth another dollar, the same as one Bitcoin is always equal to another Bitcoin.
They are equal in value.
The fungibility of cryptocurrencies makes them a trusted means of carrying out transactions on the blockchain.
NFTs on the other hand are different.
Every NFT created is designed to have a digital signature.
NFTs are Non-Fungible because it is impossible to be exchanged for another like Cryptocurrencies.
For instance, one art piece is not equal to a short video clip simply because they are both considered as NFTs.
The Art piece is not even necessarily equal to another Art piece.
How does an NFT work?
You may probably be familiar with blockchain as the process that makes cryptocurrencies possible.
NFTs exist on a blockchain just like cryptocurrencies, which is a distributed public ledger that shows records of transactions.
The Ethereum blockchain is the most popular blockchain for the issuance of NFTs.
But other blockchains with a better User experience when it comes to transaction fees are seeing an increase in usage.
Examples of NFT that are tangible and intangible items:
- Art
- Videos and sports highlights
- Collectibles
- Music
- Designer sneakers
- GIFs
- Virtual avatars and video game skins
Amazingly, even tweets count.
Jack Dorsey, Twitter co-founder earlier in the year, sold his first-ever tweet as an NFT for more than $2.9 million.
NFTs are essentially like physical collector’s items, just that they are only digital.
So the idea is, instead of getting an actual oil painting to hang on the wall in your house, the buyer gets a digital file of it instead.
Notably, NFTs can have only one owner at a time.
Buyers also get exclusive ownership rights of your work.
Essentially, NFTs’ unique data makes it easier to verify ownership and transfer tokens between owners.
The owner or creator is at liberty to also store specific information inside them.
You can include your signature in the NFT’s metadata as an artist.
What can I Use NFTs for?
Blockchain technology and NFTs give content creators and artists the unique opportunity to monetize their craft.
For instance, artists can no longer have to rely solely on galleries or exhibitions to sell their art.
Instead, they have the opportunity to show the world, not just the region their art, and also sell it directly to the consumer as an NFT, which is even more profitable for them.
Artists are allowed to place royalties on artwork to receive a percentage of sales anytime the art is being sold to a new owner.
This feature is very attractive as artists generally do not usually receive future proceeds after their art is first sold in galleries.
Do you know Art isn’t the only way to make money with NFTs?
Awesome brands like Taco Bell and Charmin have auctioned themed NFT art so they could raise funds for charity.
Taco Bell’s NFT art sold out in minutes, having the highest bids for 1.5 wrapped ether (WETH) which is equal to $3,723.83 as at time that Art work was sold.
Charmin “NFTP” (non-fungible toilet paper) dubbed its offering
The Nyan Cat, a 2011 era GIF showing a cat with a pop tattooed body, was sold for close to $600,000 in February.
The NBA Top Shot generated more than $500 million in sales as of late March.
A single LeBron James NFT highlight sold more than $200,000 and many more NFTs sell examples.
Celebrities like Snoop Dogg, Floyd Mayweather, Lindsay Lohan, and Gary Vaynerchuk are jumping on the NFT train, unleashing unique artwork, memories, and moments as securitized NFTs.
How to buy NFTs
Considering on starting your own NFT collection, there’s a need for you to acquire some key items:
1. You will need to get a digital wallet that will allow you to store NFTs and cryptocurrencies.
2. There will also be a need for you to purchase some cryptocurrency, like Ethereum or Smart chain Bnb, this depends on what cryptocurrencies your NFT provider accepts.
Also keep paying fees in mind as you are researching options, especially on the NFTs that were minted in the Ethereum Blockchain
Popular NFT marketplace you should know
There’s no shortage of NFT sites you can shop from once your wallet set up is complete and funded. These are the largest NFT marketplaces you can find:
- Rarible: Rarible is considered as a democratic, open marketplace that gives artists and creators access to issue and sell their NFTs.
The tokens issued on the platform are known as RARI which enables holders to weigh in on features like community rules as well as fees. - OpenSea.io: A peer-to-peer platform bills itself a purveyor of “rare digital items and collectibles just like Rarible.”
All you need to do to get started is to create an account to browse NFT collections.
To discover new artists, you have access to also sort pieces by sales volume. - Foundation: On this platform, artists must receive an invitation or upvotes from other fellow creators to post their art.
Because of the cost of entry and community exclusivity, artists must also purchase “gas” to enable them to mint NFTs. T
his implies that it may boast a higher caliber of artwork. Nyan Cat creator Chris Torres for example sold the NFT on the Foundation platform.
This may also mean higher prices which is not necessarily a bad motive for artists and collectors who are seeking to capitalize, assuming the demand for NFTs increases over time or remains at current levels.
These platforms as well as many others are host to numerous NFT creators and collectors.
It is advisable to do your research carefully before attempting to buy.
Quite a number of artists have fallen victim to impersonators who have sold their work without these artists giving them permission.
Furthermore, you should note that the verification process for creators of NFT listings is not consistent across platforms.
Some verification processes are more stringent than others depending on the platform.
For example, OpenSea and Rarible do not require owner verification for NFT listings.
When you are shopping or buying NFTs, keep in mind the old adage “caveat emptor” (let the buyer beware).
Wrapping It Up
Investing in NFTs is solely a personal decision.
If you have enough money to spare, it may be a wise choice of investment, especially if a piece of Artwork or other NFTs holds meaning for you.
An NFT’s value is entirely based on what someone else is willing to pay for it, always keep it in mind.
It is only demand that will drive the price rather than economic, technical, or fundamental indicators, which have influence typically on stock prices and generally form the basis for investor demand at least.
This means that an NFT may resale for less or more than the price you paid for it.
Be guided when considering buying an NFTs, you either may or may not be able to resell it at all if no one wants it.
Just like when you decide to sell stocks at a profit, NFTs are also subject to capital gains taxes.
This means you need to check in with a tax professional as you are considering adding NFTs to your portfolio.
Do your own research, approach NFTs just like you would approach any investment.
Understand the risks involved including the fact that you may lose all your money.
If you decide to take that bold step to sell or acquire one, proceed with a healthy dose of caution.
