Everything You Need to Know About NFTs
If you’re an investment-minded or tech-savvy individual, you’ll probably have at least heard of the term “NFT” over the past year.
They’re all the rage, with communities forming around them and a lot of high-profile celebs who seemingly just can’t get enough.
However, this new emerging industry has a lot of people wondering what exactly NFTs are, and how they exist as a tradeable asset. So, what are NFTs?
NFT stands for Non-Fungible Token, and they are a digital asset that can exist in a variety of forms (most commonly art, videos, music, and in-game items).
As items that are recorded and based on blockchain technology, each NFT is completely unique and cannot be copied or subdivided in any manner.
Of course, the world of NFTs is a complex one, and in this article we’ll walk through the basics: How we can use them, trade them, and whether or not they’re worth all the fuss. Keep on reading to find out!
What does NFT mean?
As mentioned above, NFT stands for Non-Fungible Token.
Fungible means duplicatable. Therefore, non-fungible means that the thing in question is irreplaceable.
In plain(ish) language, a NFT is a piece of unique digital property that can be bought or sold online as an asset with either fiat currency or cryptocurrency.
Digital art, as you can imagine, is easily copied and downloaded and available to all. However, since NFTs are based on the blockchain, you can see who actually owns what NFT.
Therefore, ownership is really what you’re buying with the purchase of a NFT more so than accessibility (which remains free to everyone else on the internet).
The image that you have is exactly the same as the content everyone else can access, but the blockchain secures your singular ownership of it.
To date, the Ethereum blockchain remains the most popular for issuing NFTs. However, the Solana, Polygon and BNB Smart chain blockchains are also used to create NFTs.
In 2017, NFTs started to gain popularity among regular consumers. This was around the time when the first NFT collections were introduced on the Ethereum blockchain. Unlike previous blockchains, the Ethereum network made it much easier to trade and transfer ownership due to its built-in token creation, programming, storage, and trading capabilities through smart contracts. This allowed for easier onboarding and increased accessibility for interested parties.
CryptoPunks was one of the first Ethereum projects to gain traction, and it remains a significant part of early NFT history. This collection was launched by Larva Labs for free. Now CryptoPunks are trading for millions of dollars.
NFTs: PFP Collections and Emerging Communities
The range of content that can be classed as an NFT is pretty broad. It might be a piece of music, a GIF, videos, a drawing- or even a tweet!
William Shatner, an actor who has had a long and prosperous career over the past few decades, sold his personal memorabilia in the form of NFTs back in 2020. Shatner sold 125,000 units within only minutes!
Entire communities are emerging within the NFT world, such as Bored Apes Yacht Club, Invisible Friends, and Lazy Lions NFT
These PFP collections – PFP basically meaning Profile Picture – have become popular among high-profile users who in turn have increased the collections’ popularity.
To become a part of one of these communities, you simply have to set up a crypto wallet, purchase a unique avatar using Ether, and then store it in your wallet.
Exploring the Many Use Cases of NFTs
NFTs have become increasingly popular in recent years, and their use cases are developing rapidly.
NFT for digital art: Primary use cases for NFTs is the trading of digital art. NFTs allow artists to obtain proof of ownership and authenticity for their digital art, which has always been difficult to monetise.
NFT in gaming: NFTs are also used in the gaming industry to represent objects and assets in the game. Players can trade NFTs, providing a new revenue stream for game developers. It is also allows players to own assets from their favourite games.
NFT for collectibles: NFTs are also used to represent physical and digital collectibles, such as sports trading cards, rare sports shoes and limited edition items.
NFT in Music industry: NFTs are used in the music industry to sell music and related products, as well as to represent ownership of royalties and other rights.
NFT for real estate: NFTs are used to represent ownership of physical assets, such as real estate. This provides investors with a new way to buy and sell property and facilitate fractional ownership.
How can you buy NFTs?
NFTs are not just for the Jimmy Fallons and Paris Hiltons of the world; they are about inclusion. Anyone can get involved in creating, buying and trading NFTs!
First things first: To buy NFTs, you need to create a crypto-currency wallet. There are a multitude of wallet, the most famous are : TrustWallet, Coinbase Wallet, Metamask.
Although they are very secure, it is highly recommended to store your NFTs (even your cryptos!) on a hardware wallet such as Ledger or Trezor.
Once your wallet is set up, don’t forget to add some Ether on (or Sol, Matic, BNB depending on the blockchain you use) to pay for the gas. After that, you are ready to shop.
There are many reputable NFT Marketplace that give you access to a wide range of digital art and collectibles.
- Opensea.io
- Rarible
- Binance NFT Marketplace
- Nifty Gateway
- Looksrare
- Coinbase NFT
- Blur.io
What is the Most Expensive NFT Ever Sold?
The digital art piece by creator Pak titled ‘Merge’ sold for a whopping USD$91,806,519.
This is arguably the most expensive piece of art ever sold, though because it was sold in 266,445 units, it can be thought of as a collection rather than a singular piece.
The most expensive singular NFT ever sold is a digital artwork called “Everydays: The First 5000 Days” by artist Beeple, which sold for $69 million at a Christie’s auction in March 2021.
Beeple is famous in the crypto community for criticising NFTs and throwing away his bag of Ether right after his NFT sale.
Twitter CEO Jack Dorsey sold his first ever tweet for $2,500,000, the proceeds of which went to charity. This is an example of the wide-ranging content that can be sold as an NFT.
Is NFT a Good Investment?
NFTs are valuable because of their copyright ownership, uniqueness and resale prospects, which makes them attractive to collectors and investors.
Investing in NFTs can be more complicated than investing in traditional crypto-currencies. This is partly due to the fact that their value is not so much determined by their functionality, but by their trending popularity among others. NFTs may also suffer from a lack of liquidity in the secondary market, which is something to consider.
Pros of NFT investments
- Investments are secured by the blockchain – Ownership of NFTs is secure and transparent with the use of blockchain technology
- Anyone can invest in NFTs – The NFT community prides itself on inclusivity. Anyone can invest in NFTs, with prices ranging widely for different tokens on the market, and access to this market is available worldwide
- Low barrier of entry into blockchain investing – Through the purchase and trade of NFTs, traders can get more familiar with blockchain technology in order to build their knowledge for further investing across different platforms
- Social Status – For some, the value of NFTs is in the ability to say “I own that!” about a well-loved, popular image or other such content.
Can you Make Money with NFTs?
For digital artists, the NFT industry is a great avenue for making money on their work where there previously has not been such an accessible market.
As a concrete example, the creator of the Nyan Cat GIF, Chris Torres, made the image into an NFT in order to sell ownership of the image. He sold the NFT for $590,000 worth of ether!
You can also treat NFTs like stocks, by investing in something you see potential in before it gains momentum. You can hang onto NFTs in your crypto wallet, and then sell them later for a greater value. There is a growing market for buying and selling digital assets.
There is also the possibility to monetize your NFTs while they sleep in your wallet via NFT staking.
This allows you to receive a reward without having to sell your NFT collection. Basically, like with DeFi, but with your NFTs.
NFTs and the Environment
In the early days, NFTs were minted on proof-of-work blockchains that had a massive appetite for energy.
But hold on a second, because Ethereum, the most popular blockchain platforms for NFTs, has transitioned in September 2022 to Proof of Stake.
The proof-of-stake consensus method reduce Ethereum environnement impact by 99%. It makes investing in NFTs a no-brainer for environmentally-conscious investors.
This is an excellent example of how innovation by web3 players can bring about positive change in the world.
In Summary
As you may have found after reading this article, NFTs are no simple thing. The world of NFTs is wide- and a complex one at that.
However, one thing is for sure. NFT trading platforms have created a much-needed space for digital artists to sell their work at stunning prices. And with that, the market for digital art has increased!
Not only can digital artists earn money, but traders and investors can make big bucks off this artificially-imposed scarcity of online content as well.
NFTs are popular among high-profile celebs such as the Weeknd, but are also accessible to your average joe.
This accessibility has created an inclusive space for all to commune and connect over a shared love of digital art and other content.
NFT platforms have also put work into making their trade environmentally-sustainable, so that people can pursue guilt-free NFT investment.
The emergence of NFTs also opens up a discussion around art- what can be classed as art, in this modern age?
The trends of new technologies can be hard to follow, but so far it does appear that NFTs will be around for quite some time yet.
