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Everything About NFTs
If this is your first time hearing about NFTs, or if it’s something that piqued your interest, that’s great. Today, we will share everything about NFTs that you need to know before getting into it.
Our guide will explain all the important elements related to NFTs. These include what they are, how they function, what makes them click, and how to get involved.
To begin, let’s learn what NFTs are.
What Are NFTs?
NFTs or non-fungible tokens are distinct and non-replaceable digital items. These are validated by the blockchain technology where networks of computers save all purchases on a digital ledger. It also provides buyers with proof of ownership and authenticity.
Generally, the blockchain eliminates the risk of fraud, damage, and theft, making it a safe place.
When buying an NFT, you’ll acquire a full ownership record of the asset, plus access to the said asset. To put it simply, these assets can be anything under the sun. But for now, a lot of these are mostly digital art or trading cards.
Other assets are virtual goods that only exist within the marketplace that’s selling them. Some of these come packed in recognizable formats such as a PDF or JPEG. To note, a small number of NFTs are digital records of ownership of a physical item.
How do NFTs Work? Are They Cryptocurrency Too?
NFTs are usually purchased and sold using cryptocurrencies. However, they aren’t cryptocurrencies themselves.
Like US dollars and other types of currencies, cryptocurrencies are fungible. Let’s say one Bitcoin is traded for another Bitcoin. Both will still have the same value, and that means you’re still left with one Bitcoin.
As for NFTs, these are unique. And because of that, they don’t have any equivalent value other than what the market agrees to pay for it.
Difference of Fungible and Non-Fungible Tokens
The difference between these two is that NFTs are basically unique and can’t be replaced. As for fungible tokens, these can be exchanged and traded for one another.
NFTs are tokens that hold an item’s copyright and ownership data. You can purchase NFTs in music, art, trading cards, in-game collectibles, etc. It’s even possible for you to purchase NFTs for real-life collectibles, but these aren’t common in the market.
A good example of NFTs is this: your house is unique. You can’t swap or trade it with your neighbors’ despite living on the same street.
Another example would be physical art pieces such as the Mona Lisa. Such masterpieces are non-fungible since there’s no other original Mona Lisa piece around.
And just like we mentioned, if something is fungible, you can interchange it with another item of the same kind.
What Makes NFTs Special?
For buyers, NFTs are special since they offer a secure and guaranteed certificate of ownership over a digital item. This helps protect and secure the value of the goods.
If you think about it, the internet makes it very easy to forge and duplicate things. And without having absolute ownership records like an NFT, the item is essentially worthless.
For sellers, NFTs make it possible to sell things today while it also keeps letting them earn for tomorrow. Artists, in particular, have continued struggling to reap the rewards if their creations appreciate in value.
With NFTs, these can be coded to let the original creator collect money every time the token trades hands. Often, this is between 2.5% – 10% of its sale price.
The capacity to set recurring revenue streams attracts any famous person searching for how to extend their fame’s earning potential.
Can Anything Found Online be Sold as an NFT?
Between art, sports, music, tech, and the finance world, it wouldn’t be a surprise if every big name gets into the NFT game. But literally, anything that can be reproduced as a multimedia file can be sold as an NFT. Plus, it can be any digital asset.
So far, what is categorized as NFTs include the following:
- Art
- GIFs
- Tweets
- In-game purchases
- Songs
- Domain Names
- Essays
Can Anyone Sell NFT?
Yes, anyone can sell an NFT and anyone can create work then turn these into NFTs on the blockchain. The process of doing so is called minting.
Once done, these can be put for sale on the preferred marketplace. What’s interesting is that you can even link a commission to this.
Doing so will pay the creator each time someone purchases the piece. That also includes resales.
Just like when purchasing NFTs, you’re required to set up a wallet that needs to be filled with cryptocurrency. And this is where the challenges lie since money will be required upfront.
The Marketplace
You can sell NFTs on a special marketplace that specifically sells NFTs. These are similar to eBay where people can either buy or bid assets.
To buy NFTs, you’ll have to set up a wallet on the site. Then, fill that wallet with whatever cryptocurrency that marketplace uses for trade.
To establish a higher demand for specific NFTs, the marketplaces hold drops. Here, they set a particular time the assets will be available to establish more interest and importance.
The Different Uses of NFT
As we mentioned earlier, NFTs can be used as artworks that can be verified without needing centralized authority. That alone is a great innovation that offers the asset class genuine legitimacy.
But that’s not the only thing NFTs are good for. These can also be utilized for the following:
Distinct Personal Documentations
With these, private or government-issued documents can even be transformed into one-of-a-kind personalized tokens. If you think about it, there’s really no stopping people from eventually owning digital documentation wallets. These would likely hold immunization records, birth certificates, or even licenses minted by sovereign states.
That also goes for private vendors like event promoters. In the future, everyone will find concert tickets sold as NFTs. Doing this will possibly prevent scalping or illegal secondary-market activities.
VR Items
VR or Virtual Reality technologies are fast becoming popular in this day and age. And the appearance of decentralized VR environments can influence the use of NFTs for purchasing and selling original digital works.
We’re already seeing a number of decentralized VR worlds functioning on blockchain technologies in Decentraland and Somnium Space.
In-game Purchases
Another way to use NFTs would be as in-game purchases. Like VR environments, NFTs lend and extend themselves adequately to online video games.
These can let players purchase and keep the ownership of distinct digital items like skins, weapons, armor, and more. And compared to centralized in-game microtransactions and purchases, NFTs can be made then sold by players themselves.
Collectible Investments
Other than just art, NFTs are ideal for a number of collectible items like first-editions or pre-print books. These also include stamps and even trading cards.
Since NFTs are a decentralized technology, these eradicate the issues of having to hire 3rd-party authentications. Technically, the latter is there to determine whether a collectible is genuine or not.
How To Purchase or Sell an NFT?
You will need to follow a couple of steps before you can buy or sell NFTs.
First, you need to purchase cryptocurrencies like Ethereum. Once you’ve gotten your cryptocurrency, you can visit an NFT marketplace like KnownOrigin, OpenSea, and Rarible.
From there, you can bid on NFTs then wait for the auction to end. If no one gets to outbid you, you will receive the NFT, along with bragging rights.
What’s Worth Purchasing in the NFT Market?
There are various kinds of NFTs, but the most well-known types are music, art, and collectibles. Famous musicians who have created their NFTs include Kings of Leon, Grimes, 2 Chainz, and Steve Aoki.
A large number of artists who utilize digital media as a medium for art have taken an interest in NFTs. Some of these artists include Mike Greg, Jon Noorlander, and Beeple.
Even Score and Media & Gaming Inc. have begun converting NFTs in their weekly show “Mint Condition”.
To note, one of the very first big NFTs was the crypto-collectibles called CryptoKitties. These are digital cats released back in 2017 and are collectibles that are somewhat like Beanie Babies.
There are other types of distinct collectibles like Cryptopunks, NBA Top Shots, and in-game items for games.
Should You Buy NFTs?
Yes, why not? But no matter what you’re planning to purchase, investing in alternative markets carry great risks and less reward. This is compared to putting money into more common places like equities.
Although popular, everything about NFTs is new, and there’s still a chance that it’ll lose demand once the “fad” passes. Simultaneously, there are a lot of varying opportunities that can benefit from NFTs if utilized properly.
And since NFTs a new market, there’s a possibility to see extreme shifts in interest, value, and prices. This is until the market can settle and level itself out.
For instance, Bitcoin goes around $50 thousand today. But sometime before, its value was only less than a fifth of that amount.
The Risk
Purchasing NFTs now is quite risky. And to note, these are a volatile portion of an already volatile crypto market. Plus, even traditional collectibles and art are difficult to value and invest in, especially when you don’t understand the market.
It’s fine to invest in NFTs. However, if you’re just doing it to not miss out on opportunities, don’t.
If you want to know if you can or should invest in NFTs, take a look at these. It will make sense to invest if you agree with any of these:
- Understand and know the value of the traditional art market
- You’ve been a collector of art, trading cards, or anything else for quite some time
- You aren’t just attempting to make quick cash, and you see the long-term value/importance of investing
To note, you should invest in NFTs ONLY if your emergency fund is entirely funded. Another is if you’re at the top of your retirement contributions.
There’s a chance that the market will soar, and the NFTs you have will greatly appreciate the value. However, before you purchase, ask yourself if you want to casually bet the funds you actively need. And this is on the chance that your investments will fail.
Investing Safely in NFT
If you’re willing and certain to take the risk of investing in NFTs, that’s great. But it would be ideal to set a limit from the start.
This limit would be how much you’re willing to lose. And, you shouldn’t consider this as a get rich quick scheme.
We know that safer investments are around, but NFTs are exciting, new, and interesting to try out. That is if you’re willing to take the risk.
A safe way to jump into the NFT bandwagon is to look for trusted companies that utilize the technology. Invest in these instead of going straight into purchasing digital assets. And generally, there are tons of opportunities to look at since the market is still new and continuously growing.
Will NFTs Stay, Or is it Just a Fad?
Issuing digital assets on blockchains comes with huge potential, and NFTs are among applications. With the uses of NFTs going beyond art ownership, these will definitely stay, unlike a fad that may die out soon.
But, there’s one sure thing: the NFT market won’t look the same in the future. Producing NFTs on blockchains have unique and real benefits across various industries. These include online gaming, live events, VR, and real-world documentations.
Whether or not NFTs will stay, they are definitely having a great moment. And, a lot of people are attempting to earn real money from digital assets.
It’s not really that new, but it’s newer compared to mainstream types of investments. With that, big risks can truly pay off, that is, if it’s done right.
So if you’re set on investing in NFTs, or are thinking of whether you should test the waters, that’s fine. But before doing anything, make sure to do your research and keep an eye out for this technology. It’ll definitely be interesting to watch how it flourishes and also how businesses will utilize it to their advantage.
We suggest that you stay up-to-date on the latest information to know everything about NFTs. When getting into the NFT business, know how it works to make it sustainable in the future.