What is an NFT?
Imagine buying a piece of digital art and actually owning it as part of your collectibles. You own it – like for real, although it is out there on the internet, being downloaded, copied, and pasted. It is yours. It belongs to you. You have the rights to it. You can sell it in the future. This is possible through special cryptocurrency tokens, called Non-Fungible-Tokens. That is what an NFT is.
Fungibility is the ability to be exchanged or molded into something else. For example, a Bitcoin is fungible – it can be split into smithereens, called satoshis. Non-fungible tokens cannot be split in two. They are unique – and cannot be interchanged or replaced.
NFTs are NOT pieces of art. Rather, they represent the pieces of art linked to them. They also represent other internet collectibles like music, tweets, games, and so forth.
Why are NFTs So Valuable?
Have you ever heard of the Nyan Cat? In 2011, a meme of a devilishly cute pop-tart cat was animated and uploaded onto YouTube. The video’s soundtrack was an addictive instrumental with a voice singing the word “nyan” throughout. The owner recently tokenized this cat and sold it for a cool $500,000.
This was closely followed by musician Grimes’ sale of digital art, for around $6 million. But one thing that made NFTs trend online was Beeble’s $69 million sales of his piece of digital art. That got people’s attention. Twitter’s Jack Dorsey put up his first-ever tweet for sale. Bids of over $2.5 million in ETH came in.
To cap it all up, NFTs are as valuable as the bids will allow. The bidders give as much as they are willing to pay – and this sets the NFT’s value.
Theoretically, anyone can tokenize their digital work – and as long as there is a market for it, they can make money off this nascent asset class.
What are the Possible Applications of NFTs?
There is a favorable future for the NFT market. Currently, brands such as Turner Sports, Nike, Atari, Ubisoft, BBC, and Louis Vuitton are already embracing the asset class. It is already proving to be an excellent store of value. For instance, NFTs can be used to store documents securely. With the underlying blockchain technology, NFTs can provide a tamper-free method of keeping sensitive documents safe.
How Do I Buy NFTs?
You have probably heard of people and artists purchasing NFTs and ask yourself where you can procure yourself one or more of these new assets. Worry not. There are lots of online art galleries where you can peruse and purchase digital art, trading cards, and other types of collectibles. The marketplaces function as a form of auction houses, where you make bids on collectibles and roll the dice, and hope to win.
Before you are able to purchase an NFT, you must have a crypto wallet, such as Metamask. Wallets are similar to traditional banking accounts (which are accessed via apps nowadays. They communicate with blockchain networks to access, send and receive crypto funds. The digital crypto wallet should have funds, usually in Ethereum, in order to make purchases.
Once the wallet is funded, the marketplaces have an auction-like format to allow you to make a bid for the NFT you desire and wait for the auction to complete. If you win, the ETH is drawn from your wallet, and the NFT keys are sent back into your wallet.
How Do I Sell an NFT?
Selling an NFT is kind of a reverse procedure to buying it. Your aim is to make it available on the online NFT marketplace. First, select the token you would like to sell from the collection in your wallet.
Most wallets have an option for selling it. On selecting the option, it will direct you to the listing page where you will be able to list your token. Indicate the price and type of sale. There are two types of sales – the Fixed Price option, for which the price stays constant, and the Time Duration Option, for which the auction price varies depending on the seller’s preferences.
In both options, there is a 2.5% service fee, and a further 10% goes to the creators’ royalty fees. To finalize the sale, you’ll be asked to make a confirmation by signing the transaction.
Top 5 NFT Marketplaces
There are several marketplaces to purchase and sell NFTs. An artist will be able to acquire different types of NFTs, collectibles and digital cards depending on the marketplace they choose. The majority of these platforms have secondary marketplaces, but they tend to operate as separate sites. Some of these marketplaces include
OpenSea, SuperRare, Foundation, Rarible, and, last but not least, NiftyGateway.
The most widely used marketplace is OpenSea as it boasts of a large variety of openings for artists to showcase their work through a process called lazyminting. This process allows artists to design and create free NFTs once they pay a one-time transaction fee to set up an account.
Rarible is another marketplace that looks like OpenSea in that you can buy, sell and create NFTs through it. It is one of the few platforms which allow you to create NFTs for free. Launched in 2020, Rarible governance is aiming at achieving its operations as a DAO, whereby the community participates to vote on fresh and innovative initiatives to expand the platform.
Besides that, Rarible recently implemented a $RARI governance token that gives incentives to creators and collectors for purchasing and selling NFTs on the platform.
SuperRare is another marketplace that was launched in 2018, and acts as an exclusive platform that curates artwork from some of the most popular NFT artists. It is also optimized to serve old-school artists looking to join the digital world of NFT. SuperRare is most popular for its one-of-one marketplace offers.
Foundation provides a wide variety of artworks to its collectors. Recently, Foundation approved the minting of 3D artwork into NFTs. It is relatively new, since it was founded in February of 2021, but has, so far, managed to make creators $120 million.
NiftyGateway is a marketplace that associates with top creators to distribute limited NFTs to the public. NiftyGateway also boasts one of the larger curated NFT platforms that allow users to purchase NFTs with actual USD currency.
NFTs may seem complex and very complicated if you never looked into them. However, once you break it down it becomes more friendly than you may have anticipated. Non-fungible tokens make it easy to buy and sell digital media on the internet. They also make it easy to identify artists’ digital work and verify their authenticity and digital ownership. They have a bright future as various companies and organizations have already started to embrace and incorporate NFTs as part of their assets.