Non-fungible tokens (NFTs) are becoming massively popular amid all the crypto craze. Digital art is being sold for millions of dollars, and this is just another example of how the technological revolution impacts all spheres of our lives.
What an NFT is, how to buy one, and how you can create one on your own are a few topics that we will discuss throughout this article. Let’s get started!
- What Are NFTs All About?
- The Technology Behind NFTs
- Where to Buy an NFT
- Buying an NFT
- Minting an NFT
- Are NFTs Controversial?
- The Legal Aspect of NFTs
- Who Are NFTs For?
- Unlimited Forms of NFTs
- NFTs and Virtual Real Estate
What Are NFTs All About?
The best way to explain an NFT is by comparing it to a value-holding asset, such as a fungible art piece.
Apart from representing a digital form of popular paintings, it also works as a cryptocurrency and a collectible asset. In that regard, it is similar to Bitcoin, Ethereum, and other popular tokens.
One of the most important differences is that you can’t exchange a non-fungible token for another cryptocurrency.
The purpose of NFTs is to store information and data, whether it is related to a tangible music file, painting, or another form of art.
Digital Form of Art
As mentioned above, owning an NFT is similar to owning a physical piece of art.
The only difference is that purchasing an NFT means that you will be getting a JPG or an MP3 file instead of the painting itself.
Impressively, people have paid over $60 million for some of the most expensive non-fungible tokens.
The Technology Behind NFTs
NFTs are stored on an Ethereum blockchain and are used to hold extra information representing an art piece.
Without that information, a non-fungible token couldn’t replicate the real-life art form that you are ideally purchasing.
Similar to if you were acquiring a physical painting or a music file, the price is directed by the quantity of the available pieces and the demand for the same.
While an original NFT holds the most value, you can acquire digital copies of that art piece for a lower price.
Downloading an NFT
One of the biggest misconceptions is that you can become an owner of an NFT by right-clicking and downloading the file.
Not only is that digital art piece going to be in terrible resolution, but you won’t be able to access the information that is stored on an Ethereum blockchain.
Thus, the only way to get a non-fungible token is to buy it through a respective cryptocurrency market.
Where to Buy an NFT
The more popular non-fungible tokens are becoming, the easier it is to get your hands on one.
There is a variety of marketplaces you can choose from depending on if you want to buy a digital painting, music file, or a collectible from NBA, NFL, MLB, or crypto-based games, such as Axie Infinity.
To acquire an NFT, you will need to open a wallet on the platform that you choose to use. Among the most popular platforms are OpenSea.io, SuperRare, Mintable, Rarible, and Foundation.
Most of these platforms support drops of non-fungible tokens, which means that you can get an art piece at a bargain price or even for completely free.
As it seems, NFTs are making their way to classic video games.
And in as little as a few months, you should be able to acquire skins, upgrades, and other items in the form of NFTs through a simple in-game purchase procedure.
Buying an NFT
Once you have chosen the marketplace, it all comes down to finding the NFT that you are interested in.
Keep in mind that certain art pieces are sold through an auction, which means that the highest bidder wins. In that regard, the shopping process is similar to eBay.
Apart from the auction house, you will also find that some pieces can be purchased for a fixed price and in as little as a few seconds.
Don’t forget that most of the prices are listed in Ethereum decimals, which means that NFTs are prone to the volatility of the crypto market. You pay by transferring your Ether from the existing wallet to the NFT platform.
Selling Your NFTs
When it comes to getting rid of non-fungible tokens, there are two different scenarios.
You can either sell the NFT you’ve minted, or you can take the one that you have acquired and try to resell it for a higher price.
In any case, you should connect your Ether wallet to the marketplace and set the terms, whether that means putting it up for auction or at a fixed price.
Minting an NFT
One of the most common questions is whether you can create an NFT on your own.
The answer is yes! The first step is to create a music file or piece of digital art that you can turn into an NFT through some of the aforementioned platforms.
The process is straightforward and comes down to following the instructions after going to the “create” page.
In most cases, you will be asked whether you want the non-fungible token to be minted in just a single copy or multiple copies.
Additionally, you will get to direct the terms and conditions for those who want to buy your art piece.
Most platforms charge a gas fee for connecting your crypto wallet and uploading your digital painting or music file to their platform.
Still, if you’ve created a unique non-fungible token, it is a worthy investment.
Are NFTs Controversial?
Over the past couple of months, there have been several controversial topics including the NFT hack scam and the fact that minting digital art has a huge impact on global warming.
The reason for that is that creating an NFT requires a lot of energy.
With that in mind, environmentalists are warning about the possible impact that NFTs can have.
According to a couple of tests and surveys performed by CryptoArt.wtf, a single digital art piece requires 192 kWh to be created.
As mentioned above, the carbon footprint left by NFTs is immense, which is the main reason why artists are gathering up and trying to create carbon-neutral artwork.
The Legal Aspect of NFTs
With the ongoing popularity of non-fungible tokens, a few legal implications are arising.
The first one is related to intellectual property and the fact that, by purchasing a digital art piece, you are allowed to share and utilize the NFT that represents a real-life painting or a music file.
In addition to that, purchasing and selling NFTs will need to be taxed.
Whether we are talking about an NFT-for-NFT trade-off or purchasing an art piece through Ether, the IRS will be monitoring the capital gains that result from these transactions.
Last but certainly not least is the concern that trading non-fungible tokens are considered by some experts as transmitting money.
With that in mind, it can raise questions of money laundering and require that the businesses trading NFTs comply with the regulations posted by the FinCEN.
Who Are NFTs For?
In our personal opinion, non-fungible tokens are a perfect investment for people who don’t like the common cryptocurrencies but want to store value in a digital asset, such as a painting or a music file.
The best thing about NFTs is that you are getting proof of ownership through the fact that no one can duplicate the digital art piece that you’ve purchased.
The scarcity created by the inability to copy a non-fungible token makes these crypto-assets more valuable.
In addition to that, if you are not too keen on the volatility of stocks and the crypto market, then you will find minting, selling, and buying NFTs much more attractive.
Helping International Artists
One of the coolest points about NFTs is that international artists who aren’t able to profit from their physical art can present the same in a digital form.
Thus they are able to pay for their rent, food, and cover all other living expenses.
Unlimited Forms of NFTs
Another trait of these digital assets is that the number of forms that they can appear in keeps growing.
Although the most popular formats seem to be paintings in JPG and music files in MP3, you will find that people are already minting non-fungible tokens from blogs and Twitter posts.
Experts think that the rising popularity of NFTs will force professional photographers and book writers to also turn to digital-asset trading platforms.
The best thing is that there is no room for forgery, as you can imprint a trademark or copyright on the NFT.
The third most expensive and one of the first-ever NFTs sold, the Beeple JPEG is considered to be worth around one billion dollars.
Although the current NFT trading market is valued at around $430 million dollars, it is sure to go through massive growth in the upcoming years.
NFTs and Virtual Real Estate
There has been a lot of discussion on whether the technology of NFTs can be applied to the real estate market.
The first and most popular platform for buying virtual plots of land is Decentraland, which has been out for a couple of months.
The idea behind it is that you can purchase land in the form of an NFT, then continue to build and earn money from it.
While the idea has a lot of potential, there is a lack of legal structure and rules to support it.
The main issue when it comes to real estate and NFTs is how you can effectively transfer the land from one individual to another.
In addition to that, there are questions regarding the regulation of the platforms on which the plots you own will be stored.
There is no doubt that NFTs are the future and that the idea of digital art and ownership will become huge in the upcoming years.
The best thing about it is that anyone with a creative idea can start minting NFTs and turn a profit.