Non-fungible tokens, commonly referred to as NFTs, have seen quite a surge in 2021. The NFT market is filled with digital assets that are purchased for astronomical prices, in some cases for millions. Nevertheless, it remains to be seen whether they are yet another bubble bound to burst or their value will be preserved in the long run.
What are NFTs?
These tokens are basically virtual assets that amount to tangible items from real life such as artwork, songs, or movies. These digital assets are transactional on the internet, often via crypto coins. In most cases, they are based on the same technology as cryptocurrencies. NFTs are becoming increasingly popular as a method of trading art online. 2014 was the year when the first non-fungible token was released. Since then, hundreds of millions of dollars have been moved across the NFT market. In essence, an NFT is a unique piece of work, or it is produced in small quantities. They also contain unique identifiers.
One of the most notable differences between NFTs and other forms of virtual art is the fact that NFTs have a limited supply. As with cryptocurrencies, the lower the supply the bigger the value of an asset. However, demand is also necessary.
A lot of the NFTs being traded are in fact already existing virtual items such as sports games videos or artworks that are already posted online in unsecured forms. One could say that with NFT tokens these have all been reinvented.
One example of this sort which is famous on the NFT market is that of Mike Winklemann, commonly referred to as “Beeple”. This remarkable digital artist sold a collection of 5000 daily drawings in the form of an NFT with no less than 69 million dollars.
Even though you can get access to the very same pictures online, the advantage of an NFT is that it enables you to be in possession of the original artwork as well as proof of property. This is a great benefit if you’re a collector.
NFTs In Relation to Cryptocurrencies
NFTs use a similar software as most crypto coins. The difference between a non-fungible token and a cryptocurrency is precisely the fungible part. Unlike crypto coins, you cannot trade one NFT for another. Another significant distinction for the NFT market is the fact that NFTs are not equal in value in the way that one bitcoin has the exact same value as another bitcoin not even if both NFTs are of the same kind. What makes NFTs non-fungible is their unique digital signatures.
Same as cryptocurrencies, NFTs function on blockchains, which are similar to ledgers where each trade is documented. Most reside on the ETH blockchain. These tokens are basically born from virtual objects amounting to items such as artworks, photos, sports, video, collectible items, songs, or in-game items. The most unusable things get sold as non-fungible tokens. For instance, one of the founders of Twitter, Jack Dorsey, sold his very first post on Twitter on the NFT market. He made over 2.9 million dollars from this trade.
Another way to think of NFTs is like virtual collectibles. It’s the same as owning a famous painting, only that it’s virtual and not physical. This also involves exclusive proprietary rights for your token. Creators can even sign their NFTs within the metadata.
The Purpose of NFTs
NFTs represent a method in which artists can turn their creations into money, similar to the way in which painters sell their artwork at galleries or during auctions, but more profitable. Creators can also receive royalties when the non-fungible token gets sold again, which doesn’t happen when actual physical artworks get new owners.
However, the NFT market is not limited to art. Some companies have raised money for charitable causes using NFTs. Also, more and more celebrities are getting into the world of NFTs LeBron James, Snoop Dogg and Lindsay Lohan are just some examples of stars who have realized the great potential of NFTs.
How and Where to Purchase NFTs
In case you wish to collect NFTs yourself, here’s what is required:
First and foremost, make sure you install a digital wallet where storing both NFTs and crypto coins is possible. You will probably have to get some crypto coins first, such as ETH or other cryptocurrencies used for trading non-fungible tokens. Cryptocurrencies can be purchased from popular platforms like Binance, Coinbase, Kraken, or eToro. Before you use them on the NFT market, move the coins to the wallet you configured. Nevertheless, make sure you consider commissions as well. Most websites charge fees whenever you perform a trade.
Best NFT Platforms
Foundation
On this NFT market, only those who join by invitation or who get upvoted can sell their artworks. The prices are a bit higher than on other platforms. There are many cool NFTs to be purchased on these markets. Nevertheless, you need to do your homework first to avoid falling for scams like people selling fake collectibles.
Opensea
This platform advertises itself as a provider of rare collection items. Simply signup and you will be able to buy NFTs from a large variety of artists.
Rarible
Here Non-fungible tokens are traded openly and democratically. It also has its own cryptocurrency, RARI, which can be used to pay the fees on the platform, amongst others.
Furthermore, not all marketplaces apply the same verification methods. For instance, in OpenSea and Rarible, owners do not get verified prior to attempting to sell a non-fungible token. Seeing as the security of the buyers is limited, you need to be cautious.
Is It a Good Idea to Purchase NFTs?
Whether or not you should buy an item from an NFT market is debatable. It can be dangerous because NFTs are new and have no historical background to look upon. Therefore, it is not recommended to invest a lot of money.
Of course, the choice is all yours, depending on how much you can afford to lose. Don’t forget that the demand is what affects the value of NFTs. The resell price of an NFT may be lower than what you initially paid. Or, even worse, no one may want to buy your non-fungible token again.
In conclusion, you should be as cautious about NFTs as you would be about any other investments. Do your homework first and make sure you analyze the dangers behind NFT market trades. Keep in mind that you might risk losing all of your initial investment. Therefore, play it safe, and don’t invest all of your savings in NFTs!
