What are NFTs?

Non-fungible tokens, or NFTs, are smart contracts that reflect the ownership of one-of-a-kind assets (digital art, videos, music, tickets to an event, legal documents, etc.)

When something is “non-fungible,” it simply means that it is one-of-a-kind and cannot be replaced. A dollar bill, for example, is a fungible thing since it may be swapped with another and yet be viewed and worth the same. Assets such as diamonds, land, and even baseball cards are examples of “non-fungible” items outside of the crypto world. A Non-fungible item is not interchangeable with other items because of its unique properties.

Consider Pokémon cards, rare coins, or a pair of limited-edition Jordans: NFTs establish scarcity among otherwise eternally available assets, with a certificate of authenticity to prove it. GIFs, tweets, virtual trading cards, photographs of tangible goods, video game skins, virtual real estate, and other digital artwork can be purchased and sold using NFTs.

For example, renowned digital artist Mike Winklemann, better known as “Beeple,” created “EVERYDAYS: The First 5000 Days,” possibly the most famous NFT of the moment, which sold at Christie’s for a record-breaking $69.3 million.

How is an NFT different from Cryptocurrency?

The term “non-fungible token” refers to a token that is not fungible. It’s usually programmed in the same way as cryptocurrencies like Bitcoin or Ethereum, but that’s where the similarities end.

Cryptocurrencies and physical money are both “fungible,” meaning they may be traded or exchanged for one another. They’re also worth the same amount of money—one dollar is always worth another dollar, and one Bitcoin is always worth another Bitcoin. The fungibility of cryptocurrency makes it a secure way to execute blockchain transactions.

NFTs aren’t like other materials. Each contains a digital signature that prevents NFTs from being substituted for or compared to one another (hence, non-fungible). Simply because they’re both NFTs, one NBA Top Shot clip isn’t the same as EVERYDAYS. (For that matter, one NBA Top Shot footage isn’t necessarily equal to another NBA Top Shot clip.)

How Does an NFT Work?

NFTs are stored on a blockchain, which is a decentralised public ledger that keeps track of transactions. Most people are familiar with blockchain as the underlying technology that allows cryptocurrencies to exist.

NFTs are most commonly kept on the Ethereum blockchain, although they can also be held on other blockchains.

An NFT is made up of digital objects that represent both tangible and intangible objects, such as:

• Art
• Animated GIFs
• Videos and Sports highlights
• Antiques and collectibles
• Video game skins and virtual avatars
• Sneakers by a designer
• Instrumental music

Even tweets are taken into account. Jack Dorsey, a co-founder of Twitter, sold his first tweet as an NFT for over $2.9 million.

NFTs are essentially digital versions of tangible collector’s artefacts. As a result, rather than receiving an actual oil painting to put on the wall, the customer receives a digital file.

What are NFTs used for?

Artists and content creators have a unique opportunity to monetize their work thanks to blockchain technology and NFTs. Artists, for example, no longer have to sell their work through galleries or auction houses. Instead, the artist can sell it as an NFT straight to the consumer, allowing them to keep a larger portion of the profit. Additionally, artists can integrate royalties into their software so that they receive a share of sales when their work is sold to a new owner. This is a desirable feature because most artists do not receive subsequent proceeds after their first sale.

Making money using NFTs isn’t limited to art. To raise money for charity, companies like Charmin and Taco Bell have auctioned off themed NFT art. Charmin’s offering was dubbed “NFTP” (non-fungible toilet paper), and Taco Bell’s NFT art sold out in minutes, with the highest bids coming in at 1.5 wrapped ether (WETH)—equal to $3,723.83 at the time of writing.

Snoop Dogg and Lindsay Lohan are among the celebrities who have jumped on the NFT bandwagon, sharing unique memories, artwork, and moments as securitized NFTs.

How To Make, Buy, and Sell NFT Art

If you’re an artist who’s seen these digital artists make millions, you might be asking how you can join in. Although certain protocols, including Zilliqa, TRON, Flow, and Cosmos, allow you to mint your own NFTs, the Ethereum network is where the majority of them are created. That’s where you’ll find the staggering sales figures. Mintable, Rarible, and OpenSea are the main marketplaces for creating these NFTs.

To create an account, you first have to connect a wallet, the most popular being Metamask. Here are some of the wallets that OpenSea allows you to use.

You can use the app to create and sell your own collection. You can either get your NFT from another platform, such as Rarible, or create one on OpenSea. You can choose the qualities your NFT has after you’ve created your collection. These include the number of copies of the NFT that will exist. To finally mint the NFT and put it up for auction, you’ll have to pay a gas price. Other marketplaces, such as Superrare or Nifty Gateway, are more discerning, similar to a traditional museum exhibition. Instead of minting it yourself, these marketplaces demand you to submit your art or be asked to create a collection on the platform.

A marketplace on the internet allows you to place bids on NFTs whether you’re on a platform that allows you to mint NFTs or one that requires an invitation. You own the NFT artwork if you win the auction.

The Future of NFTs

With so many new protocols that will host NFTs in the horizon, one could argue that this is only the beginning. It may seem far-fetched to claim that NFTs are still in their infancy. Artists are already making fortunes through their work, but NFTs have only been widely adopted since 2017, a period of less than four years. For a brief moment this year, NFTs surpassed Ethereum in terms of search volume, but Ethereum is still not a household name in comparison to Bitcoin’s ubiquity.

The NFT ecosystem is ever-changing and expanding, as a new protocol for Ethereum is set to cut excessive gas fees in the summer while buyers continue to convert NFTs for hundreds of thousands of dollars. Soon, nobody interested in the future of art will ignore this exciting innovation.