Heard people talking about NFTs but don’t really know what they are? In this blog we will simply define and explain them.
A Simple Definition Of An Nft
NFT stands for Non-Fungible Token. Fungible means “replaceable” or “interchangeable” hence an NFT is a non-replaceable token that is one of a kind. It is a crypto asset used to authenticate ownership of a unique digital asset such as a work of digital art or perhaps a video or sound recording. But NFTs are also being used to authenticate ownership and verify transactions for physical assets such as real estate, a car or potentially anything at all.
How Do Nfts Work?
Like cryptocurrencies, NFTs can only be bought and sold on the blockchain. The hysteria around NFTs has been fuelled by the market for collectibles. This has been led by digital artwork, sports cards and memorabilia, videos and music clips. Many of these NFTs have been sold and re-sold for mind-blowing sums of money in the millions of dollars. Hence the market for NFTs services the seller (potentially an artist), the buyer (perhaps a fan) and the collector (an investor looking to profit from a resale). The seller has the option of placing a royalty on their piece, often between 5-10%, which they are automatically paid whenever their NFT is on-sold. Like cryptocurrencies, the market for NFTs can be extremely speculative, volatile and unpredictable.
Where Can You Buy And Sell Nfts?
To buy and sell NFTs, you need to head to an NFT marketplace. There are many marketplaces on the blockchain, most specializing in a particular type of NFT. Do your research and read online reviews about the marketplace and its safety and security record before opening up an account. Once you’ve found the right one to explore, you’ll need tokens. Some support a wide range of tokens while others trade only in one kind. You’ll need to fund your crypto wallet with the right tokens before making any purchases. Some of the biggest and most popular NFT marketplaces are:
OpenSea – leader in NFT sales with a wide range of digital assets
Rarible – another massive marketplace but requires its own Rarible token to use
NBA Top Shot Marketplace – the NBA’s own marketplace where video clips and highlights can be purchased
Axie Marketplace – specific to the video game Axie Infinity where NFT owners can use them within the game
Nifty Gateway – trades in digital art and music, retains purchased NFTs on their own platform and allows sales to be made in fiat currencies (eg USD)
Investing In Nfts
Investing in NFTs can be risky business because of their extreme volatility. Some NFTs have sold for enormous money. Digital artist Mike “Beetle” Winkelmann sold his work Everyday: The First 5000 Days for a world record $69.3m by Christie’s in March 2021. Others become worthless. Like physical art, the value of an NFT is subjective and largely influenced by the reputation of the artist and its uniqueness.
Physical Asset Nfts
These are NFTs that represent real physical assets. Their value is to verify and authenticate the ownership of a physical item such as a painting, a car or real estate. This also allows transactions to take place with security and confidence and without the need for a third party. A seller would simply create an NFT for their physical asset, say a car, list it in the NFT marketplace, make the sale and then present the car to the buyer when their token is redeemed.
Like most things in the blockchain world, evolution is happening at a frenetic pace and NFTs are no different. The latest version of NFTs is known as 2.0 and brings extensibility to the table. It allows an NFT to be linked to another NFT and “breed” a third or new NFT. They can also “hold” fungible tokens (such as Bitcoin or other cryptocurrencies), and are upgradeable with new features that are expected to lure mainstream brands to the market as the Web3 ecosystem takes shape.
Nft By The Numbers
2012 – the concept of NFTs is discussed in a paper by Meni Rosenfeld, describing them as “coloured coins”.
2014 – the first NFT, a short video clip called “Quantum”, was minted by digital artists Kevin McCoy and Anil Dash.
2015 – Etheria, the first NFT project and game, was launched.
2017 – The game Cryptokitties launched pushing NFTs into the mainstream.
2021 – “Everydays: The First 5000 days” sold for an NFT record price of $69.3m.
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