When it comes to the internet, one thing you can count on is that nothing is going to stay the same. The online world is ever-changing and you need to adapt quickly because the next invention is just a few hours away.
Lately, there’s been some strange activities happening in the online world and they are going to shock you to your very core.
The first-ever tweet published by Twitter co-founder Jack Dorsey that said: “just setting up my twttr” was purchased for $2.9 million earlier this year.
And it’s just not a tweet. In March 2021, a single jpeg was sold for $69 million. The NBA is selling snippets of basketball games for hundreds and thousands of dollars. It’s bonkers.
These are all sorts of digital stuff that people are purchasing a version of them for a massive amount of money. There are three simple letters that you need to know to understand the cause of this madness.
Those letters are NFT. What exactly is an NFT, you ask? Let’s jump down the rabbit hole.
What is an NFT?
An NFT or non-fungible token is a digital asset that represents real-world objects like art, music, in-game items and videos.
They are one-of-a-kind assets in the digital world that can be bought and sold like any other piece of property, but which have no tangible form of their own.
NFT’s use blockchain technology to certify the authenticity and ownership of a specific and unique digital object.
Simply put, if something is non-fungible, it means it has unique properties so it can’t be interchanged with something else.
It could be a building, or a painting such as the Mona Lisa, which is one of a kind. You can take a photo of the painting or buy a print but there will only ever be one original painting.
In many ways, NFT are a new solution to a problem that is as old as the internet: the never-ending replicability of digital information online.
When bits, files and pixels can be copied and pasted with a few clicks, concepts such as ownership, originality and access control often go out of the window. But that is a topic for another day.
How Does an NFT Work?
Traditional works of art such as paintings are valuable precisely because they are one of a kind. But digital files can be easily duplicated.
With NFTs, artwork can be tokenised to create a digital certificate of ownership that can be bought and sold.
NFTs exist on a blockchain, which is a distributed public ledger that records transactions. You’re probably most familiar with blockchain as the underlying process that makes cryptocurrencies possible.
Specifically, NFTs are typically held on the Ethereum blockchain, although other blockchains support them as well.
An NFT is created from digital objects that represent both tangible and intangible items, including:
- Videos and sports highlights
- Virtual avatars and video game skins
- Designer sneakers
At its core, NFTs are like physical collector’s items, only digital. So instead of getting an actual oil painting to hang on the wall, the buyer gets a digital file instead.
The buyer also gets exclusive ownership rights. NFTs can have only one owner at a time. NFTs’ unique data makes it easy to verify their ownership and transfer tokens between owners.
The owner or creator can also store specific information inside them. For instance, artists can sign their artwork by including their signature in an NFT’s metadata.
How Do I Buy an NFT?
If you’re interested to start your own NFT collection, you’ll need to acquire some key items:
- You’ll need to get a digital wallet that allows you to store NFTs and cryptocurrencies.
- You’ll likely need to purchase some cryptocurrency, like Ether, depending on what currencies your NFT provider accepts.
- You can buy crypto using a credit card on platforms like Coinbase, Kraken, eToro and even PayPal and Robinhood now.
- You’ll then be able to move it from the exchange to your wallet of choice.
You’ll want to keep fees in mind as you research options. Most exchanges charge at least a percentage of your transaction when you buy crypto.
NFTs on OpenSea are priced in cryptocurrency, making them vulnerable to the wildly fluctuating cryptocurrency markets as well as the shifting value of the NFT assets themselves.
Popular NFT Marketplaces
There are dozens of NFT marketplaces in existence, and many of them have a specific focus or niche. Currently, the largest NFT marketplaces are:
Who is Buying NFTs?
Two of my closest friends have already invested hundreds of thousands and that’s at a basic level.
When NFTs were first introduced to the masses, there were very few people who actually knew what they were and even fewer people who actually traded these digital assets.
As non-fungible tokens continue to progress in a variety of sectors, so will the people who purchase NFTs.
The type of people who buy NFTs are collectors, investors, flippers, fans, and folks all around the world. From celebrities such as Gary Vee, Jay-Z and Jimmy Fallon – to your everyday working-class citizen.
If you enjoy purchasing from your favourite brands and supporting different communities, then you may be someone who would enjoy buying an NFT.
How to Decide Which NFT to Buy?
First and foremost, you should always invest in NFTs that spark your interest. I mean, what’s the point of purchasing something that you don’t actually enjoy?
Don’t just look for the next best NFT, search for the next best NFT that suits your interests.
Most of the big NFT marketplaces host their community discussions on Discord. Discord can be a good way to discover new NFTs and to dive deeper into specific projects, to learn about their development roadmap.
Research thoroughly. After you have found an NFT you are interested in, it’s time to get your hands dirty and learn everything you can about that specific NFT.
Lastly, don’t invest more money than you can afford to lose. If you invest all your savings into a project with no money to fall back on, you may be putting yourself and your family in a hard spot.
How to Make an NFT?
Anyone can create an NFT. All that’s needed is a digital wallet, a small purchase of ethereum and a connection to an NFT marketplace where you’ll be able to upload and turn the content into an NFT or crypto art.
Just because you can buy NFTs, doesn’t mean you should. Investing in NFTs is a largely personal decision. If you have money to spare, it may be worth considering, especially if a piece holds meaning for you.
Always remember, an NFT’s value is based entirely on what someone else is willing to pay for it.
Therefore, demand will drive the price rather than fundamental, technical or economic indicators, which typically influence stock prices and at least generally form the basis for investor demand.
Finally, approach NFTs just like you would any investment. Do your research, understand the risks and if you decide to take the plunge, proceed with a healthy dose of caution.