What are NFTs and why do some of them sell for millions of dollars? Here’s everything you need to know about the latest trends in cryptocurrencies, including how (and if) you should invest.
Artist Beyoncé’s work as Portrait of a Young Woman by Jean-Etienne Liotard is NFT. So is this gif of the iconic 2011 Nyan Cat. So what exactly is NFT?
NFT is a unique and authenticated digital file. The item only exists in digital form. NFTs are bought and sold online, usually using some form of cryptocurrency, such as Ethereum.
A gif of 2011 Nyan Cat sold for $500,000 in February, and Twitter founder Jack Dorsey’s first tweet ever turned into an NFT and sold for $2.9 million in March.
If you’re wondering why anyone would pay millions of dollars for a tweet or gif that you can screenshot or download. You can definitely save the pictures or videos you like and have them for free, but NFT lets you know that you own the real thing.
“NFT is like any other token, it has its own authentication,” says Merav Ozair, PhD, blockchain expert and fintech faculty member at Rutgers Business School. “Therefore, you have possession that you can demonstrate.”
Ozair says it’s like going to a museum and taking a picture of a painting you really like. More curious about this NFT? Read on to learn more about the hype surrounding NFT, how you can invest, and what the future holds for this coveted digital token.
What is NFT?
NFT or Non-fungible assets are digital assets that represent real-world objects such as music, art, in-game items, and videos. Like every other form of investment, NFTs are also bought and sold online, often with cryptocurrencies.
It is a type of digital asset that associates ownership with a unique physical or digital item. This token is not exchangeable because it has unique properties.
It works pretty much like this – you create digital art and mark it up. The token becomes the unique identity of your artwork; You can sell or auction them off to the highest bidder for money.
The NFT is also secured by the Ethereum blockchain to ensure that no one can change ownership records or copy/paste new NFTs.
6 Things You Need to Know About NFT
1. Why is NFT important?
NFT allows people to buy and sell digital assets like never before. While cryptocurrencies can be used interchangeably, NFTs have a unique identification code stored on the blockchain that distinguishes each one. Digital art, music and even digital sports cards are all NFTs you can buy.
“For artists, this has created a new source of income and outlet for their art or music,” Hayes said. “For consumers or investors, it provides a new opportunity for you to buy or invest in a new asset class.”
Ozair believes NFT has more value than ordinary collector’s items such as tickets or albums. “You have an album, it’s something that can stay there forever, never to be scratched or shattered,” Ozair said. “This can be a keepsake that you can sell in 10, 20 years if the album is a hit.”
Kings of Leon released their latest album When You See Yourself as NFT a month ago, becoming the first band to do so. The band also released NFT which includes perks like lifetime front row seats, which you won’t get with just a physical album.
2. Is NFT a good investment?
The value of NFTs is largely based on what a person is willing to pay for them, so it’s hard to say whether they will be a good long-term investment. NFT is very popular right now with artists and celebrities like ASAP Rocky, Snoop Dogg, and Lindsay Lohan creating their own NFT—but how long will this trend last?
“Nowadays because NFT is so popular, people are spending a lot of money to keep up with this trend,” Hayes said. “If things slow down and people decide they prefer to own physical goods over digital goods, demand will drop which means the price and value of your investment may also fall.”
Ozair believes NFT is just like any other investment—you have to give it time to find out its value. “You won’t know until time passes,” said Ozair. “To tell you now whether it’s a good investment or a bad investment, I don’t know.” Invest wisely and keep an eye on NFT trends so you can see if it’s the right move for you.
3. Where Can I Buy NFT?
There are many popular NFT shops available on the internet to buy NFT. Some of the popular NFT stores are OpenSea, Axie Infinity, Foundation, Mintable, Rarible, Valuables, Nifty Gateway, and many more.
To buy NFT you need to register with the site and buy it. Most NFT these days are bought with ETH, the native currency of the Ethereum network. ETH can be easily converted to US dollars on exchanges like Kraken, Gemini, Coinbase, etc.
To buy NFT, you must first set up a digital wallet to store your cryptocurrency, which will be used to buy NFT.
4. Can I Create and Sell NFTs?
Yes, you can also create and sell your own NFT. However, Non-fungible tokens must be rare and unique.
You’d be surprised to learn that Twitter founder Jack Dorsey has been promoting NFT from his very first tweet, with a bid of up to $2.5 million. So, technically, people can buy your Tweets too, if that makes sense.
5. How can you make money from NFT?
NFT gives artists a new way to sell their creations. But art isn’t the only thing you can make into NFT, and while not all of them will bring you thousands or millions of dollars, there are ways to make money from NFT. Sites like Open Sea and Rarible allow artists to convert their work into NFT and sell it on the platform.
And NFT isn’t just for tech moguls and celebrities: “Anyone can create an NFT,” says Ozair. “It all depends on how we educate people.” Ozair said creating webinars to bring more NFT into the mainstream and explaining how NFT works is another way to make money, indirectly, from NFT.
“Sometimes there’s YouTube and ads and you can somehow monetize them… but it’s hard because everyone can copy them,” Ozair said. “But if you’re an NFT, it can be like any other income stream. I’m not saying that everything will sell for a million dollars, but there may still be people willing to pay for your videos, or photos, or music.”
Another way to make money from NFT? Digital sports card. Hayes says one of the most popular markets for digital sports cards is NBA Top Shot, which sells basketball players’ digital moments. A limited number of digital packs with three or four cards in each are released on any given day.
You usually have to queue to buy a pack before they run out. Then, you can list the cards in the market for sale one by one. “You can sell one card for more than the package price—to get your money back and then some,” says Hayes.
6. What are the risks?
As with any investment, there are some risks associated with this trendy digital collectible. Apart from the value of your investment dropping if the demand for NFT decreases, authenticity is another risk associated with NFT.
One of the risks is finding out if the person you bought the NFT from actually owns the rights to the item. Hayes said researching the seller’s key to make sure it was genuine. “Research is really important to make sure you’re buying something someone actually has a right to sell,” says Hayes.
Rarible’s NFT platform has a multi-step process for buyers and sellers who want to be verified. This includes posting two social media profiles showing that you share your work and are involved in the community, and behind-the-scenes footage of items you’ve created.
Ozair urges platforms and artists to consider solving this problem in a way that NFT can be more community-based and less exclusive while still protecting creators and collectors. “The system is in there, it’s about Bitcoin, but the question is how to make it in the NFT space…and maybe, we’re almost there,” said Ozair.
So do your research, understand the risks, and find a credible platform to collect or create potentially money-making NFTs—or at least a front row seat to see your favorite artists.
