After all, what is NFT? It’s doubtful that you haven’t asked or heard this question around. The truth is that NFTs have become a relevant subject in today’s world: due to their characteristics, opportunities, and polemics.
At TechNexon, we have a close relationship with current technology and innovations. Solutions such as blockchain and cryptocurrencies have already been covered on our blog.
And with NFTs, it will be no different. That’s why we want to explain to you, is a complete guide, everything about NFTs, going through topics such as:
- What are NFTs?
- How do NFTs work?
- Can any item become a non-fungible token?
- An overview of the NFTs market
- Why do people buy NFTs?
- How to buy NFTs?
- How to make NFT art?
- What are the most valuable NFTs on the market?
- Is it worth investing in NFTs?
- What are the risks of the NFTs market?
- NFTs and cryptocurrencies: what are the differences?
What are NFTs?
NFT is a unique digital asset for trading individually. The acronym “NFT” refers to “ Non-fungible token ” or non-fungible token.
The “non-fungible” means that each token is unique, representing the digital rights (ownership) of assets of different formats, such as audio, video, images, and others (which can also be physical).
In this way, it is possible to affirm that no NFT is the same as another. Also, the way NFT ownership works is something worth understanding:
If you buy an NFT of digital artwork in GIF format, you are not legally purchasing the artwork in its format, but you are accepting the token — which can include the rights to the artwork.
This token is a certificate of ownership that is publicly verified on the blockchain.
When were NFTs created?
The origin of NFTs dates back to 2014 when the first non-fungible token was created. Around 2017, more assiduous blockchain users and the cryptocurrency world began to pay attention to the topic. In 2018, it was the turn of the Ethereum blockchain to add a support system for NFTs.
Since then, the subject has become popular.
Soon, Ethereum stood out from Bitcoin as the leading blockchain for NFTs. Its intelligent contract capability allowed for the development of tokens and storage space programs built on the blockchain.
Among the first NFT projects, we can highlight the CryptoPunks, a collection launched by Larva Labs that ended up being identified as the beginning of the NFT.
A curiosity is that the NFTs from this collection were (and still are) sold for millions of dollars.
How does NFTs work?
Non-fungible tokens use a different blockchain standard than cryptocurrencies (in the case of Ethereum, ERC-721). It allows them to be stored and information from intelligent contracts to be accessed.
However, NFTs can also be created on other smart contract-enabled blockchains such as Solana, NEO, Tezos, EOS, Flow, and Secret Network.
Non-fungible tokens have smart contracts that allow specific information to be recorded on the blockchain, such as the owner’s identity and other advanced metadata.
It is worth remembering that, although digital arts have become popular as the main NFTs on the market, this technology applies to anything digital, such as music, video games, tweets (and other popular posts on social networks), photography, and much more
An overview of the NFTs market
The NFT market is only growing — whether in USA or worldwide. Therefore, it is a good alternative for those who want to enter the crypto world and try new investments.
For example, according to data released by Decrypt, the volume traded in the third quarter of 2021 was more than US$ 10 billion — a 704% increase over the same period of the previous year.
The most expensive NFT was acquired by nearly 30,000 collectors together — a piece by the artist known as Pak called The Merge.
The value? The incredible sum of $91.8 million.
In the case of collections, remember that we mentioned CryptoPunks?
Today, in 2022, there is another collection that has become a craze among collectors and celebrities, the Bored Ape Yacht Club.
According to an article by Exame magazine, singer Justin Bieber bought a Bored Ape NTF for almost R$7 million.
The Brazilian player’s most recent investment was also in a Bored Ape NFT, paying around R$6 million.
Why do people buy NTFs?
Why are people buying NFTs and making this market a hot spot these days? There are a few reasons!
Perhaps the main thing is exclusivity: each NFT is assumed to be unique, regardless of the information it carries. The art, document, or asset to which it is linked does not exist elsewhere — at least, in the digital environment.
However, there are other reasons; check them out:
As we mentioned earlier, several celebrities are embarking on the NFT craze.
Celebrities wield great power to influence people — and there’s nothing new here. Soon, collectors of all types are interested and want to be part of the same movement. Furthermore, celebrities are buying NFTs and creating them, which attracts the attention of their fans and followers.
It is common for those who buy an NFT from a collection to obtain specific benefits.
Today, some brands use NFTs to guarantee premium access to their members – serving almost like digital tickets. Thus, these members can have exclusive or early access to products, services, and events promoted by the brands.
How to buy NFTs?
NFTs can be purchased from a number of popular NFT markets, including OpenSea, Rarible, Mintable, Axie Marketplace, and more. The majority of markets allow you to sell digital art, music, collectibles, virtual assets, in-game goodies, and other similar products. Users may easily make, sell, and purchase NFTs on most platforms. However, before making any purchases, you should do your homework and educate yourself on how to avoid NFT frauds.
In this process, it is necessary to stay connected to some details, such as the fees known as “ gas fees.” This is a rate that varies many times across all marketplaces. It relates to NFT mining, accounting for the computational power to process the transaction via blockchain.
What are Top Marketplace to buy NFTs?
If you are interested in investing in NFTs, know that you can access different marketplaces to purchase yours! One of them, as we mentioned, is OpenSea, which aggregates NFTs from all over the world and can be considered the biggest of them.
However, other names can be considered, such as:
- FTX NFT;
- Magic Eden;
- Coinbase NFT.
How to make NFT art?
Interested in the subject and want to learn how to make NFT art? Well, there is a step-by-step you can follow. The first concept you should understand is “minting,” which describes when someone becomes the first owner of an NFT after a blockchain transaction.
Now, it’s time to understand how to build your NFT and sell it. Come on?
- Choose the asset you want to convert to NFT.
You can choose a painting, picture, song, video game collectible, meme, GIF, or even a tweet. What matters is that an NFT is a unique digital item with a single owner, and you must have intellectual property over the asset.
- Choose your blockchain platform
Once you’ve selected your digital asset, it’s time to start the NFT creation process. This starts by determining the blockchain technology you intend to use for your NFT. The most popular among NFT artists and creators is Ethereum (CRYPTO:ETH).
- Configure your digital wallet
If you don’t already have a digital wallet, you need to create your own. After all, this is where you will receive the value of an eventual sale of the NFT — as well as you will need it to cover some expenses related to this process. It is also essential to buy some cryptocurrencies. The leading NFT wallets are Math Wallet, AlphaWallet, or Trust Wallet.
- Select your marketplace
Once you have a digital wallet and cryptocurrencies, it’s time to choose a marketplace — where you will advertise NFT.
OpenSea is one of the main ones, as it allows transactions in different cryptocurrencies and allows you to create your NFT within the platform. Typically, this process takes place when the file is uploaded to the platform, making it an NFT — which can also incur some costs, so stay tuned.
By the way, remember to integrate your digital wallet with the marketplace account! Finally, you can diversify the sales process depending on the marketplace policy. It is possible to establish a fixed price, a timed auction, among many other ways!
What are the most valuable NFTs on the market?
NFTs can reach exorbitant amounts — and that’s why they attract so much people’s attention! But do you already know which are the most valuable today?
The first one we mentioned earlier is ‘The Merge’ by artist Pak, a group of investors who acquired over $91 million in December 2021.
The second is a collage of 5,000 works by artist Beeple, titled ‘Everydays: The First 5000 Days ‘ and cost nearly $70 million.
Beeple also created the third most valuable NFT, but it is a hybrid sculpture (mixture of physical and digital) called ‘ Human One. ‘ The value was almost US$ 30 million.
Is it worth investing in NFTs?
After exploding in popularity, many became interested in entering the NFT market. But is investing in these tokens worth it?
The answer depends, especially since we are talking about a very new and premature market.
Investor Vignesh Sundaresan, who bought the NFT from ‘Everydays: The First 5000 Days’, said in an interview with CNBC that NFTs hold real value and represent a transformation in how the world views art.
For investors, an NFT can also be a way to diversify their portfolio: as they can buy an NFT of art for X value and sell it for two, three, ten, or a hundred times that amount sometime later.
What are the risks of the NFTs market?
There are some risks linked to the NFTs market discussed by investors and those interested in the subject.
One of them is the risk that the NFT will disappear: it depends on a database as a digital asset. What if some catastrophe hits the database and shakes the blockchain? There are specific questions about this.
Another issue is security: Recently, OpenSea reported that a few users (17, to be exact) suffered a phishing attack that caused them to lose around $1.7 million in NFTs.
But perhaps the main problem related to NFTs (and cryptocurrencies in general) is their environmental impact.
Yes, a digital asset can impact the environment!
All because mining cryptocurrencies is a task that depends on excellent energy effort.
It is estimated that mining cryptocurrencies such as Bitcoin and Ethereum currently generates 36 million tons of CO2 per year. According to CNBC data, it’s the equivalent of the carbon footprint of countries like New Zealand.
NFTs and Cryptocurrencies: What are the differences?
The main difference between NFTs and cryptocurrencies is that one is “non-fungible” and the other is “fungible.”
You can send 1 Ethereum or 1 Bitcoin to a person, and they can send it back to you (or 1.2 Bitcoin, for example). Cryptocurrencies are divisible and shareable. The same can be said of digital payments, Real Digital or physical money.
But NFTs are not divisible, you can’t send someone a movie ticket’s part, and the logic is the same. So, 1 Bitcoin here in India is the same as 1 Bitcoin in Japan — and it has the same value, even though it fluctuates accordingly.
However, no NFT is the same: an NFT bought by a collector in New York will never be the same as an NFT bought by someone in Japan.
Today, fortunes are traded in NFTs, establishing the trend in an honest and promising market. The excitement around digital assets drives them to skyrocket prices and could mean a business opportunity! However, like any investment, there are risks to consider.