NFTs exist on the blockchain as a contract or proof of ownership for underlying digital assets. Digital assets could be anything from art, virtual real estate, gifs, video clips, and more.
NFTs are unique tokens in the blockchain, which is a distributed ledger technology. They are based on cryptocurrencies such as the Ethereum blockchain, although other blockchains support NFTs as well.
What are NFTs?
NFT can be minted from any digital object representing both tangible and intangible objects. There are no rules and regulations to what can and cannot be NFTs as of now, so users are free to mint NFTs as they see fit.
Some typical NFTs include:
- Digital art
- videos and sports highlights
- game skins, virtual avatars, and other in-game items
- designer sneakers
- the written word, or tweets
The main function of NFT is to serve as ownership rights held in a digital ledger.
Being a non-fungible token, every NFT is unique and cannot be traded with another NFT. Likewise, the value attached to each NFT is also different for each NFT, or the NFT collection, and it solely depends on the creator of the project.
If we take the example of NFT digital arts, you will not get an oil painting to hang on your living room wall, in case, you will get the ownership certificate and the original digital file for your purchase. While the file of the digital image can be replicated, the ownership will be yours, encoded on the blockchain (Ethereum or others).
There are a lot of collectors who have spent millions in the NFT art business, for the virtual future we are likely to experience in the coming days of web3.0 and metaverse.
However, there are plenty of use cases of NFTs in the present as well.
What are NFTs used for?
In order to understand the use cases of NFTs, let’s breakdown the people who are currently using NFTs into three categories
- NFT Artists
- NFT Collectors/Investors
Blockchain technology and NFTs allow artists and content creators to be independent. Artists and creators no longer have to rely on art galleries, music labels, or other forms of established companies that own the artist and their art.
The introduction of NFT allows the artists to directly sell their art to customers as an NFT. Not only is this beneficial for the artist, but it also allows consumers to invest in the artist and their art, and they have the opportunity to cash in for a potential higher value in the future. Artists can also program royalty clauses in their NFT so that they receive a percentage every time the NFT is being sold to a new owner.
You might have heard various news about NFTs being sold for millions of dollars. There are collectors and investors who are investing for the future and the value underneath the NFT item or collection. Bored Ape Yacht Club for instance has managed to garner a lot of attention, with A-list celebrities like Justin Bieber and Eminem purchasing NFTs. Likewise, there are other high-profile NFT projects like Cryptopunks and entrepreneurs and internet profiles like Gary Vee are heavily invested in it, with Gary owning 60 cryptopunks at the time of this writing.
Gary Vee has also opened a restaurant in New York, and the restaurant is only exclusively accessible to owners of VeeFriends NFTs.
While some might enjoy exclusive access allowed to them by purchasing an NFT collection, others are in it to trade for a higher value. There is no business or trade option at the moment that provides such high value in return.
Brands like Nike, Tacobell, NBA, and a host of others have joined the NFT space. They are creating NFT pieces as a part of jumping on the trend of NFT marketing. And, they have been getting a lot of buzz due to their NFT initiatives. On the other hand, these brands also gearing up for the future, the time when metaverse and web3.0 are more easily accessible.
How to Create or Buy NFTs?
There are some prerequisites to entering the NFT world. First of all, you will need a digital wallet and purchase some cryptocurrency, like Ether. Ether a.k.a Ethereum is the cryptocurrency based on the Ethereum blockchain and it is currently the most commonly used crypto for NFT.
You can buy crypto using platforms like Coinbase, Binance, Kraken, etc. Do remember that every crypto transaction requires a fee, which might vary from one platform to another.
You will need a wallet to hold your NFTs before heading towards the NFT marketplaces.
Read this step-by-step tutorial for a detailed guide on how to buy NFTs.
Common NFT Marketplaces
Once you’ve got your wallet set up, there are plenty of NFT marketplaces for you to choose from. Right now, the most popular NFT shops include Opensea.io, Rarible, Foundation, Axie Infinity, NBA Top Shot, etc.
Opensea is more popular due to its all-inclusive NFT collections, which can be anything from digital art, tweets, written word, and more. There are also some niche NFT marketplaces like Axie Infinity NFT Marketplace, which has been built around the game Axie Infinity.
These marketplaces host thousands of creators and their NFT collections. However, that doesn’t mean you should just purchase the first thing you see. We encourage you to do your own research into the creator, the project, and the value underneath before you buy an NFT.
NFT marketplaces do not hold any responsibility towards their users or the NFTs created and purchased using their platform.
Are NFTs for Money Laundering?
NFTs have grown in popularity exponentially since the beginning of 2021. However, due to the large amounts of money involved in the NFT market, people have started referring to NFTs as money laundering schemes.
Now, it would be too naive to say that NFTs aren’t used for money laundering. It very well can and may have been used for purposes other than what it’s intended for. You could use a hammer to build a beautiful home or bash someone’s head in. You know where I am getting at. All hammers cannot be classified as murder weapons.
When we learn about NFTs and start looking at NFTs as a part of the bigger wave that’s coming towards us, i.e. blockchain technology, we can understand that money is only a side effect of what’s happening.
There are an innumerable amount of NFT collections at the moment, and most of them are going to fail for a variety of reasons. But that is not a good enough excuse for us to not even bother reading up on this new technology and trying to understand how NFT works.
Should you buy NFTs?
Buying NFTs is completely a personal decision. If you are familiar with the crypto world and have been following the NFT space for the past six months, you might have a pretty solid idea about the NFT projects that can potentially do well and a few duds.
If you are a complete noob in this space and are looking for a short-term gain or long-term investment, I would advise you to do some more research.
It’s not to say that NFTs are not good investments, but the space is so new, and there are no distinct regulations as of yet. New tax laws are being regulated every day, and the NFT space is changing too rapidly for it to be predicted like stocks.
Once you start treating NFT collections like a company and dig around to see their value propositions, you will be able to make up your own mind.
Rest assured, blockchain technology is going to evolve, and web3.0 is happening whether we like it or not. Our best advice, follow “NFTstudy.net” and start reading about this fascinating technology.