NFTs, or non-fungible tokens, seem to be everywhere these days.
But what exactly is an NFT, and how do you use it?
We’re sifting through the shifting sands of this emerging digital technology.
Let’s dig in!
NFT Defined
Non-fungible tokens, NFTs, are crypto assets on a blockchain with metadata and identification codes that distinguish them from one another. Unlike cryptocurrencies like Bitcoin or Dogecoin, they cannot be traded or exchanged equally. Instead, these tokens can represent real-world items like concert tickets, music recordings, and real estate.
In the Digital Art world, this technology can be beneficial. An NFT isn’t necessarily artwork itself, but it can function as a digital certificate of authenticity for the work.
However, there are a lot of moving parts when it comes to this. This blockchain technology allows a creator to designate the rightful owner of a digital asset. It also provides rights and uses available to the buyer.
What Are the Pros and Cons of NFTs?
The main benefit of non-fungible tokens is their potential to create more efficient markets. An example of this is blossoming in parts of the art world. NFTs can allow artists to connect directly with their audience, bypassing the need for costly agents and complicated business deals.
Digitization of artwork will enhance the authentication process, reducing costs and allowing a more streamlined transaction process. Your imagination is the only limit on how to use NFT technology.
Now for the cons. By design, the tokens give you something one can’t copy: ownership of the work. However, the artist can still retain the copyright and reproduction rights. To put it in physical terms, anyone can buy a Monet print, but only one person can own the original.
But NFTs are digital, and there’s nothing to stop a digital thief from right-clicking on an image and saving it to a hard drive. These forgeries can have a token of their own, but there is no link to the original art. This potential for fraud is one of the significant drawbacks of NFTs.
What Is a Blockchain?
Blockchain technology is a system of digitizing information that’s impossible to hack, alter or delete.
It’s a digital ledger for transactions that prevents theft and mishandling by duplicating and distributing them across a network, providing a level of confidence not typically seen in other markets.
Most NFTs are created on the Ethereum blockchain, though others blockchains have their own versions. Ethereum is a cryptocurrency, like Bitcoin or Dogecoin, but its blockchain also keeps track of who’s holding and trading the tokens.
Ethereum is the most developed chain and focuses on smart contracts. These are programs or protocols designed to automatically execute, control, or document events according to the terms of an agreement.
Others, such as Ripple, focus on global payments, while J.P. Morgan designed Quorum for private enterprises. However, blockchain platforms will consolidate and collaborate as adoption increases. As a result, there won’t be a need for 1500 different platforms, and eventually, a few big players will dominate as investors figure out this new ecosystem.
What Do NFTs Have To Do With Cryptocurrency?
Unlike other cryptocurrencies like Ethereum and Bitcoin, non-fungible tokens can’t be listed or traded in online or offline exchanges. Instead, users must use NFT marketplaces to list and trade these assets.
Today, most are part of the Ethereum blockchain, which supports the cryptocurrency named Ethereum. The tokens are differentiated from the cryptocurrency because their identification codes reflect additional information, including metadata that describes the digitized asset.
NFTs evolved from the ERC-721 standard contract, developed by the people responsible for the ERC-20 smart contract. This standard defines ownership details, security, and metadata required to exchange and distribute the tokens.
How Do You Create an NFT?
The first step to creating an NFT is determining which digital asset you want to turn into one. This asset can be a custom painting, GIF, music recording, sports collectible, meme, or even tickets to an event. Additionally, you must own the rights to the item you’re creating digitally. Creating a non-fungible token for an asset you don’t own could land you in legal trouble.
The next step is minting the NFT. This starts by determining the blockchain technology you’ll use for your digital token. The most popular is Ethereum. Other choices include Tezos, Polkadot, Cosmos, and Binance Smart Chain.
Following that, you’ll need to set up a digital wallet to create your NFT since you’ll need some cryptocurrency to fund your investment initially. This wallet provides you with access to your digital assets.
Top wallets include Metamask, Trust Wallet, and Coinbase Wallet. If you already own some cryptocurrency, you’ll want to connect it to your digital wallet so you can use it to create and sell NFTs.
Finally, It’s Time to Create!
In step four, it’s time to start creating and selling your NFT. For this, you’ll need to choose a marketplace. Research each digital token marketplace to find a platform that’s a good fit.
OpenSea is usually an excellent place to start. It allows you to mint your own token, plus it’s a leader in NFT sales, with $3.4 billion in August 2021. Yes, that’s in August, not as of August.
After selecting your NFT marketplace, you’ll need to connect it to your digital wallet. That’ll allow you to pay the necessary fees to mint your token and hold any sales proceeds.
With step five, you’re now ready to mint your digital asset. Your marketplace should have a step-by-step guide for uploading your work to their platform. This process will allow you to turn your digital file into a marketable NFT.
The final step is to sell or auction your non-fungible token. Depending on your chosen platform, you can set a fixed price that will allow the first person meeting that price to buy your NFT. Or you can set up a timed auction to give those interested in your work a time limit to place their final bid.
The last option is an auction with no set time limit. With this option, you have the control to end the auction whenever you want.
Why are Artists Using NFTs?
NFT art is quickly changing how artists are paid and revolutionizing how they can work, create, and take ownership of their craft.
They have the power to decentralize and democratize wealth and provide new revenue streams. In addition, it allows people without massive funding the opportunity to create video games, movies, or even an NFT art school.
Non-fungible tokens are a great way to level the playing field for people of color, women, and any community that has been marginalized or left out. Additionally, they can use them to create projects that mainstream media ignores.
Ultimately, everyone can access fundraising and completely control their message and art. In addition, NFTs can offer a platform for new voices. A good example is TheBlkChain which promotes the work of women, BIPOC, and LGBTQ artists.
How Much Does It Cost to Make NFTs?
If you plan on making your own token, you must understand the costs of creating it. We’ve discussed some of the various blockchains. However, each of these chains has fees that vary widely.
The costs to create an NFT range from pennies to over $150. The Ethereum blockchain is the most expensive, with an average price of around $70. The Solana blockchain is the cheapest, costing only $0.01 on average to create a token, not including marketplace fees ranging from 2.5% to 5%.
Ultimately the cost to create one of these digital assets comes down to which blockchain you use to mint it. Furthermore, some blockchains are better than others. So do your research.
What Is the Most Expensive NFT Ever Sold?
The most expensive non-fungible token ever sold is actually a series of NFTs. Renowned digital artist Pak created The Merge, which sold for an eye-popping price tag of $91.8 million. Acquired in December 2021, 28,983 people invested in obtaining all 312,000 shares. Each of these shares is a separate NFT.
Considering that the starting price of each of these shares was $575 with incremental bids of $25 every six hours, this is remarkable. But does it count as the most expensive NFT since it was a series containing individual NFTs? This next single item fetched astronomical figures at auction.
Coming in as the most expensive single non-fungible token ever sold at auction is the piece titled, Everydays: The First 5000 Days, created by digital artist Mike “Beeple” Winkelmann. The digital work is a collage of 5000 pictures taken once daily for more than thirteen years. It sold for $69.3 million.
The individual pieces are organized loosely in chronological order, and zooming reveals abstract, fantastical, grotesque images that are deeply personal or represent current events. These themes include society’s obsession with and fear of technology, the love and hatred of the wealthy, and political turbulence in the US.
Other top-dollar NFTs have sold at auction for between $7.6 million and $52.7 million. So even with current market prices declining, the trend is strong.
Investing Digitally Still Has Risk
Even though most of today’s non-fungible token trading is speculative, it routinely makes people rich. Ultimately, the selling point for NFTs isn’t to make the trading of digital goods easy or cheap.
While valid for the tokens on the blockchain, the digital files they link to aren’t permanent or indestructible. Even if they represent the future handling of intellectual property, we’ll still need lawyers to hash out copyright disputes.
For better or worse, the real selling point of NFTs is that they allow people to create and trade scarce digital objects. Of course, as with anything speculative, it’s best not to invest more than you can afford to lose.
Have you invested in NFTs? Tell us about your experience in the comments!