What Are NFTs?

October 31

By lourdes

0 comments

Unless you’ve been living under a rock for the past few months, chances are good that you’ve heard of NFTs, but you have been too busy to really gain an understanding and appreciation for just exactly what non-fungible tokens are.

The Meaning of NFT

To begin, NFT stands for non-fungible tokens. But what does that really mean?

The term “non-fungible” refers to something that is unique and cannot be replaced by anything else. For example, Bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you would get a completely different card.

Since NFTs function as unique digital assets, they can be any kind of digital expressions, such as a video, a song, a collectible baseball card. But unlike collectible and valuable items in the world of physical goods, like actual books or sculptures, NFTs persist as a digital collectible that is kept secure thanks to the blockchain.

About Blockchain and NFTs

What is a blockchain? A blockchain is a digital record of all transactions of digital assets, which cannot be altered. The way the data is stored, it is linked together inextricably. This is why people are using it to prove ownership of digital items. 

Beeple NFTs is an example of a famous NFT sale that drew attention from investors worldwide is the case of Christie’s and Beeple.

Back in 2007, artist Mike Winkelman, who goes by the name Beeple, began publishing his artwork online, doing it every day for more than 13 years. He gathered this work together to create “EVERYDAYS: THE FIRST 5000 DAYS,” The NFT Sold for $69,346,250 via Christie’s, the famous auction house. With this transaction, Christie’s became the world’s first substantial auction company to sell a digital artwork relying on NFT technology to prove its authenticity. The fact that people can prove they own a particular artwork makes NFTs the future of art.

Why artists are creating NFTs

Digitally-native art and collectible virtual paraphernalia are steadily growing markets. NFTs have enormous potential, especially for artists. There are a variety of reasons why artists are turning to the digital medium.

NFTs create a new exciting direction for artists that expands their audience. 

NFTs help artists gain greater agency over their work. 

Increase in revenue. The revenue opportunities in this space have never been seen before – it’s truly extraordinary. The artist and founder behind an NFT collection can continuously collect royalties of the sale price each time their NFT creation is sold on a marketplace. 

Types of NFTs

NFTs come in various categories like PFP, Generative Art, Photography, etc.

PFP  stands for “profile picture” and is one of the most popular types of NFTs. The industry credits “CryptoPunks” with being one of the first NFT collections to be recognized for its PFP.

Bored Ape Yacht Club NFT

Generative Art is nothing new and has been around for centuries in several kinds of art such as paintings or music. The term generative art (often referred to as “algorithmic art”) describes pieces of art that have gone through a generation process by a system that “is set into motion with some degree of autonomy. An example is the Autoglyphs who are the first “on-chain” generative art on the Ethereum blockchain.

Fidenza by Tyler Hobbs

Photography is another type of NFT sold. Photographers are a active in the community, mostly as sellers but also as buyers. NFTs can be collected in the same way editions of photographic prints are in the traditional market except now photographers are able to gain more revenue through royalties.

Twin Flames by Justin Aversano

Real-world Assets:   Examples of NFT projects in this category Luxury goods and Real Estate.

Music and Media:  Artists are increasingly linking music and media files to NFTs, thereby enabling an individual with true ownership claim to access the files. An example of this is NAS choosing to stream royalty rights for two of his songs. These NFTs will include the streaming rights to two of Nas’s most popular tracks: “Rare” and “Ultra Black.”  Read more here.

Basic NFT Terms To Know

Blockchain – blockchain is a distributed digital ledger that stores data of any kind. A blockchain can record information about cryptocurrency transactions, NFT ownership or DeFi smart contracts.  Think of it as an open spreadsheet that everyone in the crypto world has access to, and it records any changes or transactions. 

Floor price – The lowest NFT price in any given category of NFTs. To “buy the floor” is to buy the cheapest NFT in a project / collection. 

Gas – An amount required to perform cryptocurrency transactions on the blockchain. Every time you buy an asset, send ETH, or set up a smart contract, then gas has to be paid in order to run the transaction.

Offers: Interested buyers of a specific edition of a collectible are able to make offers to the owner in hopes of purchasing the NFT at their desired price.

Rarity – NFT rarity decides how rare an NFT is and in turn, how valuable it is. Rare NFTs are most highly sought after by collectors, which pushes their price up.

Rugpull – The term “rug pull” refers to unknowing investors “having the rug pulled from underneath them” by the creators or developers of a cryptocurrency. This can take a number of forms, but the most common type of rug pull is the liquidity scam, which most commonly takes place on decentralized exchanges

Trait – A distinguishing quality or characteristic in the art of your NFT. A unique trait can increase the value of it. 

Whitelist:  a list of people who get early and guaranteed access to mint at a specific date and window of time. A whitelist is similar to a VIP list, or a guest list for an event. If you’re on it, you might get perks or even a lower price.

How to Choose an NFT

There’s no time like the present to start looking at NFTs to decide which one or ones you’d like to invest in. As Forbes put it,

“Three years ago, the entire NFT market was worth no more than $42 million. By the end of 2020, it had grown 705% to $338 million in value, according to the latest estimate from Nonfungible.com, which monitors the NFT marketplace.”

Online marketplaces for NFTs work like other digital auction houses. If you have ever turned to eBay to sell or purchase physical items, you already have an idea of how NFT sites operate.

According to NerdWallet, the basic premise is, “Most NFT marketplaces function like an auction house. 

Where to Buy NFTs

After seeing the value of non-fungible tokens, you may be wondering where to buy NFTs. For people who are new to NFTs, it’s useful to check out various websites that are dedicated to buying and selling them, until you find one that resonates the most with you and your investment portfolio preferences. Click here to read our article on where to buy NFTs.

Getting Into NFTs

A whole community has sprung up around buying and selling NFTs. Using sites like NettyArt.io will be helpful, with buy ratings, interviews and much more to help you sort out what to invest in next. Here are some sites for you to learn more about NFTs and make purchases:

Art Blocks curated NFTs: Bills itself as Creativity in Generative Design

Bored Ape Yacht Club: A collection of 10,000 NFTs loved by collectors 

Cool Cats NFT: Viewed as one of “the Coolest NFT’s on the Blockchain.”

Larvalabs: CryptoPunks: The CryptoPunks NFT is a project that served to inspire modern CryptoArt sales

Hopefully, this introduction about NFTs and how they work will help you start your journey. The fact that NFTs are serving as a new kind of artwork and a way to invest in digital assets may inspire you to become a creator of NFTs yourself or a person who enjoys researching about new NFTs so you can buy and sell them.