You’ve probably heard of NFT, short for non-fungible tokens. But, what are they exactly? It is a new type of digital asset similar to cryptocurrency that can get very expensive for you. The craze started in 2017, and since then Twitter’s Jack Dorsey, rock legends Kings of Leon and even Tiger Woods have been selling NFTs for a pretty dime (more below).
But what exactly do you buy when you buy an NFT? This is not a collector’s item that you can keep in your dresser drawer, like, a comic book or paintings. They are completely digital and are related to almost everything – a .
to you, well you are not alone.
In short, NFTs offer a certificate of authenticity created by blockchain for a digital asset or work of art. This interest created a digital market that generated $ 250 million in sales in 2020, with NFTs reaching new levels of hype from Visa, Warner Music Group and Nike. Sameare in the latest wave of cryptocurrency. Still confused? We’ll explain what NFTs really are, how much they cost, and how you can participate in the latest bidding wars.
What’s an NFT?Â
This is the part that takes a bit of open-mindedness. An NFT is a unique digital token, with most using the blockchain to digitally record transactions. It’s not a cryptocurrency like Bitcoin or Ethereum, because those are fungible — exchangeable for another Bitcoin or cash. NFTs are recorded in a digital ledger in the same way as cryptocurrency, so there’s a listing of who owns each one.
What makes an NFT unique is the digital asset tied to the token. This can be an image, video, tweet or piece of music that’s uploaded to a marketplace, which creates the NFT to be sold.
Do I own the asset if I own an NFT?
That’s the real kicker to understanding the whole concept. The person who buys the NFT doesn’t own the actual asset.Â
“NFTs challenge the idea of ownership: digital files can be reproduced infinitely and you do not (usually) buy the copyright or a license when purchasing an NFT,” said Jeffrey Thompson, associate professor at the Stevens Institute of Technology in Hoboken, New Jersey.Â
For example, the creator of thesold an NFT of it for $590,000. The person who bought the token owns the token, but doesn’t actually own the meme. That still belongs to the creator, who held onto intellectual and creative rights.Â
What the owner of the token has is a record and a hash code showing ownership of the unique token associated with the particular digital asset. People might download Nyan Cat and use it on social media if they want, but they won’t own the token. This also means they can’t sell the token as the owner can.Â
Why are NFTs so expensive?
As with physical collectibles like Beanie Babies, baseball cards, and toys, there is a market for NFTs. Buyers tend to be tech-savvy people who understand the idea of ââwanting to buy digital goods and probably did a murder last year with cryptocurrencies. Ethereum, for example, went from just over $ 100 last March to a current price of around $ 3,400. In some cases, buyers are only flexing their digital wallets to show how much crypto they have, but for others, there is a deeper interest.
âEspecially for art-related NFTs, there is a huge increase in demand due to the novelty and creativity of early artists,â said Jason Lau, COO of the exchange. OKCoin crypto, in an email. Whether it’s a physical work with an NFT attached (think of it as a digital autograph and proof of veracity), or a fully digital work (where NFT is art), this new medium opens up new avenues for collectors and artists to explore their relationship with the work of art itself. “
It’s also great for artists, says Lau. By selling digital art directly to interested people, an artist can begin to monetize their work without having to try and sell it to a gallery.
What type of NFT can I buy?
NFTs can be linked to any digital asset. Anything you see online can be an NFT: music, social media posts, clip art, and more. Today Sorare released his âSuper Rareâ Lionel Messi digital collectible card which currently bids at â¬ 29,992.75, equivalent to over $ 35,000. Sorare also announced that he had raised $ 680 million for his next level fantasy sports game. Funding is currently led by SoftBank.
And today, Tiger Woods will be selling thousands of digital collectibles on Autograph in the DraftKings Marketplace. The second collection will launch on September 28. Autograph is co-founded by Tom Brady, another NFT market athlete.
But NFTs go far beyond sports. Recently, Fortune gave its readers a chance to jump into the NFT craze. The company sold 256 copies of graphic designer Pplpleasr’s limited edition cover for the August / September Fortune magazine on OpenSea. The copies sold in five minutes starting at $ 1 Etherum (estimated at $ 3,000). But NFTs were available for resale at three times the cost.
And in August, a clip art of a rock, better known as Ether Rock, sold for $ 400,000 Etherum (estimated at $ 1.3 million). Two weeks ago it was valued at $ 97,716. And in August, Visa announced its purchase of NFT CryptoPunks for $ 150,000 in Ethereum. The financial firm believes that NFTs play an important role in “the future of retail, social media, entertainment and commerce.” And Vine co-creator Dom Hoffman is said to have invented a new way to gamify NFTs with his fantastic game console, Diving.
As the hype for NFTs increases, expect more digital assets to come up for sale and make big bucks.
Where can I buy or sell an NFT?
While you might not want to jump straight into a six-figure bid, there are several NFT markets to check out with Opensea being the biggest. Buyers can search for random artwork, domain names, and collectibles to bid on without breaking the bank. And the Woods Digital Collection is one of many NFT collections available on the DraftKings Marketplace, including the Tony Hawk Collection.
On the other hand, if you want to sell an NFT of your art, you can use NFTify, the Shopify NFT store, to sell NFTs without setting up your own store. You will also need a MetaMask account to get started. And Burberry recently announced a partnership with Mythical Games to gamify the buying, selling and collecting of toys as an NFT through the Blankos Block Party game. CNET’s Chris Parker has also created a step-by-step guide on how to create and sell your own NFT, in the video below.
What are the disadvantages of NFTs?
One downside is the hundreds of dollars in fees required to create an DTV. If you are making your own token on the Ethereum blockchain, you have to use Ethereum, which as mentioned earlier is quite expensive. Then, after performing an NFT, there is a “gas” fee that pays for the labor required to manage the transaction and is also based on the price of Ethereum. Marketplace simplifies the process by handling everything for a fee when an NFT is sold.
There is also an environmental cost. Like Bitcoin, Ethereum requires computers to handle calculations, known as âmining,â and these computing tasks require a lot of energy. An analysis from the University of Cambridge found that mining Bitcoin consumes more energy than the entire country, Argentina. Ethereum is second behind Bitcoin in popularity, and its energy consumption is increasing and comparable to the amount of energy used by Libya.