What the hell is an NFT? A Beginner’s Guide to NFTs
If you use social media, chances are that you have come across the term NFTs. You might have heard of images or GIFs selling for millions of dollars. The interest in NFT does not appear to be subsiding soon. For instance, the total sales volume for NFTs was $340 million in 2020. That would be impressive if the figure had not grown to over $17 billion in 2021. If you would like to understand how the NFT market has grown so big in just one year, read on.
What is an NFT?
NFTs are digital assets that represent real-world items such as music, art, and in-game items. They are traded online on NFT platforms, which is usually in crypto. Like cryptocurrencies, NFTs are secured using the blockchain. NFTs were first introduced to the world in 2014 but it was not until November 2017, when KryptoKitties NFTs launched that the NFT sector gained wide recognition.
An NFT is a non-fungible token. That simply means that it is one of a kind and it has a unique identifying code. Essentially, an NFT represents digital scarcity. This is in contrast to other digital creations, which exist in infinite supply. That is what gives NFTs their value. Since there is a limited supply and rising demand, their value will likely continue to rise.
Today, many NFTs exist as digital creations that already exist on the internet. However, when someone buys the NFT associated with the clip, it gives exclusive ownership of the digital creation. Today, there are unique digital creations that have been created with the sole purpose of being converted into an NFT. One of the best examples is the “EVERYDAYS: The First 5000 Days” digital artwork that was created by Beeple, the famous digital artist. The artwork was later sold at Christie’s for an eye-watering $69.3 million.
How NFTs Work
Many that are new to NFTs often wonder why anyone would buy a piece of digital art when they could simply copy and paste it, and view it for free. The reason is that an NFT associated with a piece of digital art gives the holder exclusive rights to the original piece. An NFT comes with built-in authentication, which is used as proof of ownership. For collectors, the value is in the digital bragging rights associated with owning the NFT.
The Benefits of NFTs for Creators
For artists and creators, the NFT concept is revolutionary. It gives them the ability to sell their work directly to a global audience. The new business model created by NFTs cuts out middlemen in the form of distributors, who often receive an outsized share of the sale price. Musicians and artists can sell their work directly on NFT marketplaces such as OpenSea.
The Concept of NFTs is still young and new use cases are being created all the time. For instance, major fashion brands are getting into the business with the sale of NFT sneakers, clothes, and other items. Another business model that is emerging is the sale of exclusive tickets to events as NFTs.
Here is one of my NFTs. I won this guy from a contest on Coinmarketcap. They have a "Diamonds" program were you get a diamond everyday if you log on and check in. You can spend your diamonds on one of the many giveaways they have. They will post an upcoming reward with a countdown clock, when that clock hits zero they open up the reward for people to claim. A word of warning though, it is pretty difficult to win on the days when the reward becomes available, you are going to have to button smash to get your order to go through. I have been able to redeem two NFTs like this but there have been plenty of rewards that I just couldn't get through for. It's part of the game, don't get too upset about it, just be ready for when they release it and remember that it's free! Sign up for Coinmarketcap and start earning your diamonds today!
Summary
When critics of NFTs believe it is a fad that will soon fade away, the data does not support this sentiment. New use cases are being developed all the time and the NFT market has grown from almost nothing to billions of dollars today. As new use cases are developed, some will undoubtedly fail but others will stick and grow.
NFTs give human humanity the ability to share, own, and trust each other with ease using the blockchain. Never before has it been so easy to do that in the history of humanity. The possibilities of NFTs will only be limited by human imagination.
How to Buy NFTs: A quick run through
If you are interested in getting into the NFT universe there are a few things you are going to need before you can receive them. The first thing you are going to need is a wallet for whatever blockchain your favorite NFT is on. Right now the most popular place to buy/sell NFTs is https://opensea.io/ which runs on the Ethereum blockchain. I use Metamask because it is easy to setup and you can download a chrome extension to make it easy to connect with websites. When creating your wallet, make sure to copy your 12 word seed phrase and store it in a safe spot. If you forget your password and lose the seed phrase there will be no way to get into your wallet and the funds you have in there will be lost.
Once you have your wallet setup, the next step is to buy some ETH so that you can buy the NFT and also pay the gas fee for interacting with the blockchain. (This fee goes to validators as a payment for making sure transactions are valid). Coinbase is one of the most popular exchanges to buy ETH with low fees. Sign up for Coinbase today (affiliate link)and receive free Bitcoin for funding your accoint!
Once you have ETH in your wallet you are now ready to explore that fascinating new world of NFTs! Simply go to https://opensea.io/, search through the huge variety of NFTs until you find one that you like and buy it!
-Disclaimer-
This is not financial advice, and you should invest at your own risk. NFTs are risky, just like any investment can be, so take your time to learn about what it is you are investing in so that you can understand the potential downsides. Only invest what you are willing to lose completely, don't spend any money that you might need to live off of.
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