An NFT (Non-Fungible Token) is a unique data unit using technology that lets digital content become authenticated and logged on cryptocurrency blockchains (primarily Ethereum). These types of digital content include videos, songs, and images. All transactions are recorded on-chain after the content is logged onto the blockchain, making an effortlessly accessible ledger of provenance and price history.
The main purpose of the NFTs is to allow users to own, purchase, and sell digital content. Beforehand, artists could attract a large following on social media, find freelance commercial work, and maybe sell prints and other merchants with their designs. Conversely,, they had issues monetizing digital art directly since consumers did not think they had to pay for anything when they could have quickly taken a screenshot.
Non-Fungible Token marketplaces are like centers where you can trade the world’s highly valuable assets. NFTs are in the limelight while modifying how we see assets, arts, investments, and rare collectibles. But how does this system work? We will give a clear but brief explanation of what you need to know bout NFTs and the NFT marketplace.
What is a Non-Fungible Token?
Non-fungible tokens have exploded this year. These digital assets sell rapidly, from art and music to food and toilet paper. But are NFTs worth it? Some experts say they are a bubble that will pop; others believe NFTs are the future and will alter investing forever.
An NFT is a digital asset that embodies real-world objects like music, art, in-game items, and videos. You can buy and sell them online with cryptocurrency. They are commonly encoded with the same underlying software as many cryptocurrencies.
Although NFTs have been around since 2014, they are gaining notoriety because they are becoming a progressively popular method to trade digital artwork.
The technology behind NFTs made it possible to trade and sell artworks online. However, the NFT community creates a market for these digital assets. As many detractors state, people can still take screenshots or save the digital images converted into NFTs.
NFTs are also usually one of a kind, or at least one of a limited edition, and have unique classifying codes. This is in blunt contrast to most digital creations, which are almost always countless in supply. Theoretically, cutting off the supply should increase the value of a given asset if it is in demand.
But many NFTs, at least in these early days, have been digital works that already exist in some form somewhere else, like iconic video clips from sports games or securitized versions of digital art that are already trending on Instagram.
Everyone can view the images online for free. So why are some people spending millions on something they can easily screenshot or download? Because an NFT lets the buyer own the original item, not only that, it holds built-in authentication, which is proof of ownership. Collectors value those digital rights almost more than the item itself.
NFT and Crypto Differences
NFT is usually built by the same kind of programming as crypto, like Bitcoin or Ethereum; however, the resemblance ends here.
Physical money and cryptocurrencies are fungible, which means they can be traded or exchanged for one another. For instance, the price of one dollar is always the same as another one-dollar bill, and the price of a Bitcoin is always equivalent to another Bitcoin. Cryptocurrency’s fungibility makes it a trusted way of executing transactions on the blockchain. NFTs are different, however.
Each NFT has a digital signature that makes it impossible for them to be exchanged for or equal to one another (therefore, non-fungible).
How does an NFT work?
NFTs are on a blockchain. Blockchain is a distributed public ledger that records transactions ( you can learn more about blockchain on the Bitunivex website). You probably know the blockchain as the underlying process that makes cryptos possible.
Specifically, NFTs are usually held on the ETH blockchain, while other blockchains also support them.
An NFT is built or minted from digital objects that embody tangible and intangible items, including Art, videos, GIFs, Virtual avatars and video game skins, music, Collectibles, and designer sneakers. Even tweets can become NFTs. Jack Dorsey (co-founder of Twitter) sold his first tweet for more than 2.9 million dollars.
Usually, creators (or artists) mint their work on an NFT marketplace, including platforms like OpenSea, Foundation, SuperRare, Nifty Gateway, and many others. Minting is the act of making an NFT, which means producing a smart contract that will be stored on the blockchain. The smart contract keeps a lot of essential data: it lists the work’s creator and ensures that the creator or other parties receive royalties every time the NFT is sold.
This process is not perfect: technological glitches can make it so that parties do not always get royalties. And a smart contract does not possess the legal weight of copyright, and it will take a related court case to see how the law regards smart contracts.
Blockchain technology and NFTs offer content creators and artists a unique opportunity to monetize their wares. Artists can sell their works directly to the consumer as an NFT, which lets them keep more profits than they could through galleries and auctions. Moreover, artists can program in royalties to earn a percentage of sales every time a new owner buys their art. This is a striking feature as artists generally do not make future proceeds after their art is first sold.
Besides art, brands like Charmin have auctioned off themed NFT art to raise funds for charity. Charmin called its offering non-fungible toilet paper, and Taco Bell’s NFT art sold out in minutes, with the highest bids coming in at 1.5 WETH (wrapped Ether), equal to 3,723.83 dollars at the time of writing. Currently, there are many trendy GIFs and NBA Top Shots that exist on the blockchain. Some celebrities, including Snoop Dogg and Lindsay Lohan, are joining the NFT bandwagon, releasing unique memories, artwork, and moments as securitized NFTs.
Should I Buy Non-Fungible Tokens?
Before making a purchase, we must see if it is the right decision. Many experts say it might not work out, and it is a risky field since it is new, and we have no idea how it will perform in time; however, some believe that this field will only become more prominent. So, maybe it is a good idea to start investing small.
In other words, investing in NFTs is an essentially personal decision. If you have money to spare, it may be worth considering, especially if a piece has a special meaning for you.
But keep in mind that an NFT’s price is based entirely on what someone else is willing to pay for it. So, demand will drive the price higher rather than fundamental, economic, and technical indicators, which typically influence stock prices and generally form the basis for investor demand. This means an NFT can re-sale for less than what you paid. Or you probably will not be able to resell it at all if no one wants it.
Consider NFTs just like you would any investment
- Do your research,
- understand the risks—and if you decide to take the plunge,
- do so with a healthy dose of caution.
What is an NFT marketplace?
They built NFT platforms around the idea that, like physical content, digital content can be limited (in quantity) and can then be owned and traded. These platforms leverage blockchain technology to confirm the provenance of digital content, similar to how an auction house might verify that a work of art is the original. Some platforms even provide the ability to “burn” items, further underlining the concept of scarcity for these digital products. Blockchain-based transaction logs can facilitate royalty credit, automatically sharing a percentage of revenue from second-hand sales with the original artist every time anyone trades an NFT.
When dealing with a rapidly-evolving new technology like NFTs, it’s not always clear what the correct choice is. To avoid making costly mistakes, you have to understand the landscape of platforms that are now available and decide which will be the best fit for your NFT offerings.
Types of Non-Fungible Token marketplaces
It is helpful to know there are two types of NFT marketplaces: streamlined and augmented.
Streamlined marketplaces support a wider range of NFTs and offer more limited, general services to sellers, whereas augmented marketplaces are highly specialized and offer a more full-service experience.
Streamlined platforms consist of services like OpenSea and Rarible, which host both auctions and fixed-price sales for various NFTs and resemble traditional platforms like eBay. These marketplaces focus mainly on enabling efficient transactions, often offering payment infrastructure to accept crypto (mostly BTC and ETH) and credit card payments. Because of their breadth, these platforms usually have large user bases.
Augmented marketplaces, conversely, tend to focus on narrower niches and offer many value-added services like minting (creating the NFT), curation, marketing, portfolio trackers, pricing recommendations, and even full-blown games constructed on the NFTs. For instance, the NBA’s Top Shop focuses on basketball collectibles, SuperRare focuses on visual art and offers extensive curation and recommendation services. Sorare focuses on digital sports cards and hosts fantasy soccer matches.
What type of NFT would be the industry standard?
At this point, you might be asking yourself which of these platforms is probable to emerge as the industry standard. Traditional marketplaces tend to have winner-takes-all potentials, meaning that when a single platform reaches scale, it becomes almost impossible for competitors to overtake it, so it’s only natural to invest in a platform that will not become obsolete. Nevertheless, in contrast to traditional markets, we believe that no single NFT platform will have a dominant position.
While NFT is still a growing industry, they have shown the potential to be highly profitable, creating real value for sellers and buyers. They might have started as a science project driven mainly by crypto enthusiasts and risk-loving, tech-savvy artists; however, NFTs quickly enter the mainstream. Whether you are a major brand like the NBA or a likely to advance independent artist, partnering with the right platform is the crucial first step to drive customer engagement and keep your position in this novel digital economy.
Popular NFT Marketplaces
Have your wallet set up and funded. Then there here are many NFT sites to shop. The largest NFT marketplaces are as follows:
- Axie Marketplace
- Larva Labs/CryptoPunks
- NBA Top Shot Marketplace
- Nifty Gateway
- Theta Drop
Even though these platforms and others are hosts to thousands of NFT collectors and creators, be sure to do your research wisely before purchasing. Some artists have become victims to impersonators who have sold their works without their permission.
Furthermore, the verification processes for NFT listings and creators are not stable across platforms (some are more stringent than others). Rarible and OpenSea, for instance, do not need owner verification for NFT listings.
How can I buy a Non-Fungible Token?
In case you found yourself interested in owning an NFT collection, you will have to acquire some essential items:
First, you will need to get a digital wallet that lets you store cryptocurrencies and NFTs. You probably need to buy some crypto, like Ether (the kind of crypto depends on what currencies your NFT provider accepts). You can now buy cryptocurrency on Bitunivex, a global and reliable fiat and crypto exchange platform in Australia. This platform also provides wallet services for you.