What are NFTs?
Non-fungible tokens are collectible digital assets that carry value which is unique and cannot be replaced. NFTs are part of the Ethereum blockchain where they have additional information stored which allows the NFTs to come in the form of GIF, MP3, JPG. It is also a digital certificate of ownership of the authentic collectibles ranging from artwork to digital sneakers.
NFTs are becoming largely popular thanks to how they have revolutionised the collectibles space. It allows for easier and more convenient ways of facilitating the buying and selling of collectibles as the value of the NFTs is determined by the market. Although NFTs that were used, bought, sold or duplicated are still valid in the blockchain, they do not carry the same value as the original artwork. This way, owners are able to monetise their artworks and even sell digital items in games such as costumes and e-dollars on a secondary market.
Pros and Cons of NFTs
Let us understand the pros and cons of NFTs
NFTs have huge potential for growth in its value due to its speculative nature where one’s judgement is the determining factor of the value of NFTs. For instance, a pipe-smoking man wearing a hat and sunglasses named CryptoPunk #7804 was purchased initially for 12 ETH in 2018. It was then available for sale in 2021 for 4,200 ETH and eventually sold for $7.5 million.
Protection of work
When an NFT is created, the blockchain system records the event and you can transact the NFT within the marketplace. NFTs require the blockchain environment for the transactions to be processed securely. This allows creators to protect their work as it is impossible to corrupt the original creator or ownership via the blockchain technology. This essentially resolves an underlying problem in the collectibles marketplace - how can one retain the ownership and value of the artwork that can be easily replicated.
NFTs can be separated from the original assets which means that the creators can edit the creation if they’d like, despite the existing copyright protection. Also, NFTs are still a digital asset afterall and cybersecurity concerns do come into play with any digital platform. Hence do get yourselves an insurance to protect against events such as hacking.
NFTs may be subjected to compliance and trade regulations, AML, bribery laws and more. For instance, NFTs could be used by parties to evade taxes. As the scope of the purchase and sales of NFTs can stretch out to any corner of the world, it is crucial that one ensures that they are acting in accordance with not only the laws that apply in their jurisdictions but also globally.
How to get Your Hands on NFTs?
Firstly, the vast majority of NFTs are held on the Ethereum blockchain so most of the marketplaces for the collectibles accept ETH as a form of payment. If you already have existing ETH in your wallets, you can simply send the crypto to your marketplace account. Also, it is important for you to find out whether the NFTs that you are interested in are available via a pack or art drop.
Moreover, you can either buy/sell existing NFTs in the marketplace or you can create one from scratch! Therefore, there are multiple factors for consideration before heading onto the marketplace to purchase/sell the NFTs. Thus, do your own research and cost-benefit analysis as to which option is more suited for you.
Where to get NFTs?
There are plenty of platforms where you can buy/sell NFTs such as OpenSea, SuperRare, and Nifty Gateway to name a few. Each of these marketplace may offer different kinds of NFTs ranging from video game items to basketball cards, and vary in terms of the form of payment accepted for the purchase/sale of NFTs. You can also consider purchasing NFTs from the primary or secondary market. The potential of resale value rising is what drives the demand in the primary market. However, this has resulted in the uncertainty of the level of demand for the digital artwork in the primary marketplace. On the other hand, there are opportunities for price comparison of current price and previous sales price in the secondary market.
Create new NFTs
Are you a creator of an art piece, looking to monetise it and gain some form of recognition for your talent? You can convert your artwork into a NFT! To kick start the ideation process, you have to decide which blockchain network you want your NFT to be issued on. Although Ethereum is the most popular blockchain used for NFTs, other networks like Binance Smart Chain (BSC), Tron and Polkadot are becoming increasingly popular. Then you will need a wallet that supports assets that are available on the chosen blockchain. Lastly, you can start to create a NFT on platforms that allow you to do so such as Rarible, OpenSea and Mintable.
It is important to know that although there is no cost to create NFTs on OpenSea, other platforms may charge a fee. For instance, you will need to pay gas fee when utilising Ethereum-based platforms. The cost of gas fee is dependent on the number of people transacting over the network at a specific time hence the costs are usually lower during the weekend.
The most popular categories of NFTs in the marketplace are music, artwork and collectibles. Popular artists like Steve Aoki, Shawn Mendes, Grimes have hopped onto the trend and created their own NFTs! Some of the popular collectible NFTs include CryptoKitties, CryptoPunks and even NBA Top shots which allows fans to buy, sell and trade NBA moments. Thus, do your research and get your hands on the NFTs that catch your attention now!
Essentially, NFTs have changed the way creators live their lives and even the collectibles industry. It is likely that NFTs will continue to influence different industries such as real estate, automobile and even the business industry where NFTs come into play, as ownership is highly valuable in these fields.