What are NFTs?
The term NFT has recently been in the news, frequently in connection with large sums of money (did you hear about that $69.3 million sales?).
But you might be wondering what all the fuss is about. We’re here to help if you’re not sure what an NFT – or non-fungible token – is or how they work.
This guide will teach you everything you need to know about NFTs, including what they are, how they work, why they have caused some controversy, and how you can participate.
Check out some of our favourite NFT artwork right here. And if you decide to make your own, be sure to use this brilliant digital art software.
Are you perplexed by NFTs? We go over everything you need to know.
The token that is not fungible.
That doesn’t make it any clearer, does it?
Sorry about that. “Non-fungible” means that it is one-of-a-kind and cannot be replaced with something else. A bitcoin, for example, is fungible — trade one for another and you’ll get exactly the same thing.
In essence, an NFT is a collectable digital asset that has value both as a form of cryptocurrency and as a form of art or culture. NFTs are now regarded as a value-holding investment in the same way that art is. But how do you do it?
First, let’s define the term. NFT is an abbreviation for a non-fungible token, which is a type of cryptocurrency similar to Bitcoin or Ethereum. However, unlike a standard coin on the Bitcoin blockchain, an NFT is one-of-a-kind and cannot be exchanged for another (hence, non-fungible).
A one-of-a-kind trading card, on the other hand, is not fungible. You’d get something completely different if you traded it for a different card. For Instance, You traded a Mercedes S for a Maserati.
Crypto art has been around for about five years, but NFTs appeared out of nowhere for many speculators outside of the crypto world.
A number of speculative factors, such as the pandemic, the wild rise in bitcoin prices, and institutional acceptance, are inflating the bubble (as companies such as Tesla buy and validate bitcoin).
In the pandemic, homebound investors armed with the latest trading platforms have nothing better to do than hunt for new trends in chatrooms: the next bitcoin, decimating hedge-fund short-sellers or foraging for the next bubble.
Because there is so much money, speculators and producers of NFTs are supplying and rushing into this space, NFTs are likely to be overinflated at some point.
Digital tokens operate on the same principles as crypto-currency cousins. They are immutable, cannot be duplicated, and can be easily verified and authenticated on the blockchain.
However, there is no guarantee that they will retain their intrinsic value over time. Currently, scarcity is the sole driver of value.
How do NFTs work?
NFTs are individual tokens that are part of the Ethereum blockchain and contain additional information. The important part is the extra information, which allows them to take the form of art, music, video (and so on), in the form of JPGs, MP3s, videos, GIFs, and so on.
They can be bought and sold like other types of art because they have value – and, as with physical art, the value is largely determined by the market and demand.
That is not to say that there is only one digital version of an NFT art available on the market.
Copies of an NFT are still valid parts of the blockchain in the same way that art prints of an original are made, used, bought, and sold – but they will expire.
Don’t think you’ve hacked the system by right-clicking and saving an NFT image, either.
That won’t make you a millionaire because your downloaded file lacks the information required to become a part of the Ethereum blockchain. Does that make sense?
Where can I buy NFT tokens?
NFTs can be purchased on a variety of platforms, depending on what you want to buy (for example, if you want to buy baseball cards, you should go to a site like digitaltradingcards, but other marketplaces sell more generalised pieces).
You’ll need a wallet tailored to the platform you’re purchasing from, as well as cryptocurrency.
As the sale of Beeple’s Everyday – The First 5000 Days at Christies (above) demonstrated, some pieces are beginning to appear at more mainstream auction houses, so keep an eye out for these as well. That Beeple piece, in case you missed it, sold for $69.3 million.
Because of the high demand for many types of NFT, they are often released as ‘drops’ (much like in events, when batches of tickets are often released at different times).
This means a frenzied rush of eager buyers when the drop starts, so you’ll need to be registered and have your wallet topped up ahead of time.
Here is a list of sites that sell NFTs:
NFTs are also making waves as in-game purchases across different video games (much to the, erm, the delight of parents everywhere). These assets can be bought and sold by players, and include playable assets like unique swords, skins or avatars.
Who’s been using NFTs?
NFTs are definitely having a moment, with NFT art creators including artists, gamers, and brands from all walks of life. In fact, it appears that a new player enters the NFT market on a daily basis.
Stepping into the NFT space adds another space and format for artists to create and share art – as well as another way for their fans to support their work.
Artists can offer the public a variety of ways to buy art while also making money, with pieces ranging from small, quick-to-create GIFs (Rainbow Cat, above, was sold by NyanCat for $690,000) to more ambitious works.
We’ve talked a little about those developing NFTs for use in video games, which is shaking up the concept of purchasing assets in-game.
Until now, any digital assets purchased within a game remained the property of the game company, with gamers only purchasing them for the purpose of temporarily using them while playing the game.
However, NFTs indicate that asset ownership has shifted to the buyer, implying that they can be bought and sold across the gaming platform with additional value applied based on who has owned them along the way.
Indeed, games based entirely on NFTs are being developed, demonstrating how they are reshaping the industry.
ARTISTS ARE ALWAYS VERY VULNERABLE WITH THEIR CONTENT IN THE INTERNET”
Why are NFTs controversial?
In the NFT market, there is a lot of money to be made. However, you may have heard that there is some controversy surrounding NFTs, particularly their impact on the climate.
NFTs require a massive amount of energy to create. So much so that many protesters are concerned about the craze’s potential impact on the environment.
According to CryptoArt.wtf, a site set up to calculate the carbon footprint of NFTs (now defunct), one-piece called ‘Coronavirus’ consumed an astounding 192 kWh in its creation.
Many have emphasised the extreme ecological impact that an increase in NFT minting and trading would have on a planet already devastated by climate change, climate-related disasters.
What are (NFTs) and what do they have to do with climate change?
Simply put, the process of minting NFTs by adding tokens to blockchains, combined with the tidal wave of trading transactions (bidding, resales, etc.), results in significant use of energy.
Multiply that by n in a market-driven by greed and the desire to keep up, and we could be dealing with a new type of environmental destruction.
Ethereum, the platform that hosts the blockchains that many of these NFTs are anchored to, has pledged to switch to a less carbon-intensive method of keeping their systems secure and operational, known as proof-of-stake, but this has yet to happen. It’s unclear when (or if) the shift will occur.
How to Make and Sell NFTs
Are you an artist or content creator looking to make a buck (or potentially several million dollars) from work that isn’t inherently monetizable? You could turn your piece into an NFT.
Say you want to turn a doodle into an NFT, or a comic strip, or something like Nyan Cat, the animated cat with a Pop-Tart body and a rainbow trail, which recently sold as an NFT for around $580,000.
The procedure varies by site, and some charge a fee (to cover the computational “gas” needed for the transaction on platforms like Ethereum).
However, you can begin by applying to platforms such as Nifty Gateway, where you can apply to create a project that will be sold as an NFT on their marketplace.
What Are Some Examples of NFTs That Have Been Sold?
A group of “art and NFT enthusiasts” purchased a Bansky piece, burned it, and then sold it as an NFT for approximately $380,000. Lindsay Lohan’s first NFT, “Lindsay ‘Lightning’ Lohan,” sold for around $50,000 on rarible.com (she also pledged to donate the proceeds to “charities that accept Bitcoin to empower younger generations in order for them to adapt and learn about this revolution that humanity is witnessing.”) Rob Gronkowski is currently selling limited edition Championship NFT trading cards for more than a million dollars.
Elon Musk had planned to sell a techno song about NFTs as an NFT, but he thankfully changed his mind. Steve Aoki’s limited edition art