Everything You Need To Know
If you’ve heard the term NFT (Non-fungible tokens) talked about a lot within the last year, you aren’t alone. Some of these digital assets are selling for millions of dollars, featuring everything from music and art to recipes and even Youtube videos, catching the attention of news outlets around the world.
So, what exactly is an NFT, and how can you use them to your advantage as an artist or a buyer? In this article, we’ll explain everything you need to know about NFTs, including how they work, what they are, and how you can get involved with the process.
What Is An NFT?
An NFT is a digital asset that represents an item in the real world, such as videos, art, game items, music, sneakers, collectibles, and more. They are sold and purchased online, meaning they can be traded from person to person without the need for a physical transaction. Instead, these transactions rely on using a digital wallet to purchase and sell assets.
NFTs have been around for a while and were initially released in the early 2010s. However, NFTs are becoming more popular as many people prefer digital over physical items. In addition, NFTs offer new possibilities that make them an attractive investment opportunity, such as providing rare objects, collectibles, or limited availability items.
How Does An NFT Work?
NFTs are unique in that they can be owned and traded online, which is different from something like the money you have saved up in your bank account to buy a physical item. They are created using blockchain technology, creating individual tokens with the information of the digital art stored into them, allowing music, art, videos, and more to be stored into the individual token. Once they are created, they can be sold, purchased, or traded just like any other physical item.
NFTs are exceptionally safe because there’s only one digital version of the artwork available through the network, meaning that while copies can be sold, they won’t hold the original information that the initial token holds. This ensures that hackers or scammers can’t illegally download or steal NFTs that you create or purchase.
NFTs offer a unique way for artists to monetize their art instead of having to rely on an online gallery or physical location to sell it. Instead, it allows them to sell their art directly to consumers, increasing the amount of profits retained. Plus, since they’re digital assets, creators can even put a royalties program in place to continue to profit off the re-sale of the digital asset.
How To Buy NFTs
The first step to buying NFTs is to create a cryptocurrency wallet to purchase and sell your assets. Once you have your own personal wallet, it will generate the address for where you’ll receive your tokens from when they’re purchased or traded. You can also use existing wallets that are already set up on marketplaces, such as Metamask and Temple.
Once you find an artist who’s created a piece of art or another type of digital asset that interests you, send them the amount through your digital wallet. Make sure to read through all instructions about what to do next to ensure you properly execute the transaction. Be aware that there may be processing fees associated with selling or purchasing an artist tokenized work or exchange fees to accept it through your wallet.
Most frequently, NFTs are released as batches, allowing excited buyers to jump in and purchase exclusive collections before they’re sold out. Popular companies like Taco Bell and the NFL have already started to capitalize on the NFT trend by offering digital cards and GIFs. Even online gaming companies have begun to sell assets like avatars, swords, or upgrades as NFTs.
How Is An NFT Different From Cryptocurrency?
The only similarity between the two is that NFTs are built using the same type of platform that cryptocurrency uses. While cryptocurrencies have equal value and can be exchanged or traded for each other, such as one Dogecoin will have the same value as another Dogecoin, NFTs don’t follow the same type of rules.
NFTs will never be equal to one another because they have their own information stored and hold different values. This means that they are not worth the same on the NFT marketplace and can’t be traded as equals.
What Is Driving The NFT Market?
There is no one clear answer on what’s driving the market, but some of these reasons include:
- Easy To Create: Instead of having to read through endless how-to tutorials on how to turn your artwork into NFT, well-known companies like BullishArt takes care of the entire process for you. This helps increase the ease of creation and eliminates issues that artists would typically run into during the NFT creation process.
- Faster Payments: Since everything is processed through cryptocurrency wallets, the payment system is a lot faster than using alternative forms of payment like PayPal or ACH payments.
- Quicker Delivery: Just like faster payments, buyers are able to receive their NFTs instantaneously, allowing them to use the assets they purchased right after they finish the purchasing process.
- Higher Returns: One significant driving factor is the ability for artists to receive higher returns than they may have been able to through a physical gallery or their own online store. This has been motivating artists to transform their works of art into NFTs.
- Uniqueness: Many people are interested in NFTs because they do not have to worry about any duplicate items. This means that if you buy a digital asset, like an album or painting, it’s yours and yours only!
Physical Art vs. NFTs
If you’re an artist, you might be wondering what the difference is between NFTs and physical art. Physical art will be physically sold to buyers, requiring them to come in person or receive your work through shipping. NFTs are digital works of art and do not require any shipping or physical interaction with the buyer.
Some artists choose to produce both physical artworks and turn them into NFTs so as to diversify their income streams and expose their artwork to a more extensive network. Plus, artists have been able to sell their NFTs at higher values than they would be able to if they were just in a traditional gallery or advertised through an online store.