NFT is not only the term on everyone’s lips in the cryptocurrency world nowadays. Also, it’s the acronym for Non-Fungible Token. But what exactly is an NFT? How does it work? Are they a good investment? This article will cover all your questions about the concept of non-fungible tokens (NFT). Also, we'll look into its origins, current stands, and future. Although NFTs are pretty recent, we thought it best to give you some context first. We’ll review their origins, what they are, and how they work.
What is an NFT?
Let’s start with the term itself: Non-Fungible Token. Non-fungible means that something is unique, and no one can replace it. This is its main difference from cryptocurrencies, like Bitcoin, which are fungible. So, unlike Bitcoin, NFTs are non-exchangeable. Meanwhile, a token refers to a type of currency within the blockchain. You can trade or list those in exchange markets.
In summary, an NFT is a digital certificate of authenticity and ownership. Nowadays, these tend to be digital artwork, music, and videos. While they get associated with art, their system applies to virtually anything. For instance, it can include physical assets.
How do NFTs work?
Most NFTs are part of the Ethereum blockchain. As well, Ethereum is one of the many cryptocurrencies currently available. The NTFs store their data in a global registry in millions of nodes across the globe. This is what we call a blockchain. While Ethereum is the first, it's not the only blockchain to use NFTs. All existing blockchains have this potential.
How did NFTs arise?
NFTs stem from the concept of Colored Coins, by Meni Rosenfeld, in 2012. He aimed to represent and manage real-world assets within Bitcoin's blockchain. Yet, Bitcoin's limitations made it impossible to bring Colored Coins to life. As a result, the concept evolved into NFTs.
The first known NFT was Quantum. This piece, created by Kevin McCoy in 2014, sold for $1.4 million. Since then, platforms like CounterParty and Spell of Genesis have been trading NFTs. In 2015, NFTs moved into the Ethereum blockchain. A year later, memes made their way into the blockchain. These, such as Rare Pepes, started to trade in 2017.
Within that year, John Watkinson and Matt Hall created the Cryptopunks project. Their project was made up of 10,000 unique characters. Also, it had a blockchain-based virtual game CryptoKitties. NFTs kept gaining popularity, reaching mainstream adoption in 2021.
What is the Current State of NFTs?
Today, you can buy various NFTs in the crypto market. Some people trust non-fungible tokens to be the future of fine art collecting. This belief lies in three aspects: artists' opportunity to sell their work. They are also giving buyers a chance to support artists. Last, collectors can potentially sell them for profit if they rise in value. Let's take a look at different aspects of this. Are they profitable? What are their copyright implications? Where are NFTs being traded? We’ll also review the leading pros, cons, and trends.
Are NFTs Profitable?
As we’ve seen with the Quantum NFT, these tokens are profitable. People have sold art, tweets, and videos as NFTs for hundreds and millions. Yet, given that most NFTs are art, their value can be pretty relative, so what you make from them can vary greatly.
You can create NFTs on any of the blockchains that currently support them. So, to make money from NFTs, the first step is investing in cryptocurrency. Once you've invested and created an NFT, the token is included in your crypto wallet. Also, it's associated with a collection. Remember that cryptocurrency platforms charge you a fee for the NFT creation service.
After these steps, you can sell it in a marketplace. If you’re wondering how people can find your NFT, you can market it by listing it on the NFT Calendar. Also, you can use social media and Reddit, word of mouth, or marketplace newsletters. On pricing, the most popular advice is to start low and raise the price when your tokens begin to catch on.
Are NFTs a Good Investment?
NFTs can be quite a volatile investment given that, as we’ve mentioned, their value is relative. They are only worth what someone is willing to pay for them, with their price depending on demand. The process of buying NFTs can be a bit complicated, too.
Moreover, the tokens are also susceptible to hacks and scams. This is not meant to discourage you from investing in NFTs. Yet, it’s to inform you about the risks involved. A few NFTs have sold for millions, showing a clear interest in these tokens.
NFTs and Copyright
One of the most prevalent concerns about NFTs is their copyright implications. Regarding NFTs and copyright, the latter is not always transferred with the sale of the former. The creator, or most recent copyright owner, might choose not to move them.
Another thing to remember is that NFTs may not meet the criteria to be subject to copyright. There's also the chance they're considered fair play or public domain. As the concept of NFTs is quite recent, intellectual property laws have not yet caught up. If you want to learn more about NFTs and copyright, you can check out WIPO's site.
Pros and Cons of NFTs
NFT Platforms and Marketplaces
1. OpenSea. Considered the “eBay” of NFTs, this is currently the largest NFT marketplace. It supports over 150 currencies and has the most extensive range of digital assets. These include art, in-game items, domain names, music, and photos. OpenSea brought non-fungible token trading into the mainstream. Also, it has accrued more than one million users.
2. Rarible. Rarible also offers a wide array of NFTs. For instance, videos, games, metaverse items, collectibles, and music. This community-owned NFT platform can host NFTs created in Ethereum, Flow, and Tezos.
3. Nifty. Nifty Gateway is a curated art platform under the Gemini crypto exchange. Here, NFTs are called “Nifties” and are built on Ethereum. This marketplace focuses on premium NFT drops. Currently, it holds the record for the most expensive NFT sold, at a whopping $91.8M. Many famous artists, like Grimes, have chosen Nifty Gateway to sell their NFTs.
4. Mintable. Launched in 2018, Mintable, backed up by Mark Cuban, gets the title of the “Etsy” of NFT marketplaces. Its categories include art, music, videos, collectives, sports, and utility. Further, it supports the Ethereum, Zilliqa, and ImmutableX blockchains.
5. Foundation. Foundation is an artist-run platform that includes rare and exclusive projects. Launched in 2021, it has sold over $100M in NFTs. Artists need an invitation to join the NFT platform. Also, buyers can use Ethereum to make purchases.
What is The Futures of NFTs?
Experts have varying opinions on the future of non-fungible tokens. However, some predictions have been made about what’s coming.
Will NFTs Survive?
Experts have no consensus on whether NFTs are a fad or will continue to grow. A point where they all seem to agree is that to survive, they would need to become more accessible to the masses. If they do stay, what would that look like? Let’s take a look.
What Does the Future of NFTs Look Like?
Experts predict NFTs will create new opportunities as crypto moves into the mainstream. But, there are also dangers ahead, with risks for bigger hacks and ransoms. Various possible scenarios may give us some insight into the future of NFTs. The first is that the market slowly stabilizes. This would turn NFTs into an established part of the investment world. Another option is that NFTs may become prime virtual assets as the metaverse takes over. The quick response from the gaming industry might state this is where NFTs will thrive. The last and most pessimistic scenario is a market collapse. As of now, it’s impossible to tell what will happen to NFTs in the future.
NFTs have made waves in the last five years, quickly growing and expanding. People are willing to spend millions on this new form of art trading. Further, it's spreading into new areas and fields every day. Yet, NFT trading doesn’t come without its risks. We hope this article has given you a comprehensive look at this type of digital certificate. Non-fungible tokens come with a few advantages and disadvantages to consider. What do you think the future of NFTs holds?