With the cryptocurrency market gaining momentum across the world, the popularity of NFTs, non-fungible tokens, art, and tokenomics is on the rise too.
You are probably interested in how to create, buy, sell, or invest in non-fungible tokens, so read on for our complete guide to learn everything you need to know about NFTs.
Nowadays, people spend millions of dollars on NFT collectibles, from art and music to sports trading cards, digital houses, game items, sneakers, and toilet paper. Have you heard about the iconic GIF of Nyan Cat sold as NFT or Grimes getting millions for NFTs?
So what are Non-fungible tokens, NFTs? Are they worth the money? Are they even worth the hype?
Many investors think they’re another bubble that is popped up for business purposes, just like the dot-com bubble and Beanie Babies, but others believe NFTs are here to stay and change the way of investment forever.
Whatever its end game is, check out our guide in investing in NFT if you are planning to venture into this digital asset.
Understanding Non-Fungible Tokens
NFTs are non-fungible tokens and digital assets you can only buy and sell on their own value, like art.
NFTs are Ethereum-based identifiers and can be anything digital, but a lot of the current excitement is about using the tech to sell digital art.
NFTs can be used as unique collectibles or to authenticate digital signatures. An NFT contains built-in authentication, which serves as proof of ownership. Each NFT is unique and can’t be duplicated. So, you can think of them as special digital items nobody else owns.
Each NFT coin or token has a distinct value, which got investors interested in NFTs.
Although NFTs are expensive, they give you the ownership rights to the pieces of art you hold. This still doesn’t make them a reliable asset class.
Like traditional physical art, the value of NFTs comes from the possession of the original and the buyer’s asking price.
Differentiating NFTs From Other Digital Art
Non-fungible tokens, NFTs, are different from other art forms, digital art, or standard recordings.
While they have similarities with cryptocurrencies, they are not cryptocurrencies. NFTs are generally encoded with the same encryption software as cryptocurrencies, i.e.,a unique code that prevents duplication or theft. This is where their similarities end.
Relating NFTs With Other Cryptocurrency
NFTs are non-fungible, unlike bitcoin or physical money that are fungible. They are like art, with encrypted data.
Cryptocurrencies like Bitcoin or Ethereum can be traded or exchanged for one another; they’re also equal in value. One Bitcoin is always equal to one Bitcoin; a dollar bill is always equal to another dollar bill.
NFTs are different in that each NFT has a digital signature. This signature makes it impossible for NFTs to be exchanged for one another or have the same value. Each NFT is as unique as a work of art.
Benefiting From Non-Fungible Tokens
Before going into the key advantages of NFTs, let’s take a glimpse at how NFTs work.
NFTs exist on the Ethereum Blockchain, although another Blockchain technology may support them as well. They are created or minted from digital objects that represent both tangible and intangible items, including:
- Real estate
- Sports highlights
- Designer sneakers
Even tweets count.
Essentially, NFTs are like physical art, only in the digital form. They can belong to only one owner at a time. The owner gets a digital file and exclusive ownership rights.
NFTs’ unique data makes it easy to verify their ownership and transfer tokens between owners. Also, artists can include their signature in an NFT’s metadata.
Below are some advantages of Non-fungible tokens:
- Authors, artists, or musicians can sell their digital art and collectibles directly to consumers as NFTs.
- NFTs allow artists to receive future proceeds after their art is first sold.
Knowing if NFTs Are the Right Investment for You
While cryptocurrencies like Ether, Bitcoin, and even Blockchains have been around for some time, NFTs are a relatively new investment option. They’ve been around since 2014 but are making a tear in the investment markets now because they are becoming a popular way to buy and sell digital artwork.
While most investors are considering NFTs an alternative investment, is it the right investment for you?
NFTs are attractive because they reassure via storing the ownership data of a digital file on the Ethereum blockchain that the NFT is the only ‘authentic’ one of its kind. NFTs cannot be altered or counterfeited, so they are considered a secure method of asset ownership.
Yet, alternative investments typically represent a greater risk than mainstream investments because they’re highly volatile. If you consider NFTs as possible alternative investments, please do so with just about the amount of money you are willing to lose. Consider that, like most assets, NFTs are unpredictable and have yet to stand the test of time.
Another reason why you should be careful is that NFTs do not pay recording dividends or interest.
Finding the Best NFT Tokens and Collectibles Tokens
To find the best collectibles tokens, consider an open marketplace.
Read on for the list of popular NFT marketplaces that CoinStats has compiled for you.
Popular NFT Marketplaces
This peer-to-peer platform has emerged as the most popular marketplace for NFTs, rare digital items, and crypto collectibles. Located in New York, it was co-founded in 2021 by Alex Atallah’s software development team and Devin Finzer.
Open Sea allows direct deals, similar to traditional auction houses where artworks and the likes are sold.
Also known as the eBay of Non-fungible tokens, this marketplace is backed by the Ethereum and Zilliqa Blockchain networks.
Located in Singapore, Mintable enables anyone to create, manage, and sell digital files, including videos, games, domain names, photography, digital art, etc.
NBA Top Shot
This marketplace was launched by DapperLabs and is located in Vancouver, Canada.
It deals with sports collectibles and allows basketball fans to collect and trade digital moments from matches.
It also allows users to buy NFTs and trade them on their private Blockchains.
Launched by Sky Mavis and located in Vietnam, this NFTs marketplace allows players to collect, breed, trade pets, and build kingdoms. Axie infinity encrypts their game characters and plots of land as NFTs. Collectors can then buy them from online NFTs marketplaces.
Nifty Gateway is a popular NFT market for buying and getting an NFT offer. It enables the storage of art in the form of Nifties or NFTs.
Last but not least, Foundation was created in February 2021 as a platform for selling NFTs of viral internet memes.
Investing in NFT
Now you know what non-fungible tokens are and how they work. You know their advantages and can decide if they are the right investment for you. You also know where to find the best NFTs.
Here is our step-by-step guide on investing in NFT.
Step #1: Opening an NFT Marketplace Account
After choosing an NFTs marketplace from the abovementioned list, you need a digital wallet to be added to your NFTs marketplace account.
Step #2: Creating a Digital Wallet
Your digital wallet should work in the NFT marketplace of your choice. A cold wallet is a safer choice as it is not easily compromised.
Step #3: Funding Your Account
To trade on an NFT marketplace, you need to purchase a cryptocurrency like Ethereum. You can buy it from CoinStats, Binance future, or other crypto wallets you trust.
After buying Ethereum, you can load it onto your wallet to begin trading cards and arts on the NFT marketplace.
Step #4. Buying Your NFTs and Digital Arts
When your wallet is activated and funded with Ethereum, you are ready to buy NFTs. Sometimes, buying NFTs may be tricky, so you need to learn how to buy NFT before proceeding.
It is essential to know that the marketplace acts as an auction house, i.e., the sales go through if you are either the only or the highest bidder.
Creating Your Own NFTs and Digital Asset
Investing in NFTs doesn’t just involve buying but also includes creating your own NFTs and selling them. You need a marketplace account and a digital wallet funded with Ethereum to do so.
Step #1: Creating a New Collection
Once you have completed the abovementioned steps, go to your marketplace and click on “my collection.” Then, click on “create new collection” andadd an image and description.
Step #2: Adding New Items to Your Collection
Once you created the new collection, all you have to do is add new items or art.
Step #3: Modifying Your Creations
You can now proceed to modify your creations, i.e., add clip art, images, audios, or videos.
Step #4: Naming the NFT
You can now choose a unique name for your NFTs and a sequence number if it’s part of a series. After naming them, click on “create NFTs” and proceed to sign the messages on your digital wallet.
Some marketplaces offer to create tokens for free but consider checking out their commission fees.
Risks Involved Investing in NFTs
When it comes to investing in NFTs, there are three main risks:
Risk #1: Investing Your Life Savings
While investing in NFT tokens or coins, do not invest more than you can afford to lose. Invest your personal finance, spare cash, but not emergency savings.
It is even better to create your NFTs than invest funds into them.
Risk #2: Losing Some or All Your Money
This is probably one of the highest risks involved. You may be unable to sell the token for the value you bought it.
Risk #3: Treating Many NFTs as More Than Collectibles
As it stands now, with no readily available NFT market, the tokens shouldn’t be taken as more than digital collectibles.
Whether you created or bought NFTs, you might not be able to sell them off quickly. Yet, you might be able to do so sometime in the future.
Pros and Cons of Investing in NFT
- You can create and sell NFTs free of charge for profit.
- The future is bright because as everything is going digital, so are collectibles.
- The value of most NFTs has increased, and if it continues, there may yet be a further exponential increase in value.
- Buying, selling, and creating NFT is easy because of the availability of recognized marketplaces.
- NFTs are new and not proven as a reliable asset class.
- It is difficult to predict the exact value of any or most NFTs.
- No one truly knows if they are the future of collectibles or just a passing craze.
- There may be a problem of copyright infringement, mainly when part or all of someone’s work is used. This raises the issue of easy duplication of original materials.
- Because of the recent hikes in the piece of NFT art, future deals may even prove riskier.
- The NFT markets may become saturated since everyone from anywhere can create NFTs.
The best NFTs are dependent on the marketplace.
Your crypto wallet should contain several cryptocurrencies to give you access to several NFT markets and digital tokens. You need Ethereum to buy some NFTS and Bitcoin for others. Remember, not all NFTs are good, so consult a financial advisor before proceeding.
Yes, you can; anyone can. You can create and sell NFTs. But your gain from selling depends on how much the buyer is willing to pay.
Some NFT marketplaces let you mint utterly free of charge. You will have to cover the costs of the materials used to make your tokens, i.e., buying a copyright asset.
However, during peak times, costs can rise upwards of $200-300.
Like every other digital asset in the crypto market, the market determines the NFT value. An NFT is worth what the buyer is willing to pay for it. No buyers amount to no value at all.
You can buy NFT tokens from NFT marketplaces like Open Sea, Mintable, etc.
Each marketplace requires a different cryptocurrency for buying NFT coins. Open Sea, for example, requires Ethereum.
You can buy Ethereum from trusted wallets, like CoinStats Wallet, Binance Future, etc.
Due to a rise in popularity in 2021, many investors want to learn how to invest in NFTs. NFTs have already accelerated a more significant trend of digital economic innovation. Gaming and art sectors are essential segments of the overall NFT market.
However, NFTs may not be a lucrative investment due to their lack of value, history, and trendy nature.
And, as a final word on investing in NFT, consider doing your own research and investing money you can easily lose.