What Are NFTs and Can You Make Money Trading Them?
NFTs are one of the recent crazes in the online world, and with millions of dollars being exchanged for “jpegs”, many are trying to understand NFTs and why they are valuable.
NFT stands for non-fungible token. A non-fungible token refers to anything with unique properties that cannot be exchanged for another due to the said unique properties. On the other hand, a fungible token can be exchanged for another as it is defined by its value rather than its unique properties.
For example, a dollar is a fungible token since it can be exchanged for another currency, let’s say 0.89 euros, going by the exchange rate at the time of writing.
How Do They Work
So why are people shelling out thousands of dollars and even millions for NFTs? Well, the answer lies in scarcity, uniqueness, and proof of ownership. NFTs are used to associate ownership with a variety of items, including:
● Art
● Videos
● An essay
● An in-game item, e.g costume, game character, etc.
● A domain name
NFTs digitally represent the unique properties of such real-world items and most importantly, aid the owners of such items in proving ownership. NFTs are securely stored and recorded on the blockchain.
The blockchain can be defined as a public ledger that records all transactions in a way that is extremely difficult to change or alter.
The blockchain also ensures the NFT:
● Is unique and cannot be replicated.
● Has one owner and the proof is publicly available to all.
● Is the original.
Current blockchains that support NFTs are:
● Ethereum (most popular)
● Bitcoin Cash
● Cardano
● FLOW
● GoChain
● Solana
● Tezos
So if a certain Mr. Pete is an artist and decides to create a nice piece of art, he can upload it to the blockchain as an NFT and prove its authenticity. If his artwork proves popular, he can sell it to a Mrs. Dixie by initiating a transaction on the blockchain, thereby permanently transferring ownership of the artwork to Mrs. Dixie.
While you can argue that you can just download a png or jpeg of the artwork, it is the proof of ownership that matters here, and according to the blockchain, Mr. Pete is the creator of the original artwork, and he’s the one who sold it to the current owner, Mrs. Dixie.
Just the same way, there may be copies of Da Vinci’s Mona Lisa, only the original matters and is what an art collector would want to buy.
Note: NFTs should not be confused with Crypto. While both run on the blockchain, Crypto, otherwise known as Cryptocurrency, is a digital currency that has value, same as fiat currency, and can be used to purchase products and services.
Can You Make Money Buying And Selling NFTs?
It is possible to make a good amount of money in NFTs by either creating a piece of art, video, etc. and selling it as an NFT, or buying an NFT and flipping it.
Many have made millions of dollars in 2021 alone, and thousands of high-value transactions keep happening daily. Some of the most popular NFT sales are:
An art by popular artist Beeple “Everydays — the First 5000 Days” was auctioned off for $69 million at a Christie’s auction.
A video clip of Lebron Jame’s LeBron James “Cosmic” Dunk sold for $208,000.
Twitter CEO auctioned his first tweet as an NFT and it sold for $2.9 million. He donated the proceeds to the African charity GiveDirectly.
A Rare Bored Ape Yacht Club NFT was auctioned off for $3.4 million.
Singer and Elon Musk’s spouse, Grimes, sold $6 million worth of NFTs in an auction.
Where To Buy An NFT
NFTs can be sold, bought, and traded in marketplaces and exchanges. You can also mint an NFT through a website presale which mainly happens before a collection of NFTs is publicly available for purchase.
The latter is one of the most popular methods of making money as buyers get into NFTs projects early before they explode and later flip them when prices are high.
Some of the NFT marketplaces include:
OpenSea: The most popular and largest marketplace with lots of features and a beginner-friendly user interface.
Rarible: Another big marketplace that features lots of unique NFT art pieces.
Nifty Gateway: Features curated pieces and works with big-name brands, artists, and creators.
SuperRare: Another marketplace like OpenSea that offers a marketplace for art, videos, etc.
Mintable: A Mark Cuban-backed project that features a market for NFTs of all kinds and free minting for creators.
Note: There’s no guarantee that you’ll make money off of NFTs. While some make thousands in profit, others end up investing in projects that turn out to be worthless. However, if you do your due diligence and invest in worthwhile projects, you can make a good amount.
Stay tuned for our upcoming post on how to make money with NFTs.
What’s in Store for the Future?
I think NFTs and Crypto as a whole are here to stay. With governments trying to restrict all manner of things, cryptocurrencies offer some form of freedom against government interference.
As for NFTs, they say beauty is in the eyes of the beholder. So as long as there is someone out there willing to pay millions for a “jpeg”, the digital art market will be here for a long time.
