Non Fungible Tokens (NFTs) and Art
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NFT is the term on everyone’s lips in the cryptocurrency world nowadays. But, what exactly are NFTs? How do they work? Are they a good investment? In this article, we’ll cover all your questions about Non-Fungible Tokens (NFTs). Also, we’ll be looking into their origins, where the NFT market stands today, and what its future looks like.
Although NFTs are quite recent, we thought it’s best to give you some context first. We’ll go over their origins, as well as what they are and how they work.
What are NFTs?
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 with cryptocurrencies, like Bitcoin, which are fungible. So, unlike Bitcoin, NFTs are non-exchangeable. Meanwhile, “token” refers to a type of currency within the blockchain. You can trade or list those in exchange markets. In summary, a NFT is a digital certificate of authenticity and ownership for an asset. Nowadays, these tend to be digital artwork, music and videos. While they get associated with art, its system is usable for virtually anything. For instance, it can include physical assets.
How do NTFs work?
Most NFTs are part of the Ethereum blockchain. As well, Ethereum is one of the many cryptocurrencies currently available. NFTs stores its 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 the potential to do this.
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 had limitations that 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. From then, platforms like CounterParty and Spell of Genesis provide spaces to trade NFTs. In 2015, NFTs moved into the Ethereum blockchain. In 2016, 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, finally reaching mainstream adoption in 2021.
Today, you can buy a wide variety of NFTs in the crypto market. Some people trust non-fungible tokens to be the future of fine art collecting. This belief lies on three aspects, like artists’ opportunity to sell their work. Also, giving buyers the chance to support artists. Last, collectors have the potential to 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 go over the main pros and cons, and what the current NFT trends are.
Are NFTs profitable?
As we’ve seen with the Quantum NFT, these tokens are definitely profitable. People have sold art, tweets and videos as NFTs for hundreds and even millions of dollars. Yet, given that most NFTs are art, their value can be quite relative, so what you make from them can vary a lot. If you’re curious, you can take a look at some of the most expensive NFTs sold. You can create NFTs on any of the blockchains that currently support them. So, to make money out of NFTs, the first step is to invest 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. Keep in mind that cryptocurrency platforms charge you a fee for the NFT creation service. After these steps, you can put it up for sale 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. When it comes to pricing, the most popular advice is to start low and raise the price when your tokens start to catch on.
Is it a good investment?
Given that their value is relative, NFTs can be quite a volatile investment. They are only worth what someone is willing to pay for them, with their price depending on demand. There are quite a few NFTs that have sold for millions, showing a clear interest in these tokens. Yet, the buying process 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, but to inform you about the involved risks.
NFTs and copyright
One of the most prevalent concerns on NFTs are their copyright implications. When it comes to 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 transfer them.
Another thing to keep in mind is that NFTs may not meet the criteria to be subject to copyright at all. There’s also the chance they’re considered as 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
• Allowing artists to directly sell to collectors, while receiving royalties for resales
• Providing a record of authenticity and ownership, both verificable on the blockchain
• Diversifying your financial portfolio in a new market with high growth potential
• Having volatile investment, as their value is always relative
• Representing a negative impact on the environment
• Posing a risk for users to fall on frauds or scams
NFT Platforms & Markets
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 is the NFT platform that brought non-fungible token trading into the mainstream. Also, it has accrued more than one million users.
Nifty Gateway is a curated art platform under the Gemini crypto exchange. Here, NFTs get the name of “Nifties” and are built on Ethereum. This marketplace focuses on premium NFT drops. Currently, it holds the record for most expensive NFT sold, at a whopping $91.8M. Many famous artists, like Grimes, have chosen Nifty Gateway to sell their NFTs.
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 Immutable X blockchains.
Foundation is an artist-runned platform that includes rare and exclusive projects. Launched in 2021, it has managed to sell over $100M in NFTs. Artists need an invitation to join the NFT platform. Also, buyers can use Ethereum to make purchases.
When it comes to trends, gaming and ticketing aim to keep growing. Another trend that seems to be going strong is NFT fragmentation. For instance, breaking an NFT into pieces so several people can buy parts of a pricey NFT. This works kind of like owning shares in a company. Other trends currently gaining ground include music NFTs and real-world experiences.
What does the future of NTFs looks like?
As crypto moves into the mainstream, experts predict NFTs will create new opportunities. But, there are also dangers ahead, with risks for bigger hacks and ransoms. There are various possible scenarios that may give us some insight on 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. 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.
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? Don't forget to check out our article about payment platforms and cryptocurrency!
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