Unless you live in the stone age, you must be aware of the internet’s new phenomenon, Non-Fungible Tokens (NFT). Even if you have heard about this buzzword, do you in your heart of hearts know precisely about this? Well, most people reside in the same boat. Well, to know more about this, let’s dive into the little background to know more about this.
Now, where did this technological phenomenon come from? The history of NFTs goes back to 2014, when the man who first created one, Kevin McCoy, introduced it on May 3rd, 2014. He minted his non-fungible token “Quantum,” way before the crypto art market cracked on the internet.
Quantum is a digital image of an octagon filled with denoting circles, arcs, or other shapes which share the same center, with larger shapes surrounding smaller ones and hypnotically pounding in fluorescent hues. The one-of-a-kind “Quantum” art piece had been on sale for seven million dollars in 2021.
Non-fungible tokens are taking the digital art and collectibles world by storm and seemingly everywhere these days. These digital assets are selling for millions and billions, from art and music to tacos and toilet paper. But are these digital assets worth the money or the hype? Some experts say they are just bubbles about to pop. Others believe digital tokens are here to stay and will change investment perspectives in the future.
So, if you are curious about how they are reshaping the world, bear with us for a few more minutes and continue reading.
What Is NFT?
A non-fungible token is a unique digital asset representing ownership of real-world items like art, video clips, music, and more. Digital tokens use the same blockchain technology that powers cryptocurrencies but are not a currency. While digital art pieces have sold for millions, they are highly speculative assets that are not for everyone.
Selling digital assets has been a lucrative business in the art world. Here are a few prominent examples:
- Digital artist Beeple sold “Everydays – the First 5000 Days” for $69.3 million through a Christie’s auction.
- A 20-second video clip of LeBron James’ “Cosmic Dunk #29” was sold for $208,000.
- A CryptoPunk sold for $1.8 million at Sotheby’s first curated sale.
- Twitter CEO Jack Dorsey auctions the digital asset of his first tweet, which sells for $2.9 million.
Difference Between Non-Fungible Tokens And CryptoCurrencies
Non-Fungible Tokens are built on the same programming as cryptocurrencies. Now you must be wondering if these are built on the blockchain; what makes them different from one another?
The expected differences between the two are physical currency and the unique physical objects that people buy precisely for their uniqueness. The considerable difference is that the value of cryptocurrency is purely economic. Its value comes from its utility as a currency or an investment. Non-fungible tokens, on the other hand, have both economic and non-economic value. Artists, for example, can use these to distribute, monetize and even autograph their work.
How Do NFTs Work?
Non-fungible tokens are unique crypto tokens powered by blockchain. Thus, blockchain acts as the decentralized ledger that traces each digital asset’s ownership and transaction history, which has a code, unique ID, and other metadata that no other token can duplicate. Blockchain records all transactions in a peer-to-peer network; therefore, these are
- Publicly verifiable
- Decentralised: Stored on a network of computers
- Immutable: nobody can change them once committed
A digital asset management platform is ideal for digitally representing physical assets, such as real estate and artwork. In addition to removing intermediaries and connecting artists to audiences, digital tokens can also serve as identity management platforms because they are built on blockchains, remove intermediaries, make transactions more efficient, and create new markets.
One can create digital collectibles through contract-enabled blockchains with the help of appropriate tools and support. Ethereum was one of the first widely used EOS and NEO, and now it also includes the essential standards.
Popular Types Of NFTs
As the industry grows, digital tokens mark their way in almost every sector. Knowing the popular ones is essential to those who intend to mint or purchase unique digital art. Let’s dig into the most popular types.
It makes sense to use non-fungible tokens when scarcity, uniqueness, and authenticity are significant, which holds particularly true for digital art.
- Digital art assets came into the limelight when the digital art creator Beeple sold his work “The First 5000 Days” for over $69M at a Christie’s auction in March 2021, as mentioned earlier. The First 5000 Days is a 1/1 collectible, which means it’s a single edition.
- Artists can also create digital tokens with multiple editions. For example, Bear Bullish by the artist duo Hackatao is an artwork with 23 editions.
- Digital art assets can include any form of art, including music. For instance, Worst Case is music NFT by musician 3LAU.
While in modern days, collectors would purchase physical items such as paintings, coins, and many others, now the available spectrum of collectible items is expanding to the digital space at a fast rate thanks to non-fungible tokens. Collectibles include sets of NFTs where each has unique traits or attributes.
- A popular collectible category is Profile Picture NFTs (PFPs). These are collections of avatars with randomly generated traits and attributes. They usually consist of 10,000 unique digital assets that people use as profile pictures.
Two notable NFT PFP projects are Cryptopunks and Bored Ape Yacht Club. These collections grant their owners exclusive access to their communities. Cryptopunks is the legendary collection that inspired the crypto art movement in 2017. It’s one of the first projects that used the non-fungibility concept on the Ethereum blockchain.
Due to historical value, Cryptopunk NFTs are very valuable. For example, on February 12th, 2022, Punk #5822 was sold for $23.7M.
Bored Ape Yacht Club (BAYC) is another reputable collection. Many celebrities, including Gary Vaynerchuk, Eminem, Steve Aoki, and Stephen Curry, have at least one BAYC in their portfolio.
Sports NFTs are verified and unique digital assets created on a blockchain to represent digital trading sports cards, sporting moments, digital memorabilia, and other sports items. The issuance of sports NFTs provides an opportunity for athletes, clubs, and sports brands with a new way of monetisation while enabling fans to connect with their favourite clubs and athletes in a new way.
Digital assets of sports are often trading for thousands and thousands of dollars (or more), and the value of some of the rarest pieces has increased since they were minted.OpenSea, Rarible, and Autograph are a few platforms where you purchase sports NFTS.
Amidst the growing recognition of non-fungible tokens, generative art has become one of the most sought-after art forms. Indeed, the rise of dedicated generative art platforms like Art Blocks and fx hash has helped take these NFTs to the broader crypto art community, and some of these NFTs have fetched hundreds of thousands of dollars.
Generative art is a form of art that works through computer code. For instance, an autonomous system follows a code (a set of rules) that an artist creates to generate a unique piece of art. These rules can range from the colors and patterns involved to the number of iterations and randomness. In short, an autonomous system and an artist together create generative art.
In 2021, the artists started uploading these creative codes to blockchains to create generative art in the form of digital assets. Some top-selling generative art non-fungible tokens include Auto Glyphs by Larva Labs, Fidenza by Tyler Hobbs, and Lost Poets by Pak.
NFT games are just like traditional video games. Players receive items and coins in classic video games by achieving new levels or winning battles. However, these prizes remain inside the game, and the players can only utilise them. The difference between traditional video games and NFT games is that players can transfer their earnings to another game or exchange it with any other player with cryptocurrency.
Here, we compiled a few of the best NFT games of 2022:
- Axie Infinity
- The Sandbox
- Gods Unchained
- DeFi Kingdoms
- Sorare – Fantasy Football / MLB
- Wizards and Dragons – Reborn
- Star Atlus
- The Walking Dead: Empires
To play these blockchain-supported games, players generally need a crypto wallet such as MetaMask and connect this with the game’s website. Even if a game is free-to-play, you need to connect a wallet, as these games will still offer free token rewards. As a rule, these are the easy steps to take:
- Create a crypto wallet; MetaMask is a universal one, and then purchase Ethereum.
- You will likely need Ethereum even if a game uses its token.
- Connect your wallet to the game’s website and purchase your digital asset.
- You can also purchase a game’s digital asset in OpenSea and hold it in your wallet.
- Play the game, earn and develop your digital hero or creature.
Top 6 Things To Consider Before Buying an NFT
The non-Fungible Tokens market was one of the hottest trends in the bull market of 2021 and continue to seek attention in the current year. But if you plan to invest in digital tokens, you must have sound knowledge of the assets and their market trends. How to buy and sell them? How to pay for it? How to store them? Queries like these can be overwhelming for anyone.
Therefore, below are the few considerations you must consider before buying non-fungible tokens.
Unique Properties Of Non-Fungible Tokens
Non-fungible tokens often come in the form of collections. For example, MekaVerse, Bored Ape Yacht Club, or PEACEFUL GROUPIES. These digital asset collections consist of individual avatar artworks with different properties. Sometimes, more properties equal a higher value. Sometimes the simpler avatars are most valuable, such as the primary Bored Ape.
So, to determine whether a digital asset is worth buying, you should first check its properties’ rarity. You will want a digital asset with the lowest percentage of commonness among the collection, and you can view these percentages in the Properties section on the marketplace’s page.
NFT Liquidity And Market Volume
Non-fungible tokens do not have the same liquidity as crypto coins, which is essential to keep in mind. You cannot liquidate a digital token into traditional currency nearly as quickly as you can with cryptocurrency, so this may be a problem for those investing for a profit. Some experts suggest fractionalizing your digital tokens to increase their liquidity rates, which essentially involves splitting them into smaller parts.
On top of liquidity, it’s essential to consider the industry’s market volume. Presently, the market volume of digital tokens stands at almost $40 billion, and the rise or fall of this number is heavily dependent on the type of digital collectible people purchase regularly.
Choose Crypto Wallet Wisely
Every digital marketplace has specific preferences regarding crypto wallets. A good crypto wallet is user-friendly and offers easy navigation for beginners and advanced users. So, choose your wallet according to the marketplace you are dealing with. Ensure the wallet is secure and not prone to any security risks; include two-step verification and strong passwords.
Below is the list of a few top digital wallets for 2022:
- Trust Wallet
- Math Wallet
Buy The Relevant Cryptocurrency
Digital collectible marketplaces buy and sell different cryptocurrencies, so you must choose the most relevant one. However, most are Ethereum-based tokens, and almost most marketplaces accept Ethereum tokens as a form of payment. But that isn’t the rule. If the digital collectible you want to buy isn’t taking Ethereum tokens as payment, you can exchange your cryptocurrency on different crypto exchanges like Binance. The platform accepts PayPal, debit card, and wire transfers but bear in mind that transaction fees apply or vary per the platform.
Analyze The Utility Of The NFT
As crypto evolves and digital assets become more than simple JPEGs, a new factor that buyers must consider is its utility. Does analyzing utility grant you any special privileges or access to something exclusive? Does it offer a way for you to make money through future projects or other income opportunities?
Non-fungible token tech is way beyond mere JPEGs, and people realize it. A real example is the StarCards project: The team builds a DEX called StarSwap, the first one with digital token governance, giving the technology a great use case.
How Do You Make Money With NFTs?
The exponential growth of digital tokens in the past two years created new and exciting ways for investors to generate high returns. So, if you are wondering how to make money with digital collectibles, it’s vital to understand the approaches that can generate high profits from digital assets.
Keeping that in mind, let’s dive into a few strategies to help you make money with non-fungible tokens.
Invest In A Passive Cryptocurrency Mining Protocol
Passive crypto mining is a unique way of making money through digital assets in 2022. One innovative project in this space is Copium Protocol, a mining investment ecosystem that provides a simple solution to participate in passive cryptocurrency mining.
The minting process is decentralized, allowing anyone to create crypto without the need for a central regulatory authority. The crypto ecosystem provides a variety of coins and tokens to users at an ever-growing number. Tokens are generally in the form of non-fungible tokens created on various blockchain networks. Minting is an invaluable element of the crypto ecosystem and traditional finance.
Minting protocol generally involves three basic steps:
- Choose your marketplace: The first step to minting your digital token is selecting the right marketplace. You can choose one according to the digital asset that you aim to invest in. Then link your funded cryptocurrency wallet, select the “Mint an NFT” option, and upload your digital file.
- List your digital asset for sale: The marketplace you choose will calculate any “gas fees” at this point, which are the Ethereum blockchain network’s fees for recording transactions. These gas fees are variable depending on how busy the blockchain network is at the moment. The marketplace itself will also list its fees for handling the sale, usually a percentage of the final sale price of the digital asset.
- Manage Your Listing: Once you complete the listing, your digital asset will be available for purchase on the marketplace. Now you need to promote the sale to potential patrons via your website or social media. You can also manage your digital token list, but remember that if you make changes, the listing might incur another fee, and gas fees you’ve already paid aren’t refundable.
Invest in Promising New Non-Fungible Tokens Early
One of the best ways to make money from digital assets is by investing in favourable new collections early before they skyrocket in value. Many of the best digital collectibles to purchase were initially minted at a low price, with their value increasing exponentially in the weeks and months after launch.
A vital example of this is CryptoPunks, which could be purchased in 2017 for between $1 and $34. When the non-fungible token craze took over in 2021, these ‘Punks’ became incredibly valuable due to their first-mover status within the space. These collectibles later sold for $24 million when celebrities started to purchase them.
Play-To-Earn NFT Games
Another promising way to earn money is play-to-earn digital games. Most games now have P2E features, allowing players to generate rewards through skilled gameplay. These rewards are usually denominated in the platform’s native token, which players can spend on in-game items or exchange for FIAT.
Playing NFT games to make money has become a popular approach, with many exciting platforms available that offer a way to generate consistent income. Axie Infinity is one of the most prominent since users can ‘battle’ other users and earn rewards.
Flipping means the process of buying and selling high, hence creating high profits. However, the process can be challenging since there is enormous competition in the market nowadays. There are several factors to consider when researching how to flip your digital assets for profit.
- Token’s Utility
- Community backing along with a developmental team
- The visual appeal
Minting Your Own Digital Assets
A common approach for those wondering how to make money is to mint your non-fungible token. Minting refers to taking a digital asset (such as digital art or music) and placing it on the blockchain. Once you mint the asset to the blockchain, you can trade it on digital marketplaces to monetise your creation.
Minting digital assets is relatively straightforward, with top marketplaces like LaunchPad making the process easy for beginners. Due to the enormous growth in the market, the competition among creators is intense, with new collections springing up daily. Thus, if you wish to take this approach, you must ensure that your creation stands out from the crowd.
Royalties go hand in hand with selling digital tokens, one of the market’s most exciting elements. During the minting process, the creator can set their royalty percentage, which means that any secondary market sales will provide the original creator with a payment. Most royalty levels are set at 5% or 10%, although some may set higher rates than this.
Many of the most expensive digital tokens will have a royalty percentage embedded into them, which provides the creator with passive income whenever they are resold. Specific digital marketplaces will cap royalties, usually around 10%, to ensure that these assets still receive the attention of future investors.
Future Of Non-Fungible Tokens
The value of non-fungible collections consists of three pillars: community, culture, and utility. Digital collectibles have the potential for investors to develop strategies to ensure the proper returns actively. Developers are designing more engaging utilities. For example, some travel and entertainment companies sell tickets through digital assets, removing the need for any kind of customer service.
Digital tokens will play a massive role in the development of the metaverse. According to experts, the emerging digital ecosystem will generate one trillion dollars in annual revenue soon, so these will become a significant building block in the digital world.
Digital art assets have enabled artists to offer digital originals without any intermediary. They are playing a huge role in digital ownership, digital communities, tradeable game assets, and the ownership of metaverse assets. Digital collectibles will enjoy a significant role in online communities, events, and purchasing video game assets, digital identities, and assets.
The future of non-fungible tokens seems promising. In 2021, these had a market size of approximately $41 billion, catching up to that of the traditional art market. Young people, freelancers, and artists will significantly benefit from the growth of digital assets. The buying and selling of goods will be much easier. You can say digital assets will be a game changer in development and investment.
The non-fungible market is still young and unpredictable. A few years back, nobody talked about this craze; now we can not imagine digital assets selling in millions. Buying and selling digital collectibles can help you make profits. Considering the hype in the past two years, people can invest now. However, you must keep up-to-date with the industry from minor to significant changes to secure your investment. As you know, it is a unique digital asset, which can be volatile but gives you immense opportunities to change the direction of your investment.