As if cryptocurrency and Bitcoin weren’t complicated enough, in 2021 we've been introduced to another cousin of crypto within the blockchain industry called NFTs.
So what the heck is that?
- NFT stands for non-fungible token, and in simple terms, think of it as a digital collectible. NFTs are assets of sorts stored on a blockchain and contain important metadata that identifies creation dates, ownership, and other relevant identifiers.
- Although NFTs and cryptos leverage the same blockchain technology, cryptos and physical currencies are considered "fungible" in that one Bitcoin can be traded or exchanged for one another, and are equal in value. A Bitcoin is always worth another Bitcoin, right? NFTs can't be directly exchanged with one another simply because no two NFTs are identical. Thus the term non-fungible.
- Their value comes from their scarcity and originality. They’re unique, non-counterfeitable, and authenticated by one of the most reliable emerging technologies on the planet. Even though NFTs have been around since 2014, they are gaining notoriety because they are becoming a popular way to buy and sell digital artwork.
- It's like a deed or the title to your car, except in this case it’s more of an uber-complex and secure deed. NFTs can be almost anything, from digital art, online collectors cards, music, to even tweets. One of the most popular NFT markets is the NBA Top Shots collection, which allows fans to own in-game digital moments (i.e., video snippets) like they were baseball cards.
- NFTs can also be used to tokenize real-world art, or any other asset for that matter, to essentially facilitate a much more efficient exchange of rights to these objects. Gold ETFs anyone?
- They can sell for anywhere from a few dollars for miscellaneous digital items, $600,000 for a Nyan Cat meme to $69 million for a digital collage. Yes, the range is really broad and unpredictable.
So are they a good investment?
Some say that NFTs are just a way to sell scarcity since most digital creations are almost always in infinite supply. Assuming it's in demand though, theoretically cutting off the supply should raise the value of the asset.
Well, tread carefully and always do your due diligence as we always say. Inevitably, some NFTs will succeed while others will fail and become worthless.
Where to buy and sell
When Bitcoin or cryptocurrencies are mentioned around those who are unfamiliar with the concept, one of the first things often asked is “where do you even buy that?” It’s an understandable question because it’s not exactly intuitive and well-known like stocks and other publicly traded investments. NFTs are not much different in that they can be easily accessible, but the market is still emerging.
Just like the overwhelming number of options we seem to have for crypto exchanges and e-commerce shopping, there are a variety of online marketplaces to buy and sell NFTs, with some being more reputable than others of course. Top names include sites like SuperRare, Foundation, and Mintable to name a few.
For advanced players and creators
Want to create your own NFT out of that tweet that got 100 likes one time? It’s certainly not a task for beginners, but it is relatively simple to accomplish once you’re acclimated to the crypto environment.
You’ll need to pick the artwork, choose the blockchain you want to create it on, oh and have at least $100 of ETH and an Ethereum wallet, in most cases. Download an app like MetaMask to go about the minting process (details foregone…) before connecting your wallet to a marketplace like OpenSea or one of many alternatives to officially list your NFT for sale.