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Over the past two years, the world of digital assets has exploded. Cryptocurrency prices surged to new all-time highs across the market and the NFT industry emerged and took the investment, collection, and technologically-curious by storm. And there’s nothing like the creation – and rapid rise – of a brand new industry to engage a community and interest those sitting on the fence.
In this, we’ll walk you through the important need-to-knows about NFTs and how they might impact you in the world of art, assets, and investment options.
What is an NFT?
In short, an NFT stands for a non-fungible token.
Slightly longer: An NFT is a tokenised asset, based on the blockchain, that has its own unique properties and unique values. When something is fungible, it means it holds the exact same value as something like it. For example, one dollar is equalled to another dollar and one Bitcoin is equalled to another Bitcoin. They hold the same value and can be traded at the same price. A non-fungible asset has a unique value that cannot be traded with something similar, much like an art piece. One painting by Van Gogh does not equal another Van Gogh painting and one NFT does not equal another NFT. They are a one-of-a-kind type asset.
The adoption and interest around NFTs
Over the last 12 months, there has been a spike of interest in the space as adoption of the digital art has increased. Looking at the trends of searches related to NFTs, we can see the steady incline of people searching for “NFT” related concepts.
We’ve also seen brands like Puma, Nike, and Adidas adding NFTs to their collections and Coca-Cola and Taco Bell minting NFTs for customers to collect.
How are NFTs created?
Much like cryptocurrencies, NFTs are created on the blockchain. Most of them are created (or “minted”) on Ethereum’s blockchain, but there are other networks and platforms that NFT creators use, like Tezos or TRON. To mint an NFT, you need to pay fees to the platform (such as the gas on Ethereum) to validate the transaction or mint the NFT straight onto a platform you can sell or trade on, like OpenSea or Rarible. To mint the NFT on a platform, you need an account and put it up for sale. Once the NFT is sold, it is minted onto the blockchain.
What sort of NFTs are available?
Most people associate NFTs with digital art, but an NFT is really anything that has been – and can be – tokenised on a blockchain. This means anything, from art to music, digital property to avatar’s clothing, can be an NFT and you can buy it on an NFT trading platform.
Digital art is currently the most popular type of NFTs available and there’s a lot of hype (and money!) in the space. There are some prominent pieces in the crypto art space that are seeing millions of dollars. Blue-chip collections like the CryptoPunks and the Bored Ape Yacht Club pieces have become renown for their status and owning one of the pieces in the early collections of NFTs – before they became so popular – is a symbol of either wealth or early adoption.
There are also artists that have made a name and gained a following through their crypto-art. Art from names like Beeple, Pak, Mario Klingemann (also known as Quasimondo), Mad Dog Jones, and FEWOCiOUS have found their niche in the space and their works, when released, will pick up massive amounts. If collectors of their work choose to sell, it will also go for a significant amount, and the artist will see secondary sale fees come in (kind of like royalties).
Can you copy an NFT?
Like physical art can be copied and imitated with prints, NFTs can be copied – they are digital afterall and there’s nothing stopping someone from right-click-copy-pasting an image or screen-recording a graphic. Where the value in an NFT lies, though, is in the authentic ownership of the piece that is recorded on the blockchain. Since it is on the blockchain, the ownership is open for everyone to see (albeit anonymous) so it’s impossible to fake any sort of certificate of ownership to try and steal or copy the piece.