What are NFTs & How to Buy NFTs

David MaxwellApril 22, 2022

6 minutes read

NFTs (Non-fungible tokens Token) How to buy NFTs (A Step by Step Guide)

What are NFTs & How to Buy NFTs, This year, non-fungible tokens (NFTs) appear to have exploded from the Ether.

These digital assets, which range from art and music to tacos and toilet paper, are selling like 17th-century exotic Dutch tulips, with some fetching millions of dollars.

Are NFTs, on the other hand, worth the money—or the hype? Some analysts believe they, like the dotcom mania and Beanie Babies, are about to burst.

Others feel that NFTs are here to stay and will forever revolutionize investment.

What is the meaning of NFT?

A digital asset that depicts real-world elements like art, music, in-game items, and films is known as an NFT.

They’re bought and traded online, often using cryptocurrency, and they’re usually encoded with the same software as many other cryptos.

Despite the fact that they’ve been there since 2014, NFTs are gaining popularity currently as a popular means to buy and sell digital artwork. S

ince November 2017, a whopping $174 million has been spent on NFTs.

NFTs are also one-of-a-kind, or at the very least one of a very small run, and contain unique identifying codes.

“Essentially, NFTs generate digital scarcity,” explains Arry Yu, managing director of Yellow Umbrella Ventures and chair of the Washington Technology Industry Association’s Cascadia Blockchain Council.

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This is in sharp contrast to the vast majority of digital products, which are nearly always available in endless quantities. If a certain asset is in demand, cutting down the supply should theoretically increase its value.

However, many NFTs have been digital works that already exist in some form elsewhere, such as legendary video clips from NBA games or securitized versions of digital art that are already floating around on Instagram, at least in these early days.

Famous digital artist Mike Winklemann, better known as “Beeple,” assembled a composite of 5,000 daily drawings to produce “EVERYDAYS: The First 5000 Days,” which sold for a record-breaking $69.3 million at Christie’s in 2021.

Individual images—or perhaps the full collage of images—can be viewed for free on the internet. So, why are people prepared to spend millions of dollars on something that might be easily screenshotted or downloaded?

Because a non-financial transaction permits the buyer to keep the original object. It also comes with built-in authentication, which acts as proof of ownership. The “digital bragging rights” are almost as valuable as the item itself to collectors.

How is an NFT Different from Cryptocurrency?

The term “non-fungible token” refers to a token that is not fungible. It’s usually programmed in the same way as cryptocurrencies like Bitcoin or Ethereum, but that’s where the similarities end.

Cryptocurrencies and physical money are both “fungible,” meaning they may be traded or exchanged for one another.

They’re also worth the same amount of money—one dollar is always worth another dollar and one Bitcoin is always worth another Bitcoin.

The fungibility of cryptocurrency makes it a secure way to execute blockchain transactions.

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NFTs aren’t like other materials. Each contains a digital signature that prevents NFTs from being substituted for or compared to one another (hence, non-fungible).

Simply because they’re both NFTs, one NBA Top Shot clip isn’t the same as EVERYDAYS. (For that matter, one NBA Top Shot footage isn’t necessarily equal to another NBA Top Shot clip.)

How Does an NFT Work?

NFTs are stored on a blockchain, which is a decentralized public ledger that keeps track of transactions. Most people are familiar with blockchain as the underlying technology that allows cryptocurrencies to exist.

NFTs are most commonly kept on the Ethereum blockchain, although they can also be held on other blockchains.

An NFT is made up of digital objects that represent both tangible and intangible objects, such as:

Grafic art
GIFs
Videos and sports highlights
Collectibles
Virtual avatars and video game skins
Designer sneakers
Music

Even tweets are taken into account. Jack Dorsey, a co-founder of Twitter, sold his first tweet as an NFT for more over $2.9 million.

NFTs are essentially digital versions of tangible collector’s artifacts. As a result, rather than receiving an actual oil painting to put on the wall, the customer receives a digital file.

They also obtain exclusive rights to the property. NFTs can only have one owner at a time, and their use of blockchain technology makes verifying ownership and transferring tokens between owners simple.

In the metadata of an NFT, the creator can also store special information. Artists, for example, can sign their work by putting their signatures in the file.

What Are NFTs Used For?

Artists and content creators have a one-of-a-kind opportunity to monetize their work thanks to blockchain technology and NFTs.

Artists, for example, no longer have to sell their work through galleries or auction houses. Instead, the artist can sell it as an NFT straight to the consumer, allowing them to keep a larger portion of the profit.

Additionally, artists can integrate royalties into their software so that they receive a share of sales when their work is sold to a new owner.

This is a desirable feature because most artists do not receive subsequent proceeds after their first sale.

Making money using NFTs isn’t limited to art. To raise money for charity, companies like Charmin and Taco Bell have auctioned off themed NFT art. Taco Bell’s NFT art sold out in minutes, with the highest bids coming in at 1.5 wrapped ether (WETH)—equal to $3,723.83 at the time of writing. Charmin’s offering was dubbed “NFTP” (non-fungible toilet paper), and Taco Bell’s NFT art sold out in minutes, with the highest bids coming in at 1.5 wrapped ether (WETH)—equal to $3,723.83 at the time of writing.

In February, Nyan Cat, a 2011 GIF depicting a cat with a pop-tart body, sold for nearly $600,000. As of late March, NBA Top Shot had grossed more than $500 million in sales. NFT sold for more than $200,000 for a single LeBron James highlight.

Snoop Dogg and Lindsay Lohan are among the celebrities who have jumped on the NFT bandwagon, sharing unique memories, artwork, and moments as securitized NFTs.

How to Buy NFTs

If you’re interested in starting your own NFT collection, you’ll need the following items:

To begin, you’ll need a digital wallet that can hold both NFTs and cryptocurrencies. Depending on what currencies your NFT provider takes, you’ll probably need to buy some cryptocurrency, such as Ether. Coinbase, Kraken, eToro, and even PayPal and Robinhood now allow you to buy cryptocurrency with a credit card. After that, you’ll be able to transfer it from the exchange to your preferred wallet.

When researching your alternatives, keep fees in mind. When you acquire crypto, most exchanges charge at least a portion of your transaction.

There are many NFT sites to choose from once you’ve set up and funded your wallet. The following are the largest NFT marketplaces at the moment:

• OpenSea.io: This peer-to-peer marketplace claims to sell “rare digital objects and treasures.” To get started, simply create an account and browse the NFT collections. You may also sort pieces by how much they sold to find new artists.

• Rarible: Rarible is a democratic, open marketplace that lets artists and producers to issue and sell NFTs, similar to OpenSea. The platform’s RARI tokens allow users to vote on features such as fees and community regulations.

• Foundation: To upload their work here, artists must get “upvotes” or an invitation from other creators. Because of the community’s exclusivity and high admission cost—artists must also acquire “gas” to mint NFTs—it is likely to attract higher-quality work.

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Chris Torres, the developer of Nyan Cat, for example, sold the NFT on the Foundation platform. It might also imply higher prices, which isn’t necessarily a negative thing for artists and collectors looking to profit if demand for NFTs stays the same or even rises over time.

Although these and other platforms are home to hundreds of NFT artists and collectors, do your homework before purchasing. Some artists have been defrauded by impersonators who have listed and sold their work without their knowledge.

Furthermore, the verification methods for creators and NFT listings vary by platform, with some being more strict than others.

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For NFT listings, OpenSea and Rarible, for example, do not require owner verification. Buyer safeguards appear to be limited at best, therefore it’s wise to remember the old adage “caveat emptor” (let the buyer beware) when buying NFTs.

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