Although blockchain and cryptocurrencies have been around for years, NFTs are a relatively new phenomenon. Tokens of this kind were created in the mid-2010s, but the first NFT projects became available only in 2017. The popularization of NFTs, with which people now earn millions of dollars, was originally the merit of CryptoKitties, a game where you can breed virtual cats. The game became extremely popular, and the amount you can sell digital pets exceeded $100,000.
The renaissance of NFT in 2021 is closely related to progress in the blockchain infrastructure itself. Users took the bitcoin system as a basis, so the Lightning protocol appeared, which allows instant transactions. We also observed the development of technologies based on the Ethereum blockchain platform. Users were building an infrastructure of non-fungible tokens rather than making purchases.
Principles NFT works
NFT, a non-fungible token is a unit of account with which a digital impression is created for any unique item. Among them can be paintings, photos, videos, music, gifs, or any content that claims to be at least some kind of uniqueness. They are highly prized among collectors, gamers, and art lovers and are bought and sold through auctions.
These same tokens are stored in the so-called blockchain, a massive chain of blocks, each of which contains information. A token is just a record in one of the blocks; as a rule, there can be a lot of such forms of the same type. For example, each individual bitcoin is an exact copy of another such bitcoin, which makes it possible to compare them with a currency.
But what if you need to create a unique token that has no analogs? The answer is NFT. An NFT token is a way to transfer special items from the real world to the blockchain. Each of these tokens is unique, inseparable, and exists in the singular. In addition, all the necessary information about it is securely stored in the blockchain. Uniqueness may vary. So, the very first SMS was sold for 150 thousand dollars, and the first tweet of the founder of Twitter, Jack Dorsey, went for almost 3 million. After that, other stars began to look at the NFT.
How are tokens made, and what can be sold in the form of NFTs?
There are many platforms where you can place your tokens. Some even have a narrow specialization, such as only game items or art.
The most popular are OpenSea, SuperRare, Foundation, and Rarible. As a rule, sites charge a commission in the Ethereum cryptocurrency, or ethers, as it is called by ordinary people. The commission size can vary, but usually, it is several tens of dollars. This cost is because the new token will need to be included in the blockchain. The commission is always charged when the token is created, but depending on the site, this can be either immediately after the file is uploaded or at the time of sale.
You can sell anything. Music, images, text, video, 3D models, and any digital product that claims to be unique. Collectors, gamers, artists, and art lovers pay special attention to NFTs. Moreover, art in all its manifestations.
Non-fungible tokens are of interest not only to artists but also to significant publications. The Times magazine put up three of its covers for sale, including the cult “Is God Dead?”, and The New York Times sold its column with the telling title “Buy this column on the blockchain!”. As NFT lots, not only music tracks or drawings are exhibited, but also models. For example, Canadian artist Krista Kim raised $520,000 for a minimalist model of a house designed in Martian scenery.
How to make money selling NFTs?
Although, as planned, NFT tokens were created as an opportunity for digital content creators to earn money on collectors, gamers, and simply art lovers, now the main direction is monetizing popularity. For example, Elon Musk, the founder of Tesla, auctioned his NFT tweet for $1 million. Ultimately, it was never sold but received much attention from the online media. For a long time, the $70 million record was held by the work of digital artist Mike Winkelman in the form of a collaboration of all his paintings over the past 5,000 days.
So what do you need to do for promotion and potential sales if you are going to dive into the world of NFTs?
Create your own token
A step-by-step guide on how to create your own NFT token using the example of the OpenSea site. Any crypto wallet is required here:
- open the site;
- select Create – My collections;
- create a collection, name it, and add a description and a logo;
- add tokens to the collection. For this, you need to select Add items and then Add new item;
- after the successful loading of the token, we put it up for an auction;
- we are waiting for it to be bought for 70 million.
Resale of tokens
NFT tokens do not have to be considered valuable in terms of uniqueness. They are also excellent investment tools. If, in the real world, we have a rough idea of how the price of art objects is formed, then in the case of the blockchain, a wholly new and incomprehensible creative market appears where the price does not depend on artistic factors at all.
For example, in 2020, you bought an NFT picture for two ethers, at that time, $170 each. And decided to sell it now. At the moment, the cost of the coin is already $2150. Questions immediately arise: “what am I actually investing in” and “at what rate the buyer will take it.” It is difficult to answer them, and each auction is held individually. Some lots go cheaper, and some collectors fight for more than one day, overstating the original cost a thousand times.
Free distribution of tokens
Another way to make money on NFTs is through free giveaways. Many new platforms entering the crypto market try to lure users to themselves with the help of free distributions of their own tokens. Usually, they are used to pay for goods and services on the site itself. But there are situations when such tokens begin to live their own lives and become full-fledged cryptocurrencies.
For example, in 2017, Larva Labs created an application for generating pixel art avatars – CryptoPunks. Initially, these avatars cost nothing, but now the cost of one copy is estimated at $173,000, and the whole collection will cost almost $2 billion.
Services for Token Authors
Every day, millions of people create new NFT tokens to earn them, but only some succeed. Even if the token can be valuable, many aspiring authors must learn how to implement it. They come to the aid of a kind of crypto-producers. These people have extensive experience selling tokens and working with trading platforms.
If you have these skills, you can sell your promotion services to novice users. You can find them on thematic forums, marketplaces, and social networks. You can also provide paid consultations on NFT. At the same time, the form of training can be different, from online Zoom classes to full-fledged many-hour courses with additional materials.
Sale of tokens to receive cryptocurrency
The main feature of this investment method is that after selling cryptocurrencies, you do not immediately withdraw money but buy new electronic currencies with them. Next, you must wait until the token grows in price to sell it at the maximum value. The only negative is that the behavior of cryptocurrencies is sometimes difficult to predict, and you may have to wait a long time before the tokens jump in price.
Copyright and criticism
One of the main reasons why NFTs are criticized is the somewhat confusing relationship between tokens and copyrights. People, who buy NFTs often wonder, “Do I now own the rights to something?” The fact is that NFT does not give any rights to own an object outside the boundaries of the blockchain platform. Let’s look at an example.
More than 10 years ago, a Nyan Cat video appeared on YouTube, quickly gaining popularity and becoming a meme. Today they are still alive in a simple video. An animated pixelated cat flies through the sky and leaves a rainbow trail behind it. The author of the video, Christopher Torres, sold an NFT GIF with his creation last year for $580,000. But nothing prevents you from watching a video on YouTube, downloading it, or using a cat as a screensaver. So you definitely won’t face a lawsuit from the token owner.
Or you can take the famous Quentin Tarantino film Pulp Fiction. Recently, the director announced that he plans to sell cut scenes as a token. The person who purchases it will receive a unique digital artifact, which they can dispose of as they wish within the platform. Of course, it is yet to be decided by law how the tokens relate to copyright, but it is unlikely that you will have to pay the token owner to view the same scenes on the Internet.
Yes, after buying tokens dedicated to some films or art objects, we can still use them, but this is not important. The most valuable thing in NFT is exclusivity. No one else has the same token as you, and all information about it is securely recorded on the platform. For collectors, art, or game lovers, it’s like buying an original. While we can download the files we like, their exclusivity, not available on the Internet, carries the primary value. The blockchain securely records the fact that you purchased a specific unique item previously created by its original owner, the data about which is also stored in the blockchain.
For collectors, gamers, and art lovers, such purchases are akin to acquiring original paintings. It is possible, in theory, to purchase the original of Kazimir Malevich’s Black Square. Still, the very fact of this purchase and its cost will be significantly different from if we hung a reproduction of this painting on the wall.
But NFTs can be seen as more than just part of a collection or something of value in terms of emotional experience, nostalgia, or the opportunity to show off a unique acquisition. In addition, the ability to resell NFTs embedded in their smart contracts allows them to be considered investments.
Does NFT have a future?
NFT has become the buzzword of 2021, and interest in this topic will only grow. Platforms are already announcing various innovations and attracting investors, and artists and musicians are starting to show more and more interest in a new niche.
The market for non-fungible tokens is developing extremely fast, and over the past few years, blockchain technology and infrastructure have undergone significant changes. However, many questions remain today, according to what rules the NFT market can and should operate by and in what areas non-fungible tokens can be used. It is necessary to solve copyright problems and revise the distribution formats.
NFT is likely to impact the formats for creating and distributing content, objects of creativity, and art. “It’s a new environment for creativity,” says Professor Donna Redel. – The current situation can be compared to the period when photographers switched from film cameras to digital ones; It is appropriate here to recall the rejection with which many treated the new photographic equipment.
One of the potential applications of NFT in the future is the recording of unique documents in the blockchain. For example, due to the security of the blockchain, diplomas, certificates, and various documents can be issued in NFT format, potentially helping to eliminate the risk of their forgery.
“Blockchain is evolving, transaction opportunities are growing, and we are at the beginning of this journey,” Redel sums up. “We are just starting to work on this topic, and many specialists – brilliant, versed in finance, technology, and art – are currently experimenting and looking for new ways to use blockchain, cryptocurrency, and tokens in our future.”
CONCLUSION
These are all the most important things you need to know about NFT today. In addition to the applicability, such as purchasing rights to own art or real estate, NFTs have massive potential in the coming future, namely in the metaverse. People are already buying up NFT lands or NFT characters, expecting them to increase in value as the metaverse becomes popular. But still, the NFT is a very unchanging phenomenon, and the market is weak for acceptance, so it is too early to give ironclad conclusions or even recommendations.