It isn’t just a fad anymore like what Crocs and Beanie Beanies were in times of yore. Half of the digital world is going crazy over NFTs, while the other half is figuring out why. They are selling like hotcakes at astronomical prices!
Let us do the work for you as we discover what the fuzz is about and why some NFTs demand such high price tags over others.
What are NFTs?
Non-fungible tokens, or what we commonly know as NFTs, are unique digital assets that come in many different forms. It can be an image, a video, a meme, a game item, or music, among many others. It has a one-of-a-kind digital signature, much like a fingerprint. This signature includes information such as the creator’s name, transaction history, and conditions of a future sale.
The term non-fungible refers to an NFT’s nature of being unique and irreplaceable. Think of NFTs as art (painting or sculpture) that can never be replicated or interchanged. You can find countless prints of Van Gogh’s Sunflowers, but the original artwork is all there is.
NFTs are ascribed to the blockchain technology, which awards them proof of exclusive ownership. Blockchain refers to the massive public database that tracks and records the movements of all its assets. Because of its unique nature and exclusivity, an NFT becomes valuable.
How are NFTs Created?
One of the best things about NFTs is that anyone can create them with the proper know-how. Artists, illustrators, graphic designers, gamers, musicians, and many others have been known to develop NFTs and made tons of money from them. Creating NFTs is what’s called minting.
First, you need to create your NFT art. You’ll have to convert it into an NFT on the blockchain. To do this, you need to create an account on an NFT marketplace such as Opensea or Mintable. Minting isn’t always free, so you need to get your hands on some cryptocurrency such as Ethereum using a crypto wallet like MetaMask or Coinbase.
Once you have created your NFT, you can now sell it directly to a buyer or offer it for auction. You have to write a description for it and attach a royalty (commission) fee. Take note that there is a gas fee involved when you sell, buy, or trade NFTs. Check with your NFT platform how this works for them.
The good thing about this is that when you create an NFT using blockchain technology, it can never be altered. This means that the ownership of the NFT cannot be undone, or your NFT art to be recreated. Anybody can now view, buy, or bid on your NFT.
How to Buy, Sell, and Trade NFTs?
To trade NFTs, you need to go to an NFT marketplace, as mentioned above. Aside from Opensea and Mintable, there’s Rarible, SuperRare, and AtomicMarket, to name a few. Choose which ones are the most suitable for you and create an account there.
You have to have cryptocurrencies on hand as this is what you’ll be using to trade NFTs. Ethereum is the most commonly used, but other options include Bitcoin, Ripple, etc. An account in a crypto wallet is up next. This is where you’ll buy and store your crypto for trading.
After connecting your crypto wallet to your NFT marketplace account, you’re good to go. You can now start buying, selling, holding, trading, and minting NFTs. The next question that will probably pop into your mind is, how do you make money from NFTs?
In general, you can earn money using two different ways:
- Create or mint your own NFT art and then sell them
- Or, you can buy and resell an NFT for profit (more commonly known as “flipping”)
Looking at these ways to make money from NFTs, it’s clear that non-artists can join in on the fun even without the skills. You can buy, sell, and trade as long as you have the marketing chops.
What Makes an NFT Valuable?
If you’ve already spent some time in the NFT scene, you’ll notice that some NFTs are more valuable than others. As with art, its value increases when it becomes scarce. Just as there is only one The Scream by Edvard Munch, there is only one Everydays – The First 5000 Days by @beeple.
Here are the four pillars of NFT value:
1. Ownership Rights
One factor that makes an NFT valuable is its proof of authenticity. Sure, anyone can copy and paste any pixelized ape NFTs and share them. However, this has no value at all, and only the owner of that NFT has full ownership rights.
2. Utility
An NFT that has utility becomes more valuable. A few possible uses for them can be any of the following:
- Art – just like a painting, you display them where you want them. You can showcase them in virtual galleries or as PFPs (profile pictures)
- Music – it gives owners the rights to a song without the help of intermediaries who take a massive chunk out of the songwriter’s earning
- Games – some NFTs are created explicitly for use as gaming items or images in the metaverse
3. Rarity
As earlier stated, the more scarce an NFT is, the more valuable it becomes. However, you can find two NFTs in a collection with similar attributes but differing values. An excellent example of this is the Lebron James Top Shot NFT, a series with 59 cards, one of which was sold for a whopping $387,600!
4. Liquidity
An NFT’s high value also comes from its high liquidity. This is why tokens made on the ETH technology have a higher value than those from off-chain resources. In essence, the ability of an NFT to be sold and bought easily and quickly also makes it increase in value.
Final Thoughts
What makes an NFT valuable is based on several factors. The very concept also has its ups and downs. Having said that, its future is still as rosy as NFTs have made a significant impact on some artists’ lives.
