Author: Narek Gevorgyan, Coinstats
Narek is the founder and CEO of Coinstats and helps over 1,000,000 active users manage their crypto portfolios.
NFTs can be described as one-of-a-kind digital assets that are very valuable. Non-fungible tokens run on a blockchain and can be used in several ways, such as making art, music, or even collectibles for sports and other franchises and, most recently, real estate.
NFTs are likely the most dominant blockchain product because it provides security for the digital contents of owners and buyers. It is encoded, making it private and secure and an authentic record containing information on the ownership of assets.
Every NFT is unique and can be identified using TokenIDs assigned to blockchain wallets or accounts and align with the records for either a particular asset or a collection of assets.
The TokenIDs are linked to the assets or collection of assets when they are being created, and this process is called minting. Each token can be linked with different data and metadata as assets could be both physical and digital.
In other words, NFTs can be defined as electronic certificates for specific assets or collection of investments that store encoded data and provenance on the purchases being certified.
The evolution of NFTs has been quite significant. This concept has made millionaires of the most unlikely people globally, and the numbers keep climbing. Present-day records show about 470,000 active NFT blockchain wallet transactions completed in 30 days on some of the most popular marketplaces.
In 2020, the NFT market realized revenue of about 250 million dollars, and the figures have grown exponentially to more than 2.8 billion dollars as of August 2021. NFTs were first centered on GIF animated art, trading cards, and sports but have since delved into several industries.
One of the significant industries NFTs invaded is digital collectibles and other rare art forms. Now creators can make NFTs in movies, real estate, virtual pets, fashion, gaming investments, music, and more.
NFTs have grown to be the most dominant concept in blockchain for several reasons. Here’s what makes NFT important:
The first thing that sets NFTs apart is that they cannot be replicated or broken into bits. This means that an NFT can always be traced back to the owner and transferred to a new owner if sold.
In other words, NFTs cannot be owned by multiple blockchain wallets or accounts. Only one account or wallet at a time can claim ownership of an NFT, which changes once a sale is made.
Another importance of NFTs is that they provide a means for artists to create and sell their art without tampering. In cooperation with Defi and the crypto marketplace, NFTs provide a smoother market environment for creators to make and sell their art.
Besides all this, NFTs have gone a long way to creating a path for themselves by going beyond just selling art and delving into other aspects of the crypto trade, sports, and even real estate. It is safe to say that NFTs could be the future.
The main aim of NFTs is to help creators and asset owners make money by providing a real sense of scarcity. The scarcity of certain assets or art makes them more valuable.
For instance, a picture on the internet can be used by numerous people, and this makes it difficult to determine the source of the photograph; for all we know, they are all duplicate copies. An original painting in a museum is scarce as everyone knows which the original is, even if people might have identical copies in their homes or offices.
NFTs, allow creators to own original copies of their art solely. Even though there may be copies of this art with other people or in other places, the original artwork can always be traced back using the NFT, and ownership is transferred if the NFT certifying said artwork is sold.
The marketplace thrives on scarcity. If a product is scarce, it costs more, and NFT is a great way to exploit the benefits of scarcity for creators worldwide.
Considering that not everyone can be a creator, some people would instead buy NFTs from the creator or another owner. Here are some tips on how to buy NFTs
Before we proceed, it is essential to note that crypto wallets, accounts, and the marketplace are different spaces. A crypto exchange is a platform that permits the buying and selling of various cryptocurrencies. It could be seen as a crypto brokerage platform essential for buying and selling NFTs.
A crypto wallet is different. It doesn’t store your tokens or coins as the name suggests but instead stores the keys that grant you access to your coins or tokens and other digital assets. Having a crypto exchange account and a crypto wallet account is necessary to buy NFTs.
Most NFTs are built on Ethereum or Ethereum compatible blockchain. The Ethereum blockchain is a network that enables the recording and sharing of details of transactions between members on a shared ledger.
Buying Ethereum makes the transaction more straightforward, although other options like the polygon matic built on the Ethereum blockchain improve scalability and lower the charges. That being said, Ethereum remains the most popular currency for buying NFTs.
After choosing an exchange platform and buying Ethereum, the next step is to move Ethereum to your crypto wallet. It is essential to know that the exchange platform you choose, the crypto wallet, and even the crypto marketplace will affect the transfer process.
The next step is to link your crypto wallet to an NFT martlet place. There are three types of marketplaces to choose from:
- Open marketplace
Here, anybody can mint, buy or sell NFTs. Minting refers to the process of converting NFTs to digital assets, and in an open marketplace, either the creator of the marketplace can handle the minting.
- Closed marketplace
A closed marketplace offers more restrictions as only the marketplace handles the minting. Also, the marketplace is exclusive, as artists need to apply before they can conduct transactions in the marketplace.
- Proprietary marketplace
This is a marketplace for NFTs trademarked by the company that owns them.
Once you’ve chosen a marketplace and have created an account on the market, you can proceed to buy NFTs. The specifics of the transaction depend on the agreement between the buyer and the seller and the market chosen. For instance, purchasing an NFT may not include the copyrights of the NFT unless it is included in the agreement between the buyer and the seller.
NFTs are well on their way to ruling the world as they have become the bedrock for ownership of digital assets in the metaverse. NFTs have gone beyond GIFs, trade cards, and collectibles and ventures into more significant industries like different forms of art and entertainment, virtual land, and real estate.
Not to mention the growing popularity and the wide acceptance of the use of NFTs. Soon, NFTs might be the primary way to buy and sell physical and digital assets.
This publication is an opinion and is for informational purposes only. It is not intended to be investment advice. Seek a dully licensed professional for investment advice.