Non-fungible tokens, or NFTs, are a digital token somewhat similar to other cryptocurrencies, as they live and are verified on the blockchain to identify unique goods. Non-fungible means that the asset is one of a kind and cannot be broken down into many parts or factions and reassembled like a currency can. This is what makes cryptocurrencies like Bitcoin fungible, NFTs tokens are not.
Because NFTs are non-fungible, they are similar to physical assets sold in a marketplace. NFTs are similar to rare baseball cards or artwork, and have been in the headlines, most famously in the world of digital artwork, but also include music, video game characters, or potentially any other form of digital asset.
With the popularity of NFTs on the rise, it’s essential that crypto investors understand how they are created, bought, and sold in the digital marketplace. Like cryptocurrencies, NFTs use a blockchain ledger and are traded across a secure network. NFTs offer benefits like transparency, security, and immutability. Today, we will take a closer look at what you need to know before you take the plunge into the NFT world.
How Are NFTs Made?
Artists and content creators use NFTs to sell their work when it is not inherently monetizable. For example, this may take the form of a unique video, digital artwork instead of a print or painting, an exclusive comic strip.
NFT investors have paid tens of thousands (or even tens of millions) for ownership of a digital project or asset sold on an NFT marketplace. These items can be anything from a video game skin to a song, record, JPEG, or even footage from an iconic sporting moment.
An NFT is considered “minted”, when the unique token is created the data prescribed to your NFT is ready to sell and stored on the blockchain. Once the NFT becomes a part of the blockchain, the creator can nominate to always receive royalties, it can be purchased and traded in the market and tracked if it is resold or collected in the future.
Can NFTs Be Copied?
The simple answer is yes. NFTs are designed to give you something that can’t be copied, the rights to the piece. Just like you can buy a Degas print, only one person owns the original. NFTs give you ownership of the original work minted by the creator’s address, providing authentic proof. Copies of the digital assets do not hold the same value as the original. This means that while someone could copy a piece of digital art, they cannot make a copy of the unique token minted which stores that digital art on the blockchain.
How Do I Buy NFTs?
Most NFT marketplaces function like an auction. Much like the famous auction house, Christie’s (where the highest-valued NFT ever was sold), potential buyers bid on a specific NFT, and the highest bidder wins. Almost all NFTs are purchased with Ether and must use the Ethereum blockchain for the transaction. When you purchase an NFT, you not only obtain one-of-a-kind artwork, but you also financially support artists you like. You have basic usage rights, to share on social media and other digital platforms.
Some of the most popular NFT marketplaces are:
Buying NFTs may seem pretty straightforward. However, this does come with some caveats. Before you can purchase an NFT, you have to have the funds readily available in your digital wallet. In addition to having money available, there are fees associated with buying, selling, and trading NFTs.
There is a “gas” fee for each sale – this is the price for the energy needed to upload the transaction to the blockchain. In addition, there are fees for selling and buying, conversion fees and fluctuations in price depending on the market value at the time of the purchase. Just like any other online purchase, the bottom line is “buyer beware.” Make sure you research and fully understand the nuances of purchasing NFTs before you make the big purchase.
How Can I Sell NFTs?
An NFT can be sold in two ways – by trading an NFT you’ve already purchased or selling an NFT you’ve minted. If you’re reselling an NFT that you bought, it will be sold on a secondary market. The NFT needs to be in your crypto wallet and put up for sale on a registered marketplace. You may sell the NFT for more money than you originally bought it for, but the value is not guaranteed, as with the sale of any collectible good.
NFTs are sold by auction or at a “buy now” price. If they are sold by auction, a reserve can be set to guarantee an amount of return. In addition, you can attach a commission to the file that pays you on the initial purchase and any subsequent purchase thereafter. Some NFTs can be set up to allow the creator to receive royalties when sold in the future. Just like buying NFTs, your wallet needs to be set up and funded with cryptocurrency.
Aus Merchant Helps You Navigate The Future Of Money
While the NFT market has created new investment opportunities for those on the forefront of technology, there’s still a lot that even the seasoned crypto trader may be unfamiliar with. That’s why you need an experienced advisor on your side.
That’s why Aus Merchant is here.
We provide guidance and investment services for individuals, crypto traders and firms of all sizes. We can help you research and hold assets, execute trades and prime brokerage services to help you reach your financial goals through crypto. Reach out to our team and learn more about how we can assist you in building your portfolio of both cryptocurrency and NFTs.