CryptoCurrency

What is NFT?

Some people are just crazy about collectibles. From works of art,antique furniture, to coins, you name it. Do you know that collectibles have extended to digital items too? And just like your tangible collectibles, they can cost thousands or even millions of dollars. In fact, since 2017, NFT’s total sales have already amounted to $174 million. Yes, it’s that wild; a digital photo, an audio clip, music, or a video clip can break a bank (Well, not really if your bank account is obese). In the digital world, these collectibles are called Non-fungible Tokens (NFTs)

NFT – A Digital Asset

An NFT can be any digital item. It can be a photo, a video clip, a Twitter tweet, or digital art that is sold and bought online using cryptocurrencies. Each NFT is a unique and non-interchangeable token. Unique in such a way that each NFT has a unique identifying code, which is encoded in the same way as crypto tokens. But unlike cryptocurrencies, NFTs are not interchangeable because they cannot be swapped with something else. With money, for example, a $10 bill can be interchanged with two $5 bills and its value is still the same, but with NFTs, this is simply not the case.

Blockchain technology is the backbone of NFTs. They are created, sold, and bought within a blockchain platform. All the information and transactions about the NFT, like who owns it, can be found in an online ledger, or a blockchain, accessible to anyone. Anyone can view, take a screenshot, or download the NFT online but only the owner holds the original item which contains a built-in authentication code as proof of ownership. Technically, it is the authentication code that the owner owns, and not actually the intangible item itself. It’s the same thing as purchasing an original Mona Lisa and displaying it in your household. Anyone can see or have a photo of the painting but only you own the original.

Creating an NFT

Anyone can create an NFT but you at least need to have basic knowledge of cryptocurrency. NFTs are created, sold, and bought on a blockchain, mentioned above, so before creating your NFT, you must first decide which blockchain to use. Currently, Ethereum dominates the NFT issuance service although other blockchains are becoming popular like Binance Smart Chain, Tron, and EOS.

Each blockchain has its own standard and platform for creating an NFT.

Two important things common across all blockchains for NFT creation are (1) the wallet that supports the blockchain’s NFT standard and (2) a certain amount of cryptocurrency in the wallet. If you’re using Ethereum, for example, you would need an Ethereum wallet that supports the Ethereum-based NFT token standard, ERC-721, and fund it with a $50-$100 amount of ether. The next thing you need is an NFT-centric platform built upon the blockchain you’re using to upload the file that you want to mint as NFT.

Popular platforms are Nifty Gateway, SuperRare, Async Art, and OpenSea. NFT platforms are, however, not universal to all blockchains. For instance, if you created your NFT in an Ethereum-based platform like OpenSea, you won’t be able to market your NFT in a Tron-based platform. The cost of creating an NFT would depend on the platform you’re using. In some platforms, NFT creation is free but, in some others, there’s a fee for uploading your NFT or any other transaction you perform in the marketplace.

Once you’ve created your NFT, the platform will assign a unique code to it and it will be stored in your collection. Anyone logged on to the platform can then see your unique piece of digital art.

Buying and Selling an NFT

The marketplace is where you upload and sell your NFTs. Be sure you include the conditions on how you want to sell your NFT including how you want to sell it; either run an auction or sell it at a fixed price. You can also keep the copyright of the original item and add in royalties so that you get a commission every time your NFT is sold to a new owner. This is one of the ways NFT helps you create a passive income.

On the other hand, if you are a purchaser, there are also things that you need to set up before you can buy an NFT. You first need to know which marketplace or platform you want to use to make your purchase and create an account within that platform. Like with NFT creation, you also need to download a wallet and fund it with the cryptocurrency that the platform supports. You can then connect your wallet to the NFT platform where you want to make the purchase. Once you’ve made a purchase, NFTs use a software code or smart contracts to ensure that the digital certificate of ownership is transferred to you.

Why is it so Expensive?

There is value in authenticity and scarcity. In the digital world, both are easily verifiable where copies of copies of copies of digital items can be made. NFT breaks the norm by adding verifiable authenticity and scarcity to NFTs. In economics, when supply is low, prices are high, and vice versa. The same principle applies to NFTs. Since each NFT is unique, there isn’t any duplicate of the digital item. This is the reason behind NFT’s expensive price, giving the owners bragging rights to the original item.

Most Popular NFTs

NFTs have been around since 2014 but it was only in 2020 that they became very popular. The most notable, and most ridiculously expensive, NFT to date is the digital art by Beeple entitled “Everyday: The First 5000 Days” that was sold at an auction house called Christie’s. It sold for a final bid of a whopping $69.3 million. The digital art is a colorful and massive collection of Beeple’s digital arts since he started in 2007 varying in style, content, and medium. Other popular NFTs and their corresponding prices are:

  • CryptoPunk #3100 – $7.58 Million
  • CryptoPunk #7804 – $7.57 Million
  • Crossroads – another Beeple artwork costing $6.6 Million
  • The first tweet promoted by Twitter’s founder Jack Dorsey – bids hit $2.9 million
  • Animated GIF of Nyan Cat – $580,00
  • Video Clip of Lebron James – $100,000

A Digital Milestone

NFT is another milestone achieved in this age of digital revolution and it has taken 2021 by storm. To some people, the preposterously high price tags are just crazy and not economical but to some, a unique and different form of a token with verifiable authenticity and scarcity is more than a worthy investment.

About the author

Glynis Navarrete

A freelance blogger who loves to write about anything related to technology. Born and raised in the Philippines and worked in Singapore for eight years as Technical Support for a wide range of IT equipment. Took a dive into the world of freelancing and now enjoying doing what I’m passionate about while not losing touch with technology.