Want to buy NFTs? First you can buy Ethereum on eToro and transfer it to MetaMask to use on Opensea!
There are 2 concepts you need to understand to know what NFTs are: fungibility and tokens. Tokens are scarce, digitally authenticated assets secured by decentralized blockchains. Fungibility is a term used to describe assets that hold equal value to one another: one ounce of gold is worth the same as another ounce of gold, and one bitcoin is equal to one bitcoin. These assets are fungible.
Non-fungible assets are asset that hold distinct value based on its traits. Automobiles, real estate, and art are all non-fungible. Each holds its own value based on characteristics like mileage, rarity, and desirability. Simply put, non-fungible tokens are assets on that are verified using blockchain technology that hold a distinct, unique value.
How do NFTs Work?
NFTs are typically built using Ethereum, but sometimes use other smart contract blockchains like Solana or Binance Smart Chain. The use of Ethereum for some NFTs proved so popular that it has congested the network, leading to higher transaction fees. Other blockchains with much cheaper fees can be used for NFTs, making them better options for low-value non-fungible tokens.
NFTs allow users to own digital assets like virtual real estate, art, digital sneakers and video moments. The concept of digital assets is similar to in-app purchases of items in video games. The big difference for NFTs is their uniqueness and ability to be easily transferred to another owner thanks to blockchain technology.
NFTs also give artists more control over their assets and allow them to set sale prices. Some NFTs are also set up to where the original creator gets a portion of each sale of the digital asset, creating a perpetual stream of royalty payments.
The industry has quickly exploded and turned what is a non-fungible token into a popular topic question and internet search.
How to Buy Non-Fungible Tokens
Some NFTs can be purchased and exchanged on their own trading platforms. Lots of NFTs are offered up for sale as drops or limited time sales for those who are lucky enough to be at the right place at the right time to take advantage of the sale.
NFT marketplaces like OpenSea offer a way for investors and fans of NFTs to buy the digital assets from individuals. OpenSea has hosted works from musician Shawn Mendes, Twitch co-founder Justin Kan and digital artist Beeple. To use OpenSea, you'll need to transfer Ethereum to an Ethereum wallet and connect the wallet to OpenSea's website. Some exchanges that let you buy and send Ethereum are eToro and Gemini.
With crypto taking over the digital art world, NFTs are even making their way to popular auction houses like Christie’s. Christie's has hosted NFT auctions for popular projects like CryptoPunks and Bored Ape Yacht Club, and the auction house received bids in the millions of dollars for the most sought after items.
Nifty Gateway is one of the top marketplaces for digital assets and has partnered with some top names in the music, art and celebrity worlds. The company was purchased by cryptocurrency company Gemini in 2019.
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Brief History of NFTs
NFTs can be traced back to colored coins on the Bitcoin network. NFTs that recreated Pepe the Frog also popped up around this time with rare ones selling on eBay and at live auctions.
CryptoPunks became one of the first Ethereum based NFT with 10,000 unique offerings. Each CryptoPunk has a different set of characteristics. The NFTs from CryptoPunks, a Larva Labs company, are considered digital assets that are truly unique and collectible with their limited supply.
In 2017, CryptoKitties from Dapper Labs became the first NFT to truly hit the mainstream digital asset market. The digital assets were part of a blockchain based game as well.
NFT Use Cases
As of writing, NFTs main use case is to verify the ownership and authenticity of digital collectibles and art. While there has been some adoption of NFTs in this way, the total market capitalization of non-fungible tokens is still incredibly small compared to the entire cryptocurrency market cap. In the future, NFTs have limitless applications.
Some countries, such as Israel, have tested using NFTs to verify the authenticity of government-issued documents, such as real estate deeds. Also, NFTs have also started to appear in blockchain-based games, such as Axie Infinity and Star Atlas. Other applications for NFTs are IP rights, credit scores, car leins, and voting. These applications are still just beginning to be explored, however.
How to Transfer a Non-Fungible Token
Non-fungible tokens can be transferred similar to cryptocurrencies. Some vary in the degree by which they can be transferred and traded.
Most NFTs are traded within their existing game or created platform. Blockchains make ownership and trading of NFTs easy on open marketplaces. The open marketplace style of the blockchain allows non-fungible tokens to be transferred in marketplaces such as auctions or placed for sale for cryptocurrency on digital asset transaction platforms.
The blockchain technology provides a digital record of each transaction for the non-fungible asset.
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NFT Popularity Is Rising
The rise of popularity and acceptance of Bitcoin and other cryptocurrencies was a top story in 2020. NFTs look to be the hot story in the cryptocurrency and digital asset world in 2021. Now in 2022, Twitter has added NFT verification for users' profile pictures.
NBA Top Shot has been one of the dominant crypto collectible NFTs with sales of $225 million in the month of February 2021, according to CryptoSlam. NBA Top Shot, owned by Dapper Labs, sold over 200,000 packs of highlights at a price point of $9 in a recent digital asset pack drop sale. A LeBron James dunk highlight from NBA Top Shot was recently sold for $208,000.
A decade old rainbow cat meme was sold for $580,000 recently. An animated artwork created by Beeple featuring Donald Trump laying face down in the grass covered in graffiti was sold for $6.6 million.
The rise of NFTs is attracting some big names to the market. Logan Paul offered NFT highlights of a Pokemon box break that sold out in less than an hour. Musician Steve Aoki is launching a NFT drop with Nifty Gateway. Even William Shatner has NFTs using his likeness. Other celebrities who have showed off their NFTs on twitter include Mark Cuban, The Chainsmokers, Snoop Dogg, Marshmello and Odell-Beckham Jr.
NFTs were a $41 million market in 2018 and has become a multi-billion dollar market in 2022. That figure is set to rise exponentially with the popularity of NBA Top Shot alone looking to surpass last year’s figure.
Frequently Asked Questions
Q: What is a famous example of a non-fungible token?
A: CryptoPunks and Bored Ape Yacht Club are some of the most popular NFT collection to-date. To get your hands on a piece from these collections, you’ll need to shell out around $200,000 or $250,000, respectively.
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