Last week, Christie’s Auction house set a record for the highest selling non-fungible token (NFT) to date, a transaction worth more than $69 million Ethereum tokens. This 1/1 piece dubbed “The First 5000 Days” by Beeple is just one of many NFTs selling at unprecedented amounts. Artists like Beeple are using NFTs to release digital artwork that can be verified authentic through the blockchain.
Non-fungible tokens are much different from other cryptocurrency investments. These tokens don’t have value from their utility like other cryptocurrencies. Instead NFTs have value because of the media attached to them –– the most common forms of media on NFTs today are art and music, but NFTs have the potential to tokenize any real world asset.
Learn how you can buy NFTs now.
What is an NFT?
NFTs are typically Ethereum-based tokens, and they’re used to authenticate ownership of whatever asset is attached to the token. Non-fungible tokens make it possible for artists to release their work digitally without the risk of counterfeits. Sure, you could copy the file from someone else’s NFT, but it won’t be an original.
Although NFTs can be expensive, you’re paying for more than just a JPEG file. The token gives you ownership rights to the piece you receive, and you’re able to sell your NFTs on marketplaces like Opensea and Nifty Gateway. Saying that NFTs are just JPEG files is the equivalent of calling traditional art just paint on canvas. Similar to traditional artwork, the value of NFTs comes from the artist who created it.
Step 1: Make an NFT Marketplace Account
There are many marketplaces to buy and sell NFTs. Depending on which marketplace you choose, you’ll be able to purchase different types of art or collectibles. A lot of these websites have secondary marketplaces with a variety of NFTs, but each platform operates slightly differently.
Here are some of the most popular NFT marketplaces:
- Opensea is a marketplace for NFTs that operates on Ethereum. Users can interact with the network to exchange non-fungible tokens for cryptocurrency. It hosts a variety of digital collectibles, from video game items to digital artwork. To use the platform, you need a web3 cryptocurrency wallet such as Metamask. Metamask is a crypto wallet chrome extension that lets you interact with certain platforms like Opensea.
- SuperRare is a social network for NFTs. Each piece on the platform is unique, and users can buy and sell these original pieces on its website. The platform operates with Ethereum’s network, so you’ll need to fund your account with Eth tokens to make your purchase.
- Nifty Gateway is an NFT marketplace owned by the popular cryptocurrency exchange Gemini. The platform works with popular artists such as Steve Aoki, Grimes, 3LAU and many others to release artwork on the primary marketplace. The company also has a secondary marketplace that allows collectors to resell artwork. You can fund your Nifty account with Ethereum, or you can connect a credit card directly on its website.
- NBA Top Shot is a marketplace for licensed NBA collectibles. These digital items are a new take on basketball cards; these digital cards are more interactive than traditional trading cards. For example, the cards have in-game highlights of the featured players. The highest sold card on NBA Top Shot was a Lebron James Dunk card: the card featured a clip of James dunking on the Houston Rockets and sold for over $200,000.
- Sorare offers a platform to collect and trade limited edition soccer NFT cards. More than 125 clubs are featured and more are added weekly. Connect and trade with other fans via Sorare‘s open marketplace or take part in its Global Fantasy Football Game where you can create your line-up and earn points based on real-life performances.
Step 2: Fund Your Account
Since most NFTs are Ethereum-based tokens, many marketplaces for these collectibles accept Eth tokens as payment. If you already have an account with a cryptocurrency exchange, you can purchase Ethereum on it and send your crypto to your marketplace account.
If you don’t already have a crypto exchange account, Coinbase and eToro are good options for beginners.
Step 3: Buy Your NFT
It’s an easy process to buy an NFT once you’ve funded your account. Most marketplaces are in an auction format, so you’ll need to submit a bid for the NFT you want to purchase. Some marketplaces operate more like an exchange, using highest bid and lowest ask for NFTs that have several prints.
A benefit of purchasing an NFT from the primary marketplace is the potential resale value directly after the product goes on sale. Some NFTs that are in high demand will sell for 5 to 10 times their initial price right after the release. The downside to buying NFTs on the primary marketplace is it’s hard to estimate the demand for the art. On the secondary marketplace, you can compare your purchase to previous sales.
Current Crypto Prices
The cryptocurrency market has been in a bull market this year, with prices of major cryptocurrencies doubling since January. Cryptocurrencies are some of the most volatile investments to make, so it’s a good idea to keep an eye on the market if you want to find a good buying opportunity. As a general rule, Bitcoin’s price movements indicate the market sentiment of the crypto markets as a whole.
How are NFTs Created?
Creating an NFT is a surprisingly easy process. All you need to do is make an account with a marketplace like Opensea that lets its users create NFTs. You don’t need to know how to make an ERC-721 (NFT) token or have any experience with blockchain for that matter.
Although anyone can create an NFT, that doesn’t mean you can make money selling NFTs. Tons of NFTs made by random people never sell or sell for extremely low values. For an NFT to have value, the media needs to have some sort of significance. NFTs often gain value from the artist’s reputation or the historical significance of the media.
Pros and Cons of NFTs
NFTs clearly benefit artists who produce digital media. Before NFTs, it was extremely hard to verify the authenticity of digital media, as anyone would be able to copy and paste the file.
However, not all NFTs are valuable, and there are clear pros and cons of NFTs.
- Non-fungible tokens make it easy to buy and sell digital media online.
- These tokens use the blockchain to make it easy to verify authentic artwork.
- NFTs can make collectibles like trading cards more interactive and engaging.
- The NFT craze has made prices for some collectibles extremely expensive, and they may not hold their value in the long term.
- If you don’t store your NFTs safely, they may be at risk for being hacked in a similar way to other cryptocurrencies.
Top NFTs & Collectibles Tokens
There are many types of NFTs, but the most popular categories are art, music and collectibles. Big name musicians who’ve created NFTs include Grimes, Kings of Leon, Steve Aoki and 2 Chainz.
A lot of artists who use digital media as the medium for their art have been drawn to NFTs, such as Jon Noorlander, Mike Greg and Beeple. Even the public company Score Media and Gaming Inc. (SCR) has started covering NFTs in its weekly show Mint Condition.
One of the first big NFTs was a crypto collectible called CryptoKitties. These digital cats were released back in 2017 are collectible in a similar way to Beanie Babies. There are many other unique collectibles such as NBA Top Shots, Cryptopunks and in-game items for video games.
The Future of NFTs
Right now most NFTs are used to sell digital art and collectibles. This may be a fad or it could be the new form of exchanging collectible assets ranging from trading cards to artwork.
In the future, NFTs can be used to tokenize any real world asset, making ownership of assets transparent and incorruptible. Non-fungible tokens could be extremely valuable for real estate deeds, vehicle titles and business ownership.
Frequently Asked Questions
Q. What are NFTs?
Non-fungible tokens are commonly ERC-721 tokens on Ethereum’s blockchain. Unlike ERC-20 Ethereum tokens, ERC-721 tokens each have a distinct value. Since each NFT holds its own value, they can’t be exchanged for one another like normal cryptocurrencies. Because of this, NFTs act more as a form of authentication than a form of exchange.
Q. Are NFTs Cryptocurrency?
NFTs aren’t exchangeable for each other, so they don’t act like normal cryptocurrencies. Instead, non fungible tokens are unique tokens used to verify the authenticity of digital media. In the future, NFTs could be used for tokenizing real world assets, making transactions of these assets more efficient and transparent.
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