What you need to know about NFTs
NFTs have taken the worlds of art and gaming by storm. Whether you think they’re a speculative fad or a great money-making possibility, they continue to make the headlines when they sell for millions of dollars.
What is an NFT (Non-Fungible Token)?
- An NFT is a digital asset that represents real-world objects like art, music, in-game items and videos.
- NFTs are bought and sold online usually with cryptocurrency, and they are encoded with the same underlying software as cryptocurrency.
- each NFT is one of a kind, or at least one of a very limited run, and have unique identifying codes.
Many NFTs, have been digital creations that already exist in some form elsewhere, like iconic video clips from NBA games or securitized versions of digital art that’s already floating around on Instagram.
Anyone can view the individual images, or even the entire collage of images for free. So why are people willing to spend on something they could easily screenshot or download?
Because not only an NFT allows the buyer to own the original item, but it also contains built-in authentication, which serves as proof of ownership. Collectors value those “digital bragging rights” almost more than the item itself.
How do NFTs work?
The identity and ownership of an NFT is verifiable via the blockchain ledger. they were first launched on the Ethereum blockchain, but nowadays many other blockchains also support them. Whether the original file is a JPG, MP3, GIF or anything else, the NFT that identifies its ownership can be bought and sold just like any other type of art. And like physical art, the price is largely set by market demand.
If you wandered into a gift shop of an art gallery, you’d find a number of replicated prints of famous masterpieces, well there are some NFTs that act the same way. There are parts of the blockchain that are totally valid, but they wouldn’t hold the same value as the original.
NFTs will most likely come with a license to the digital asset it points to, but this doesn’t automatically confer copyright ownership. The copyright owner may reproduce work and the NFT owner gains no royalties.
Can anyone make NFTs?
Technically, anyone can create a piece of art, turn it into an NFT on the blockchain (he process is called “minting”) and put it up for sale on a marketplace of choice. You can even attach a commission to the file, which will pay you every time someone buys the piece through a resale.
Much like when buying NFTs, you need to have a wallet set up, and it needs to be stuffed full of cryptocurrency. It’s this requirement for money upfront that causes the complications, because the hidden fees can be astronomically high, with sites charging a “gas” fee for every sale (gas fee is the price for the energy it takes to complete the transaction), alongside a fee for selling and buying. You also need to take into account conversion fees and fluctuations in price depending on the time of day. This means that the fees can often add up to a lot more than the price you get for selling the NFT.
Whether or not NFTs are here to stay, for the moment they are making some people money and they’re creating new possibilities for digital art.