Decoding NFTs: What are NFTs and How do they Work, All you need to Know
Non-fungible tokens, or NFTs as they are more colloquially known, have taken the art world by storm. The very first NFT project was launched on the Ethereum blockchain in 2015, and interest grew in tandem with the rise in interest in cryptocurrency. According to NonFungible.com, sales in the first quarter of 2021 exceeded $2 billion, more than doubling the previous quarter’s volume.
Celebrities have begun to mint their work on the new Blockchain technology as the market has grown so rapidly. Through this form, artists have discovered a new digital way to monetize their work and broaden their reach.
What are NFTs?
NFTs are short form for ‘Non-fungible Tokens’, a digital token that is created using blockchain technology and attached to a work of art (Or any original content) that can be anything from artwork, picture, video, music, website or even a GIF. Unlike cryptocurrencies, they cannot be exchanged, replaced or are not divisible.
An NFT token linked to a work of art verifies its authenticity and assigns ownership to the creator. Anyone can make an NFT of their art form, but this does not guarantee a sure-fire sale on the NFT marketplace. The art form must be one-of-a-kind and appealing to the digital spectrum’s masses.
As a result, they are one-of-a-kind assets that cannot be replaced, and they are verified and sustained using blockchain technology.
What makes them so special?
Non-fungible tokens have distinct characteristics and are typically linked to a specific asset. They can be used to prove ownership of digital items such as game skins all the way up to physical assets. Other tokens, like coins or banknotes, are fungible. When two fungible tokens are exchanged, they have the same attributes and value.
Some famous known most expensive NFTs
Everydays: the First 5000 Days ($69.3 million)
CryptoPunk #3100 ($7.58 Million)
CryptoPunk #7804 ($7.57 Million)
Crossroads ($6.6 Million)
Ocean Front ($6 million)
How to buy NFT tokens
Non-fungible tokens are available for purchase on a plethora of NFT marketplaces, including Rarible, OpenSea, and Enjin Marketplace. NFT minting can be done on a variety of platforms, but the first step is to create an Ethereum wallet. There are several options for a wallet like Metamask, Math Wallet, Enjin etc. Metamask also has a Google Chrome extension, if that makes your work easier.
Steps to buying an NFT token
- Create an Ethereum wallet and buy some Ethereum.
- Connect the wallet to an NFT marketplace (OpenSea, Rarible, Decentraland, Enjin, Zora, etc.)
- You can create your first NFT once the wallet is linked.
- Click on ‘Create’ and add your art form.
- Add the file you want and upload it like a JPG, PNG, GIF, MP4, etc. formats.
- Assign a Name and describe to give some details about your art form. Better visibility in the NFT marketplace will result from a good description and naming of the art form.
- Finally, just create your NFT and you are good to go.
NFTs as Investment
NFTs are gaining popularity as the future of digital art and are expected to grow exponentially in the coming years; however, the NFT marketplace, like most Crypto assets, is volatile and will not always provide profits. Plus there are the added legal understanding and aspects attached with NFTs.
In general, an NFT often denotes a right to the underlying asset associated with the NFT, whereas the underlying copyright is typically retained by the copyright owner.
In other cases, NFTs can be structured to grant purchasers additional intellectual property rights, such as the right to exclusive use, whether commercial or noncommercial, or within the scope of fair use, and so on, until the NFT is transferred to a subsequent third party, or until the NFT is transferred to a subsequent third party.
Furthermore, it is frequently unclear who can enforce intellectual property rights for an NFT’s underlying asset. Beyond outright ownership of intellectual property rights, licencing them can be complicated because different entities in the ecosystem may have rights to different elements that are essential to the product as a whole.
NFT marketplaces, such as Opensea, allow creators to include royalties in their NFTs, in which the creator receives a percentage of each subsequent sale on an ongoing basis.
Future and Scope
However, It is worth noting that in most cases, such royalties are not hardcoded into the smart contract and are instead provided by the NFT marketplace to the smart contract owner.
NFTs are indeed an innovative application of blockchain technology, and their adoption and use in business applications will continue to grow in the future. However, it will be critical to ensure legally that the NFT fulfils the rights promises made to investors.
