What Are NFTs and Are They Worth Investing In?

NFTs have been around for some time but few noticed. The first NFT came out in 2014. However, it is only now that it is getting phenomenal attention. This year, a series of NFT purchases happened in auction worth millions of dollars. In this article, you will know what NFTs are and if they are worth investing in.

What Are NFTs?

NFTs stand for non-fungible tokens. It is NFT for singular and NFTs for plural.
To understand non-fungible tokens, let us break down the term into its individual parts.

Non-fungible

Fungible is an item with value and it is replaceable or interchangeable with another item or several items of the same value. Money, for example, is fungible. With money, you can exchange a P100 bill with two P50 bills and the value is the same.

Non-fungible is an item that is unique and so, it is irreplaceable. It is one of a kind.

Tokens

NFTs are tokens like cryptocurrencies. They are both built on blockchains. However, NFTs differ from cryptocurrencies because they are not replaceable and exchangeable. Cryptocurrencies like bitcoin and Ethereum are fungible.

A blockchain is a digital ledger without a centralized institution controlling. Only the computers in a blockchain network maintain the information in a blockchain. These computers can add blocks containing information to the blockchain. And they also check if the information is correct.

You create or “mint” an NFT by adding a block to the blockchain. To have an NFT, it is not enough for a block to have information. It should also have a digital asset attached to it. In fact, the information in the block is about the asset. A digital asset is an original artwork, song or tweet in digital format.

The information about the asset is like a provenance in art. It includes the creator, the date of creation, the past owner, date of purchase, current owner, date of purchase and other important details.

So, an NFT has the following aspects:

• It is a block built on a blockchain. This block contains the digital asset and its information.
• Its digital asset is an original artwork, song or tweet in digital format. The digital asset, being an original work, is unique.
• Its uniqueness makes it tradable. People want to buy and sell it.
• Its information is about the asset like the creator, the date of creation, the past owner/s, date of purchase/s, current owner, date of purchase and other important details.

How Do NFTs Differ from Cryptocurrency and CBDC?

To fully understand NFTs, let us compare it with cryptocurrency and CBDC (central bank digital currency)

	NFTs	Cryptocurrency	CBDC
Recording of transactions	Blockchain technology	Blockchain technology	Central bank
Storage	Online wallet	Online wallet	Online banking system
Interchangeable/ fungible	Not interchangeable/ non-fungible	Interchangeable/ fungible	Interchangeable/ fungible
Connected to digital asset	Connected	Not connected	Not connected
Control/regulation	Decentralized	Decentralized	Centralized
Value	Connected to digital asset	Connected to the supply and demand	Connected to real currency

What Are the Types of NFTs?

Artwork

This is where the frenzy is right now because of the record-breaking sales of artworks. This development makes the digital artists euphoric together. Digital art is easy to copy in this digital age. It is just a matter of Ctrl-C and Ctrl-V.

With NFT, their ownership over their original works, now, becomes rock solid. This gives the artists more control in trading their works..

There are two digital artists who received a huge amount of money from their works. The first digital artist is Mike Winkelmann a.k.a. “Beeple.” His work, “Everydays: The First 5000 Days' made a record-breaking sale of $69 million on March 11, 2021.

The second digital artist is the Canadian musician, Grimes, who auctioned off her 10 digital artworks on NiftyGateway on February 28, 2021. The total price of all the artworks went up to more than $6 million.

GIFs

GIF (Graphic Interchange Format) is a bitmap image. It supports both static and animated images. Since it is already in digital format, turning it into NFT is not that difficult.
Last February 20, 2021, an animated gif of a flying cat made by NyanCat in 2011 fetched a price of $1,411,188.00 in auction.

Collectibles

One good example of this is trading cards. Collecting trading cards was getting out of fashion. However, there is a resurgence because of NFT. Some NFT cards are the traditional static images but some are animated. The animated ones can have games with them you can play.

French firm Sorare, which sells NFT football trading cards, has drawn $680 million on September 21, 2021.

Videos and sports highlights

The NBA was the first organization to take advantage of NFTs. NBA Top Shot encourages fans to purchase, collect and trade video highlights of their favorite players and teams.

Virtual avatars

The most common and the easiest NFTs to purchase, collect and trade are the avatars. Those who play online games need avatars. And there are thousands of avatars available to purchase and collect. 

However, there are also rarer ones. Traits are the basis for rarity. Holders of the rarer avatars are the ones inclined to turn them into NFTs for trading.

Fashion

Fashion designers are joining the NFT craze because they can offer unique designs. This is what Artist MGXS and RTFKT studios did. To make it unique, they designed The X Evolution sneakers using AI (Artificial Intelligence). And they plan to make a physical version but on a limited run. Meanwhile, the buyer can use the design as an avatar.

Music

This is a game-changer for the music industry. NFTs use could tilt in favor of the artists and composers. So, they are looking closely into the NFTs’ development. King of Leon is the first band to publish an NFT album.

Right now, most of the money goes to the middlemen, the record labels. NFTs can strengthen the handling of intellectual property rights and the allocation of royalties.

Domain name

A domain name is important to any business and institution. It is the digital gateway to your website. And your website carries a good deal of information that you believe is important to your clients.

As the current NFT buzz continues, the demand for NFT related domain names will increase. Those who are into NFT businesses will have an interest in the NFT related domain names. Last March 2021, Unstoppable Domains sold “win.crypto” blockchain domain NFT for a record $100,000.

There are advantages in having an NFT domain name.

• The owner has control of his domain name. He does not have to go through an external organization to do it.
• The domain name is not under the control of any government agency. Blockchain domain names are decentralized.
• There is no annual fee for the use of the domain name. Once, you buy it that is yours. You can sell it through auction if you want to make money out of it.
• If you are into cryptocurrencies and NFTs, you will appreciate the simplicity of having a blockchain domain name. Prior to this, those with cryptocurrencies and NFTs had to use long strings of characters to access their cryptocurrency wallet.

Video games

Video games are benefiting from NFTs. The different video games have these collectibles, skins and avatars. Players can purchase, own, collect and trade them..

NFT video games are popular among Filipinos. Because of the pandemic, many Filipinos played NFT video games to entertain themselves and to make money. Yes, they play to make money. 

A documentary, Play-to-Earn: NFT Gaming in the Philippines, covers the emergence of NFT gaming in Cabanatuan City. People who were struggling financially played video games for money. The most popular game they play is Axie Infinity. 

In Axie Infinity, one earns money by winning a fight, farming Axie characters, scholarships (let somebody play for you) and flipping Axie cards (just like flipping Pokemon cards).

Virtual worlds

The world building and crafting NFT games are like Minecraft and Sims. The difference is that you can own a piece of the game. You can own a virtual real estate and trade accessories and goods. Examples for this are The Sandbox, Cryptovoxels and Decentraland.

Essays

You can “tokenize” an essay. Bobby Hundreds is a good example. He is one of the founders of The Hundreds. The Hundreds is a streetwear and media site. He wrote an essay titled Cryptomedia, NFTs, And The Next Internet and posted on The Hundreds website. But he also posted it on Zora for bidding. So far, the highest bid is 1.1 WETH (Wrapped Ethereum).

Tweets

You can turn a tweet into an NFT. Since a tweet is in digital format, you can create an NFT with it. In fact, last March 21, 2021, Twitter's founder Jack Dorsey sold the first-ever tweet. through Cent’s Valuables, a marketplace for tweets. The winning bid was $2.9 million.

How Can You Create an NFT?

1. Pick your item

Choose an item in digital format. You can choose from any of the different types discussed above such artwork, GIFs, collectibles, etc.. The most important thing is that you have intellectual property rights over that item. You are its original owner and creator.

2. Choose a blockchain

You will need to find a blockchain on which to mint your NFT. Find a platform or network that offers a blockchain for you to work on. There are many options but the most popular is Ethereum. But it is also wise to check other platforms like Binance Smart Chain, Tezos, Quorum and many more.

3. Set up your cryptocurrency wallet

You will need to set up your digital wallet. You will need it for your cryptocurrencies which will finance the minting of your NFT. You will need to buy some Ether, the cryptocurrency of Ethereum. 

Most wallets accept Ether. Some examples of wallets are Coinbase Wallet, Ledger Nano X and Exodus.

4. Find a marketplace

With your digital asset, blockchain and wallet, the only thing lacking now is the marketplace. Mintable, OpenSea, and Rarible are the largest. They are also the easiest to use.

After selecting your NFT marketplace, you need to connect it to your digital wallet. There are fees to pay to create your NFT. But you can also use platforms that charge nothing as you mint your NFT. One of them is OpenSea.

5. Mint your NFT

Now, you can mint your NFT. Your marketplace will guide you on how to mint it.

How to Buy and Sell NFTs?

Selling NFTs

Considering the prices the NFTs are getting at present, it is not surprising that people want to sell NFTs. If you want to go into selling, there are three options you can take depending on the platform you choose.

• Sell at a fixed price
• Set a timed auction
  With timed action, you set a period for the bidding. Whoever has the highest at the closing time gets your NFT.
• Start an unlimited auction
  If you want an unlimited auction, you set the starting time but not the closing time. Let the bidding start and run. Close it any time you want.

In any of the auctions, you set a minimum price. But, do not set it too low because you have to pay some fees later. One of them is the gas fee (transaction fee). You will pay a gas fee for the entire process of selling the NFT.

Marketplaces vary in their order of steps for selling. However, they share these three basic processes.

• Connecting your wallet to the marketplace
• Adding price, title and description to your NFT
• Paying for the listing of your NFT

Buying NFTs

• Purchase some Ethereum
  With your cryptocurrency wallet, buy some Ether, the most popular cryptocurrency in NFT trading. You can buy from them from cryptocurrency exchanges and those offering blockchains and wallets. But the two most popular are Coinbase and Gemini.
• Link your wallet to a marketplace
• Buy Your NFT

The auction format is the common market format. So, prepare to bid for the NFTs you are interested in.

What Are the Pros and Cons of NFTs?

NFTs are still in its infancy stage but so far, here are its clear pros and cons:

Pros

• No centralized control
  NFTs are independent and decentralized. It has no central body controlling and regulating the creation and the trading of NFTs.
• Ownership and licensing solution
  NFT provides a solution for ownership and licensing digital creations which are easy to copy. The development of NFTs favors the creators of arts.
• Monetizing artistic works
  Creators can fully monetize their digital creations. They directly receive the money from sales and royalties of their works.
• Ease in buying and selling digital assets.
  NFT makes it easy to buy and sell digital assets. You do not have to go to an auction house for the bidding.
• Upgraded collectibles
  NFT makes collectibles exciting. It can make trading cards animated and interactive like having games in them.
• Opportunity to earn from games
  NFT games offer play-to-earn incentives.

Cons

• Viability
  Being in its infant stage, there are a substantial amount of uncertainties. Will the present craze hold on? Or is this a bubble and will it someday burst?
• Skyrocketing prices
  The current craze is driving the NFT prices upwards. If the trend continues, it will make NFT out of reach of the ordinary people wanting to join.
• Security
  Hackers are already targeting NFTs. Last March, 2021, they stole some NFT artworks from NiftyGateway. NiftyGateway is an NFT marketplace for artworks. This is not surprising considering that cryptocurrencies are also hackable. They are both built on blockchains.
  
  In 2016, a hacker took $50 million from DAO (Decentralized Autonomous Organization), an Ethereum-based crowdfunded project. Last August, 2021, Hackers stole $600 million worth of cryptocurrency from Poly Network. Although for whatever reason, they returned half of it.
• No centralized control
  This is one of the strengths of NFTs. But it is also one of its weaknesses. With no centralized body to control and regulate, NFTs are open for abuse. Who will go after the abusers?
• Ownership and control of asset issues
  Just because you own an NFT asset does not mean control over the creation of the asset. The creator can still reproduce copies. NFT ownership simply means owning the “original” work. Some say you own “the bragging rights” for owning the original.
• Environmental and energy issues
  Keeping the NFTs in the digital world is expensive. It is not like a physical asset that you buy, bring home and then keep it with minimal maintenance. Electricity keeps the digital world afloat. 
  
  Keeping the NFTs in the digital world is expensive. It is not like a physical asset that you buy, bring home and then keep it with minimal maintenance. Electricity keeps the digital world afloat. 
  
  As digital activities increase so also is the use of electricity. Ethereum, in current estimate, consumes around 95.21 terawatt-hours of electrical energy every year. That is comparable to the power consumption of Kazakhstan in a year. 
  
  Remember that in some places of the world, the production of electricity is not environmentally friendly. Some still use coal, bunker oil or diesel to run power plants. NFT is going against the trend of investing in an environmentally friendly business.

Top 20 NFT Marketplaces

NFT marketplaces connect buyers and sellers. Here is a list of the top 20 different marketplaces and their specialties. They are arranged in no particular order.

OpenSea

Specialties: Art, videos, collectibles, games and music, etc.
Wallet/s accepted: MetaMask, Coinbase Wallet, TrustWallet, Portis, Fortmatic / Magic, Arkane, Authereum, Bitski, Dapper, Kaikas, OperaTouch, Torus, WalletConnect and WalletLink
Cryptocurrency for trading: ETH (Ether)
Website: https://opensea.io

Rarible

Specialty: Art, videos, collectibles, games and music, etc.
Wallet/s accepted: Coinbase, Argent, MyEtherWallet (MEW), Fortmatic, Mobile Wallet, Torus, Portis and Blocto
Cryptocurrency for trading: ETH (Ether)
Website: https://rarible.com

AtomicHub

Specialties: Wax gaming and art
Wallet/s accepted: Wax wallet
Cryptocurrency for trading: WAXP (Worldwide Asset eXchange)
Website: https://wax.atomichub.io

SimpleMarket

Specialties: Wax gaming and art
Wallet/s accepted: Wax wallet
Cryptocurrency for trading: WAXP (Worldwide Asset eXchange)
Website: https://wax.simplemarket.io

Enjin

Specialties: Wax gaming and art
Wallet/s accepted: Ethereum wallets compatible with ERC-20 tokens and Enjin Blockchain Wallet
Cryptocurrency for trading: ENJ (Enjin Coin)
Website: https://enjin.io/products/marketplace

Axie Marketplace

Specialties: Axie gaming
Wallet/s accepted: MetaMask and Coinbase
Cryptocurrency for trading: AXS (Axie Infinity Shard)
Website: https://marketplace.axieinfinity.com

Larva Labs/CryptoPunks

Specialties: CryptoPunks gaming and collectibles
Wallet/s accepted: MetaMask and Coinbase
Cryptocurrency for trading: ETH (Ether)
Website: https://www.larvalabs.com/cryptopunks

NBA Top Shot Marketplace

Specialties: NBA video clips and art
Wallet/s accepted: Blocto wallet and Ledger wallet
Cryptocurrency for trading: Flow
Website: https://nbatopshot.com/marketplace

Foundation

Specialties: Cryptoart
Wallet/s accepted: MetaMask
Cryptocurrency for trading: ETH (Ether)
Website: https://foundation.app

Nifty Gateway

Specialty: Cryptoart
Wallet/s accepted: MetaMask
Cryptocurrency for trading: ETH (Ether) and accepts USD using regular debit and credit cards when buying
Website: https://niftygateway.com

MakersPlace

Specialty: Digital art, virtual reality, short film, motion animation
Wallet/s accepted: MetaMask, Coinbase and TrustWallet
Cryptocurrency for trading: ETH (Ether) and accepts USD using credit card when buying
Website: https://makersplace.com

KnownOrigin

Specialty: Cryptoart
Wallet/s accepted: MetaMask, Coinbase, Fortmatic, WalletConnect and Portis
Cryptocurrency for trading: ETH (Ether) and accepts USD using regular debit and credit cards when buying
Website: https://knownorigin.io

SuperRare

Specialty: Cryptoart
Wallet/s accepted: MetaMask, Fortmatic and WalletConnect
Cryptocurrency for trading: ETH (Ether)
Website: https://superrare.com

Cargo

Specialty: Cryptoart
Wallet/s accepted: MetaMask and Fortmatic
Cryptocurrency for trading: ETH (Ether)
Website: https://cargo.build

Mintbase

Specialty: Cryptoart
Wallet/s accepted: MetaMask, MyEtherWallet,Coinbase Wallet, Argent Ledger, Trezor and Exodus
Cryptocurrency for trading: ETH (Ether)
Website: https://www.mintbase.io

Theta Drop

Specialty: Video clips
Wallet/s accepted: Phantom, Clover, Sollet, Slope, Ledger and MathWallet
Cryptocurrency for trading: TFUEL (Theta Fuel), USD using credit cards, Bitcoin, ETH (Ether) and more
Website: https://www.thetadrop.com

Dapper Labs/CryptoKitties

Specialty: CryptoKitties gaming and collectibles
Wallet/s accepted: Dapper Wallet
Cryptocurrency for trading: Flow and ETH (Ether)
Website: https://www.dapperlabs.com

Binance NFT Marketplace

Specialty: Rare digital art, game assets and collectibles
Wallet/s accepted: Binance NFT Wallet, MetaMask and WalletConnect
Cryptocurrency for trading: BSD (Binance’s Stablecoin), BNB (Binance Coin), and ETH (Ether)
Website: https://www.binance.com/en/nft/home

Solanart

Specialty: Digital art collectibles
Wallet/s accepted: Phantom, Clover, Sollet, Slope, Ledger and MathWallet
Cryptocurrency for trading: SOL
Website: https://solanart.io

BakerySwap

Specialty: Collectibles, Virtual Worlds, Art
Wallet/s accepted: MetaMask, Trust Wallet, Coin98 Wallet
Cryptocurrency for trading: BETH (BakerySwap Ether)
Website: https://www.bakeryswap.org/#/home

NFTs are creating a buzz. This buzz makes people want to know them and if they are worth investing in.

An NFT is a one of a kind digital asset that is tradable and it carries information of ownership. You can convert any original work in digital format into an NFT. Its best application is in works of art like digital art and music.

The development of NFT favors the creators of arts and music. NFT solidifies the creators’ ownership over their works. As a result, the creators can maximize the compensation they receive from their works.

At present, buying and selling of NFT artwork is lucrative. Prices are skyrocketing. This makes investing in NFT attractive and reasonable. Big companies are even investing in it. However, the question is about sustainability. Will the frenzy continue?

NFT technology is still in its infancy stage. There are still many uncertainties and problems that it has to overcome. If you want to invest in it, do it with care.

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