When a celebrity does something, it gets immense popularity, and that is what happening in the crypto space in recent times. Celebrities and artists are selling their artwork for cryptocurrencies. For instance, Chris Torres who created the Nyan Cat, a popular meme on the internet platform sold out one of his creations, a viral GIF for three hundred Ethereum.
Similarly, there is musician Grimes who sold her crypto art using non-fungible tokens worth $5.8 million. The Crypto industry is booming and the NFT space is getting flooded with celebrities and general crypto enthusiasts as well. So, here in this article, we will elaborate on non-fungible tokens which are taking the crypto industry by storm.
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What are Non-Fungible Tokens (NFT)?
NFT or Nun-fungible tokens are known for their uniqueness. They are cryptographic tokens that are one-of-its-kind and known for their unique set of characteristics. They are also referred to as collectibles and antiques. The value of the NFTs is usually due to the uniqueness they hold. These digital assets are not interchangeable as they are different from each other. Each NFT defines different characteristics and has a unique value.
The history of NFT – how and why did it start?
Non-fungible tokens can into existence in 2017. It started with a game – ‘Cryptokitties’ where the players have to buy limited edition ‘virtual cats’ and also ‘breed’ the same which means generating them. These are used to provide the players with prizes for the games they win. The game developers started using the NFTs for these prizes, collectibles, and other in-game rewards. These tokens can be transferred to other players as well using NFT specialized blockchain marketplace. However, these tokens have become popular because of the digital artists and the other celebrities who sell their collectibles and artwork for NFTs.
Characteristics of NFT
The primary characteristic which set NFTs apart are –
- Non-interchangeable: The non-fungible tokens are neither interchangeable nor interoperable. These tokens are built on the standards of ERC – 721 and thus the information which is in these tokens cannot be interchanged with any other tokens or used otherwise.
- You cannot destroy NFTs: These token are indestructible. These tokens are managed by blockchain and also the information is stored in them. So, the security level is too high for anyone to destroy these tokens.
- Unique and rare: NFTs always stay away from the crowd and resonates with artwork that is real. They make use of blockchain to keep themselves authentic. It helps in distinguishing between original items from the replicas. This uniqueness of these tokens sets them apart. Moreover, the total number of NFTs is really low and they are considered to be scarce digital assets. However, their value is higher than many other digital assets because of their uniqueness and thus they are quite popular.
- NFTs are indivisible: You cannot divide and send a portion of the NFTs like other cryptocurrencies. This is because the NFTs do not have any defined value like other cryptocurrencies and thus cannot be divided.
How do Non-Fungible Tokens work?
Non-fungible tokens work differently from other digital assets. They being unique with their own sets of characteristics cannot be manipulated in any way. You can prove that the tokens are yours as they have ownership. You can hold it for eternity as well as sell the same. In some of the NFTs, the resale royalties are acquired by the original creator of the tokens. Whenever NFT holders sell their tokens, they earn royalties.
The NFTs can be kept in Ethereum based wallets and they remain there safely. There is no need for any intermediary for selling these tokens. You can sell the tokens in the open market as well as in a peer-to-peer setup. For the NFTs, you can determine the scarcity as well.
Two aspects that need to be understood in respect to Non-fungible tokens are Scarcity and Royalties.
When you sell the NFTs, royalties are being paid to the creators as well as the sellers (holders). It is one of the most powerful concepts which are still in its nascent stage of development. Even there are some of the platforms which have royalties for their artists as well. It works automatically, so whenever there is a sale of the NFT, the royalty for the same gets credited into the account of its creator automatically. However, the royalty programming should be done right to get the royalties in your account automatically otherwise it is difficult as everything else is still manually processed and very slow.
The creator of the Non-fungible tokens can decide the scarcity of the digital assets they create. Since every NFT is unique thus the creator can create and fix the number of NFTs. Each of the NFTs will be different from each other slightly and that is where the uniqueness lies. Now the creator can decide whether all the NFTs will be similar with slight differences or there will be a few with major differences which can be collected as collectibles as well.
Why do NFTs Have Value?
The value of non-fungible tokens is derived from their uniqueness. As each of the non-fungible tokens is unique, each represents a value that is different from the other. It is not the same with other digital assets like Bitcoin or others where the value is the same and determined by demand and supply. Here the value is determined by the scarcity, rarity, and uniqueness of the tokens.
How to Buy NFT?
If you want to buy Non-fungible tokens, you can follow the below-mentioned steps –
- You have to select one platform for buying and selling the NFTs. There are many such platforms like Enjin Marketplace, OpenSea, or Rarible, and others. You have to choose one for your trade.
- The second step is to connect the wallet. There are different wallets as well which you can choose from – MetaMask, WalletConnect, MyEtherWallet, and others.
- Then you need to find the NFT you want to purchase.
- Once you choose the NFT, click on the ‘BUY’ option
- Double-check the details on the pop-up window
- Make the payment for the NFTs
- And you will receive the NFTs in your wallet.
How to Make and Sell NFT?
The process of creating and selling the NFTs is as follows –
- You can use any of the NFT marketplaces say for example OpenSea or Rarible.
- Click on the option CREATE on the marketplace you choose
- Create the collection or single collectible out of your art or any creative thing you have made which you want to sell or monetize
- Choose the type of file – PNG, MP3, or GIF and select which is appropriate for your creation.
- The maximum size can be 30 MB.
- Put a description and name for the NFT
- Enter a price for the creation
- Set the royalty program
- Then connect the wallet
- Pay the GAS Fee
- Sign the sell order using the digital wallet connected
- Then click on the confirmation for sale on your wallet.
- NFT created and listed and now once there is a sale, your wallet will be credited with the royalty amount.
What are the most expensive NFTs?
Here the list of five top most expensive NFTs around the world –
- In the first position, it is Claim ‘Grimes’ Boucher which entered the Non-fungible tokens arena with his ‘WarNymph Collection Vol. 1’. It is in a collaboration with his broker Mac Boucher. They made the NFT on Nifty Gateway on March 1st, 2021. The whole series was sold within just twenty minutes and the valuation stood at $5.8 million.
- The second place is captured by Mad Dog Jones with his Crash+ Burn collection which was sold for $3.9 million.
- In the third position, Bitcoin Angel by Trevor Jones is there which got sold for $3.2 million in February 2021.
- Justin Roiland with his ‘The Best I Could Do’ art holds the fourth position. It was sold for a whopping $1.65 million.
- The fifth position is held by Krista Kim with her Mars House which got sold for $512000. She is the first woman to enter this arena.
Fungible vs non-fungible tokens
|Basis||Fungible Tokens||Non-Fungible Tokens|
|Inter-changeability||These tokens can be interchanged with other similar tokens as they have similar values.||These tokens have different values and a unique set of characteristics, so they cannot be interchanged.|
|Value||The value of these tokens is derived from the market action.||The value of NFTs is determined by the uniqueness of the tokens.|
|Owner||There is no specific owner or creator of Fungible tokens.||These tokens have one individual creator and owner.|
|Divisibility||These tokens are divisible||NFTs cannot be divided into multiple tokens.|
|Token standards||It is dependent on the ERC- 20 standard||It is dependent on the ERC-721.|
The future of NFT
The future of non-fungible tokens seems to be promising with the growing number of artists and celebrities taking interest in these tokens. The overall market for these tokens is becoming huge day by day and analysts anticipate it to grow further. The investors are embracing the short-term risks of these tokens to achieve the long-term benefits.
Non-fungible tokens are one of their kind and thus they are becoming attractive as the days are passing. Not only the celebrities and the artists but the investors and crypto-enthusiasts are taking interest in this market. The future seems to be brighter for the NFTs. It is mainly due to its uniqueness and scarcity and different sets of characteristics that are bringing variety in the decentralized financial structure.
No, NFTs cannot be divided into multiple tokens. These tokens have unique characteristics and thus indivisible.
NFTs can be created by anyone. If you have something unique to sell or monetize like art, painting, GIF, and anything of that sort, you can create NFT out of it and sell.
Non-fungible tokens are risky investments but the value and popularity of these tokens in the current market scenario suggest the risk is short-term. There are long-term benefits as well.
You can earn royalty from the NFT you have created if you have integrated the royalty program in your NFT.