NFT has been the buzzword in crypto but what does it mean and how does it impact the industry? If you’ve read our March 2021 Commentary, then you may already be aware that tech personalities and even sports stars are experimenting with the technology.
What does NFT mean?
So, what is an NFT? NFT stands for non-fungible token. Non-fungible means something unique that cannot be replaced or traded with something else.
When exploring the meaning of NFTs in crypto, it’s important to know the difference between fungible and non-fungible assets. So how do you know the difference between fungible and non-fungible?
What are examples of fungible and non-fungible goods?
|Examples of Fungible Items||Non-Fungible Examples|
|Currency / money||Collectible items such as one-of-a-kind baseball or game cards|
To know if something is fungible, ask these questions:
- If there are two things that are identical in specification, can these individual units be mutually substituted?
- Can it be readily interchanged for another like its kind?
What is fungibility in crypto?
Fungibility in crypto doesn’t change its meaning. This brings us to NFTs which are cryptographic tokens built on a blockchain. They cannot be replicated. They can also be used to represent real items such as artwork and real estate. These items can be “tokenized” which allows them to be sold, bought, or traded.
Currently, a lot of NFT marketplaces utilise the Ethereum blockchain. Of course, creators can use other blockchains to implement their own versions of NFTs too.
Are bitcoins fungible?
Bitcoins are fungible because if you trade one bitcoin for another bitcoin, and you’ll have exactly the same thing.
What are the different types of NFT?
NFTs can be any fungible digital asset. Here are several examples of NFTs that have been bought and sold.
NFT artworks are stamped with a unique string of code. They are stored on a virtual ledger called a blockchain. Digital NFT art has made headlines due to explosive auctions and valuations, with some fetching millions of dollars. The most famous ones include works by Beeple and the musician Grimes.
There are several artists who are using NFTs as another way to generate income. The industry is considering the technology as a more viable way to earn value when compared to streaming royalties. Examples of musicians who have jumped into the trend include The Weekend, who sold a song and visual art. The DJ/EDM/remixer 3LAU also sold $11.6 million of NFTs and Kings of Leon became the first major artist to release album art and fan experiences as NFTs. Another example is DJ Steve Aoki, who also sold $4.25 million worth of NFTs.
Publishers like The New York Times, Forbes and Quartz have also started selling articles as NFTs. The NYT argued that journalists and artists alike can take advantage of this trend because blockchain technology made it possible to “stamp digital goods with a cryptographic marker of authenticity and keep a permanent record of its ownership.” Thus, royalty agreements can be attached to these digital creations.
In the food industry alone we have seen many companies jumping into this crypto trend as publicity stunts. Here are some examples:
- Pringles: Sold a can called CryptoCrisp for $180. Technically, it’s an artwork and winning bidders receive one of 50 version of animated Pringles package on Rarible.
- Taco Bell: Sold taco-themed GIFs and images. 25 tokens were sold out in 30 minutes. The proceeds went to their foundation and a scholarship foundation.
- Virtual dining experience: 18 year-old chef Logan Guleff sold an NFT virtual dining experience at Rarible. It consists of a three-course meal that exists as pieces of digital art.
- Pizza Party: A collective of creators called Rare Pizza sold digital “toppings” to “algorithmically” create digital pizza NFTs. Funds from the pizza art NFTs and community donations will be used to buy 10,000 pizzas on May 22, which is international Bitcoin Pizza Day.
How do NFTs work?
So, how do you get into NFTs? Before you learn how to get into NFT, you must learn how it works.
Where can I buy NFTs?
You can buy and sell NFTs directly from artists on marketplaces such as Super Rare, Nifty Gateway, MakersPlace, OpenSea, Decentraland, and Rarible. There are also specialized websites for specific types of NFTs, such as NBA Top Shot for NBA collectibles.
How do you know if an NFT is of value?
NFTs allow you to view the provenance of a piece of art, and verify that it is the only copy of a certain digital asset. Critics might argue you can just copy digital assets, bringing their value into question, however, forgers and fans have copied paintings for centuries, but this does not stop the verifiable original from having value. The origin and story can be worth different values to different investors.
How do you monetize NFTs?
If you’re an artist or someone planning to sell NFT, then the answer to this question is simple. You monetize NFTs by selling them. Companies like Nike, Samsung, Vodafone, F1, Ubisoft, and Louis Vuitton have engaged with NFTs, including virtual items and wallets to store them. Most notably, the NBA has been selling historic game “Moments” as NFTs. In February, they sold a LeBron James dunk for $208,000.
How much are NFTs worth?
According to nonfungible.com, the all-time market volume is fast approaching $1 billion as of March 2021. What are the prices of each piece of NFT? It depends on the type of NFT you are buying. It can be for a few dollars to several million dollars.
Aside from tweets, art pieces, videos, music are also being sold. It’s undeniable that the market for crypto art is getting bigger and bigger.
Here is a list of some of the most expensive NFTs sold in Q1 2021:
|Beeple||The complete MF Collection||Digital & Physical art||$777,777.77||Nifty Gateway|
|WhisBe||Not forgotten, but gone||Video clip||$1 million||Nifty|
|Steve Aoki||Hairy||Music Clip||888,888,88||Nifty Gateway|
|N/A||CryptoPunk #6965||Token||$1.54 million||Larva Labs|
|Jack Dorsey||First Tweet||Tweet||$2.5 million||Valuables|
|N/A||CryptoPunks #7804 and #3100||Token||$7.6 million each||Larva labs|
|Krista Kim||Mars House||Digital house||$512,000||Super rare|
|Grimes||WarNymh Collection Vol.1||Digital art||$5.8 million||Nifty Gateway|
|Beeple||CROSSROAD||Digital art||$6.66 million||Nifty Gateway|
|Mad Dog Jones||Crash + Burn||Digital art||$3.9 Million||Nifty Gateway|
|Justin Roiland||The Best I Could Do||Digital art||$1.65 million||Nifty Gateway|
|Trevor Jones||Bitcoin Angel||Digital art||$3.2 million||Nifty Gateway|
|Beeple||Everydays: the First 5000 days||Digital art||$69.3 million||Christie's|
NFT: Frequently Asked Questions
How do you make crypto art?
You can make crypto art the same way you make any type of art. The difference lies in where these art pieces are sold and how their ownership is known, stocked, and transferred. Most marketplaces and applications will handle the encryption for you.
- Create your art as you normally would and go to websites that sell crypto art such as Rarible.
- Upload your single or multiple collectible art files.
- Enter the price or put it on sale.
- Enter a name for your NFT and a description.
- Set your royalties.
- Connect it to your crypto wallet.
- Pay the necessary fees in the website to process the listing before signing the sell order.
Can anyone make an NFT?
Anyone can make an NFT because it can be as simple as a tweet. For example, Twitter boss Jack Dorsey sold his first tweet as an NFT for just over $2.9 million.
What is the NFT space?
The “NFT space” is a term used by the crypto community, especially the artists, to refer to the marketplaces where NFTs are sold and bought.
Do NFTs fit into an investment portfolio?
NFTs can play a role similar to physical art in an investment portfolio, and can been an excellent diversifier.