Picture yourself purchasing or creating a piece of art and getting a token that gives you sole authority over that piece anywhere on the internet. Well, that’s what NFTs offer. You might have been wondering what NFT stands for. You see it on YouTube Videos and blogs but haven’t got a clue as to what it’s all about.
In this article, we will cover all that, and in a matter of minutes, you will have a lot of knowledge about this digital asset.
So let’s dive right in.
The word NFTs simply means non-fungible tokens, and this digital asset is similar to crypto, especially in how both digital assets are programmed. Both crypto and NFTs make use of Blockchain and cryptographic technology.
However, the difference between both digital assets is that Non-Fungible Tokens, unlike crypto and its assets, are unique and can’t be traded like their counterparts.
How Does NFT work
The word non-fungible token can be explained as creating digital art of any sort, be it an image, video, music, etcetera. After creating such, the creator obtains a smart contract. These contracts will give him unique ownership of that art, and this ownership can’t be shared with others, unlike the usual crypto we have.
You see, those who have NFTs sell their Non-fungible Tokens if they wish to alongside their ownership over it. So it simply means, in NFTs, one owner of that particular art at a time.
The beautiful thing about Non-Fungible Tokens is that your ownership of that piece is known over the internet, and that piece (the original one) can only be found with you. So, any other copy out there is just a fake of the original.
Take, for instance, the Mona Lisa painting by Leonardo Da Vinci. There’s only one original, which costs millions of dollars and sits in a museum or some well-guarded building, and many others which are but a copy of the original.
So, if someone decides to sell the look-alike versions as the original, the authorities will verify their authenticity. Besides, it’s obvious that the original isn’t in the hand of any person but is heavily guarded.
However, in the case of Non-Fungible Tokens, it’s digital, and all these are achievable through Blockchain technology, a decentralized or distributed ledger that records transactions on multiple computers.
How To Make Money From NFTs
Non-Fungible Tokens, just like crypto, make money and have made many millionaires overnight.
There are a lot of ways to make money from this digital asset. Some of these includes:
- Staking NFTs: Just like crypto, NFTs can be staked too. This involves locking up the asset on a DeFi (Decentralized Finance) platform and receiving rewards in return. This can be in the form of additional NFTs or tokens. However, because this section of the NFT market is new, only a few platforms offer such. This method of earning from NFTs is expected to become popular with time.
- Minting NFTs: This is simply the process of placing digital art, such as a piece of music or an image on the Blockchain. Once it has been minted, it can then be traded. However, due to the competition in this market, it is advisable to promote one’s assets because they might not be visible to potential investors. After implementing all this, one simply has to wait and see if the NFT will do well. If it does, the money from the sales will be sent to you after the deduction of the marketplace fee. This money can then be withdrawn to your crypto wallet.
- Trading NFT: This involves buying cheap NFTs out there and reselling them at a higher price. This method is technical and requires a lot of expertise. Although, this method often results in exponential profits as one can buy an NFT for 100 bucks and later sell it for ten thousand bucks. Amazing, right?
- Participating in NFT airdrops: Often, some NFT projects or platforms may distribute their NFTs for free to bootstrap that new NFT, and this process is called an ‘airdrop’. One can participate in these NFT airdrops by following NFT projects or platforms on their social media pages or by subscribing to their newsletters.
- Earning commissions as an NFT affiliate: This is advantageous to those with massive followers on social media or high website traffic. This is done by sharing referral links or embedding NFTs on your website.
- Offering NFT-related services: If you know how to create, design or code NFT arts, you can simply offer these services to NFT platforms or individuals looking to create their own NFTs, and in return, you get paid.
It’s very important to note that making money from NFTs has it’s risks, as the market for NFTs is still relatively new and unpredictable. You must research and be aware of the risks before investing in or creating NFTs.
Is NFT A Good Investment?
Well, NFTs have earned a lot of people millions in dollars, but it can be risky sometimes because the market is new and so it’s unpredictable.
However, you should do your research before investing in or creating NFTs. You can start buying Non-Fungible Tokens from platforms such as Opensea.
Frequently Used Terms In Non-Fungible Tokens
These are some of the common terms that are often used in the context of Non-Fungible Tokens. They include
- Blockchain: This is a decentralized, secure, and transparent digital ledger that records transactions.
- Cryptocurrency: This is a digital asset that uses cryptography for secure financial transactions. Examples are Bitcoin, Ethereum, Litecoin, and so on.
- Ethereum: This is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (dApps).
- Smart contract: This is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code.
- Non-fungible token (NFT): This unique digital asset represents ownership of a one-of-a-kind item or asset, such as a piece of art or collectibles.
- Fungible Token: This is an Interchangeable and equivalent token. A good example is a dollar and a cryptocurrency coin such as Bitcoin. Both tokens can be traded one for the other, and they are not one-of-a-kind items or assets such as a piece of art or collectibles.
- Metaverse: This is a collective virtual shared space that includes the sum of all virtual worlds, augmented realities (AR), and the internet.
- Digital art: This is artwork created using digital technology, such as computer graphics, 3D modelling, or digital photography.
- Rarity: This is the limited availability of a particular NFT, which can increase its value.
In conclusion, NFTs are basically non-fungible tokens that are unique and represent ownership of a specific item. They have the potential to revolutionize the way we think about ownership and value in the digital world.
Let us know in the comments section below if you have any questions.
Thanks for reading. Share this with your friends and loved ones.