25 February, 2024



Non-fungible Tokens Explained: How Do We  Buy And Sell NFTs

2 years ago

12 Dec, 2023

NFTs are non-fungible tokens. In economic terms, a non-fungible asset is something of value that cannot be interchanged. NFTs are becoming valuable and the demand is steadily increasing. Let’s find out why they are so valuable.

What is blockchain technology?

A blockchain can be described as a distributed ledger that is shared among the nodes of a computer network. It functions as a database and stores information electronically in digital format.

Blockchains are most commonly used in cryptocurrency systems, like with Bitcoin, for maintaining a secure and decentralized record of transactions. The great thing about blockchain technology is that it almost guarantees the fidelity and security of a record of data and generates trust without the need for a third party.

One of the main differences between a typical database and a blockchain is how data is structured. A blockchain collects information together in groups that are known as blocks. These blocks hold dets of information and have certain storage capacities. When filled, they are closed and then linked to the previously filled block.

This then, intiurn, forms a chain of data that is known as a blockchain.

All of the new information that follows the freshly added block is then compiled into a new block that will be added to the chain once it is filled.

While a traditional database structures its data into tables, blockchain structures its data into chunks or blocks that are strung together to form chains. This structure makes an irreversible timeline of data when implemented in a decentralized nature.

Once a block is filled with data, it is basically set in stone and becomes part of the timeline. Every block on the chain is given a timestamp once it is added to the chain.

What Are NFTs?

Non-fungible tokens (NFTs) are defined as cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other.

Unlike cryptocurrencies, they can not be traded or exchanged at equivalency. This is different from the cryptocurrencies we know that are identical to each other. Because of this, cryptocurrencies are able to serve as a medium for commercial transactions.

However, NFTs still have the potential for a variety of use cases. The can, for example, be the ideal vehicle to digitally represent physical assets like real estate and art. Because they are based on blockchains, they can also remove intermediaries and connect artists with fans or even for identity management. NFTs also have the potential to simplify transactions and create new markets.

The Value of NFTs

NFTs are valuable because they can verify the authenticity of a non-fungible asset. This makes these assets unique and one of a kind.

 Picasso’s paintings, for example, are non-fungible. While it is still possible for anyone to make a fraudulent copy of his paintings, the original painting is still irreplaceable and unique. This is how NFTs make digital content irreplaceable and one of a kind.

To fully understand the value of NFTs, it is necessary to understand what “fungibility” means. When something is fungible, you can exchange the asset that you own with another asset that has an equal value. Currency is an example of something that is fungible.

Here is another example to give you a better picture of what fungibility means. If you have $20 and you get two ten dollar bills in exchange for that $20, you still have the same value, but you have exchanged your asset and received a new asset.

Bitcoin is another good example of a fungible asset. You are able to exchange Bitcoins for valuable goods and services. The main difference between NFTs and Bitcoin is the fact that NFTs are non-fungible and unique.

Now, to refer back to the example of the artwork by Picasso. Since Picassos’s artwork is unique and irreplaceable its value depends on multiple factors. Usually, the value for non-fungible assets will depend on the utility, ownership history, future value, and liquidity premium.

A painting or artwork is, in fact, just the arrangement of colors in a specific manner. But the feelings it evokes and the impact it creates are central to the valuation of that piece of art.

Recently a digital-only artwork by Beeple, a very well known digital creator, was sold for $69 million. What does the buyer get? Nothing tangible — only a virtual picture. But there was a value to these pixels as much as $69 million.

For many, the “bragging rights” of owning something created by someone famous or well known is almost better than the art itself.

What Makes NFT Art Valuable?

There are a few specific key aspects that one can look at when it comes to determining what makes an NFT valuable.

One of the very first things to take a look at is the underlying value of the NFT. This refers to any kind of value attached to, for example, the creator of the NFT.

One can also ask questions about the potential value of the NFT. This can refer to the potential value that comes along with up and coming artists, creators and celebrities.

The perception of the buyer is also important.Buyers usually ask themselves: what is the NFT worth to me?

Similar market value is also an important thing to take in consideration. This is where people need to do research on what other pieces from the same creator are selling for.

Once again coming back to fungibility, this is one of the aspects that adds to the value of NFTs. Fungible tokens are divisible into smaller units. Some examples are Bitcoin and Ethereum. For example, you can split up Bitcoins into Satoshis and Ethereum can be broken down into base units known as Wei.

NFTs cannot be broken down like Bitcoins into smaller units.

 There is a unique piece of data that is usually rare and limited in number. Couldn’t any artwork be copied and shared endlessly? Of course, it can be, but the aspect of NFT is that it can be made into a token which means that it has a digital certificate of ownership that can be bought and sold along with the artwork.

This creates the authenticity and credibility of the source of that work or the type of NFT that you are buying. The authentic Picasso will be valuable even if multiple fake copies of it are made and sold. The original will still have value if its authenticity can be proven.

How NFTs Are Created

Theoretically speaking, anyone who wants to can create an NFT. Artists, gamers, brands and even musicians have the opportunity to create and sell their very own NFTs. For  this to be a reality, they first have to create an artwork and then turn it into an NFT on the blockchain. This process is what is known as minting.

Once the artists has minted their NFT, they can put it up for sale on the marketplace of their choice and attach a commission so that every time someone purchases it, they receive a payment.

It is still important to remember that there are fees when conducting there transactions and they can be quite high at times due to the very high gas fees on the Ethereum blockchain.

Every time a transaction occurs, the price of the energy, or gas, it uses is taken to complete the transaction and is then charged to you. This is then added to any other fees connected to the selling and buying if NFTs.

As mentioned before, these fees can be very high and can also fluctuate based in the site you are using.

If you make the decision to create an NFT, you will have to use the platforms on which NFTs are minted and createdc. Some of these platforms include Rarible and SuperRare.

These platforms allows its users to create NFTs using blockchain technology that can never be altered. In other words, the ownership of the NFT can not be undone by anyong an =d it is impossible for someone to recreate your creation.

Aftwer you created you NFT, it can be viewedby anyone once it is uploaded on the platform of your choiuce. It is also possible for for anyone to sell or buy it without the permission of anyone else.

What Are the Different Types of NFTs With Value?

There are multiple types of non-fungible tokens which hold a certain level of value, but what exactly are the different types of NFTs with value?

Multiple types of NFTs are authenticating certificates for any digital content such as music, artwork, collectibles, characters, and objects within a video game, etc. All of these can be made into NFTs and ownership can be claimed and verified on them.

Buying and Trading NFTs

The most well-known places to buy and sell NFTs are OpenSea, Rarible, SuperRare and Mintable. In order for a collector or enthusiast to start buying and selling some NFTs, they will have to purchase some cryptocurrency first. Ethereum, Ripple and Bitcoin are good places to start, but  there are many cryptos that can be used to buy or sell NFTs.

If you prefer working with Ethereum, MetaMask can be a very good place to start. Metamask. Metamask is a crypto wallet that will allow you to buy and store Ethereum cryptocurrency.

MetaMask can be installed directly from the site. You can then buy some Ethereum by using a credit card or a bank transfer. After you have bought some Ethereum, you can start buying NFTs.  This means that you can start exploring marketplaces like Nifty Gateway, SperRare or NBA top shot to fing=d the NFT of your dreams.

What Is MetaMask?

MetaMaskis a browser plugin that serves as an Ethereum wallet that  can be installed like any other browser plugin. Once it is installed, it allows its users to store Ether and some other ERC-20 tokens which then, in turn, allows users to transact with any Ethereum address.

By connecting their MetaMask to Ethereum based decentralized apps (DApps) it allows users to then spend their coins on games, staking tokens in gambling applications and trade them on decentralized exchanges.

It also provides users with an entry point to the decentralized finance (DeFi) industry by providing a way to access DeFi apps like Compound and PoolTogether.

NFT Marketplaces

OpenSea

OpenDSea is the leader in NFT sales and has all sorts of digital assets available on its platform. In addition to this, it is free to sign up and browse its extensive offerings. OpenSea also supports artists and creators and has a relatively easy-to-use process if you make the decision to make your own NFT.

OpenSea also boasts the ability to support more than 150 different payment tokens, which is why the name of the exchange is rather fitting.

Many people believe that OpenSea is one of the best places for newcomers to start their exploration of the NFT industry.

Rarible

Rarible is another large marketplace where you can find and explore all sorts of NFTs and it is very similar to OpenSea. A variety of art, videos, collectables and music can be sold and bought on this platform.

Unlike OpenSea, you will need Rarible’s own token, RARI, to buy or sell on the marketplace.

Rarible is built on the Ethereum blockchain, but artworks can still be managed on OpenSea and by using Rarible tokens.

Since its inception, the company has partnered with some reputable companies like Yum!Brands. Taco Bell has also listed on Rarible and the cloud software giant Adobe has also partnered with Rarible to help secure NFT artists’ and creators’ work.

Mintable

Mintable is backed by the billionaire Mark Cuban, and strives to be an open marketplace just like OpenSea.

In order to participate in buying and selling NFTs on Mintable, you will need Ethereum. The platform also supports minting of NFTs for creators of all types, including photographers and musicians.

In order for an NFT collector to start collecting, they will need to purchase Ethereum for a cryptocurrency exchange first. Only then can they connect their wallet to Mintable to facilitate bidding and buying on the marketplace.

SuperRare

Similar to Rarible, Super Rare is also a marketplace for digital creators. The site includes things like art, videos and 3D images and collectors can purchase this art using Ethereum.

SuperRare also recently announced its own token of the same name that will be based on the Ethereum blockchain. The tokens will be used to find and curate new talent for the marketplace.

Just as is the case with Rarible, SurerRare NFT will also be bought and sold on OpenSea.

Nifty Gateway

Nifty Gateway is renowned for the fact that it has facilitated some of the most popular digital artists such as Beeple and the singer, Grimes.

It is known as an art curation platform that is powered by the crypto exchange Gemini. The NFT, which are known as Nifties, are built on the Ethereum blockchain.

Besides being a curated platform, Nifty Gateway also hosts NFTs purchased. This means that NFTs aren’t stored in your own wallet, but are actually stored for you by Nifty Gateway and Gemini.

This might noy work for NFT collectors who want more flexibility with their art investments.

Nifty purchases and sales can also be made in fiat currency without having to make a cryptocurrency purchase first.

Are NFTs Worth the Investment?

With the huge spike in interest in NFTs since 2021, many people are entering the industry, which is making the space a bit crowded. Before joining in on the fun, you need to answer one question for yourself: are NFTs worth the investment?

Many people believe that NFTs are with the investment as long as the token you purchase has some underlying value. This underlying value represents the value of the company or person behind the minting of the NFT.

For example, the founder of Twitter, Jack Dorsey, once put up his very first Tweet on auction as an NFT. At the end of the day, bidding for his NFT crossed the $2 million mark. Other NFTs have sold for as much as $50 million.

To many, this could serve as proof that there is big money to be made in the NFT industry.

But ultimately the worth of an NFT is what the market demands. Just like how the artwork has been valued and sold in the real world for ages based on the value assigned by the market, NFTs will also follow suit.

To Recap

NFTs are new and exciting since they saw a surge in popularity since 2021 and many people are looking for ways to get in on the fun.

This is probably also because many people believe that there are real values in NFTs and there might be the potential for real money to be made. The way NFTs are created are in part responsible for the value of NFTs, but the hype and the big names supporting it also helps to add to the value.

Although it is very possible to make money from NFTs, it is still important to do your own research to choose the best marketplace for buying and selling NFTs. People should also remember that although NFTs can make people money, there are still a variety of transaction and gas fees that need to be considered.

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