Think of one of the most famous paintings: the Mona Lisa. The original is presently housed at the Louver Museum in Paris. Worth more than $850 million, the Mona Lisa’s origins can be traced to its creator, Italian artist Leonardo da Vinci.
It was later acquired by King Francis I of France. Practically, half a millennium later, 519 years to be exact, the Mona Lisa is property of the people — the French Republic and not available for sale.
But what does that have to do with NFTs?
So, What Is An NFT?
In a nutshell, NFTs are likened to the Mona Lisa but instead of painting on canvas and a museum to house it, it is in digital form and transferred into a digital wallet and appears under the “Collected” tab on a profile page on the blockchain.
An NFT, a non-fungible token, transforms digital works of art and other collectibles into one-of-a-kind verifiable assets traded on the blockchain. NFTs make it easy to not just purchase but also sell virtual art and capability to store it on the blockchain.
The minting, how the NFT comes into existence, includes the creation of a unique ID to use on blockchain networks Ethereum, Bitcoin Cash and EOS. The unique ID to the digital work also includes additional fields for ownership details. Once the NFT is created and listed it is offered for sale to buyers.
Purchasers of NFTs must-have digital wallets capable of receiving and storing such digital assets, the same way physical wallets are designed to hold traditional currencies. This digital wallet enables purchases of NFTs on platforms like OpenSea, Mintable, and Rarible using cryptocurrencies.
Here’s why the blockchain is on its head — NFTs offer artists or creators the possibility to claim resale royalties on subsequent sales of the artwork not otherwise traditionally offered on the blockchain or in real life, IRL.
And while it may sound like a variation of copyrights, it doesn’t quite work like traditional copyright. The “Token” portion to an NFT is a digital item designed to track the asset by its “TokenID” and attribute ownership to the current owner, as the transaction histories dating from the “minting,” — the initial creation and recordation on the blockchain of the NFT, to current ownership is public.
Blockchain essentially records time-stamped data on all transactions, with a permanent indication of ownership across a distributed ledger. A look inside at the transactions will provide all the information needed on the NFT like when it was traded, who was involved in the transaction and how much was spent.
What Do I Need To Know About NFT?
NFTs are not currency and instead represent unique and individualized values. For example, NFTs are like the iconic Balenciaga city bag. In this instance, the bag is the NFT and Bergdorf Goodman is OpenSea or the marketplace. Once you’re in the marketplace you can buy and sell digital artwork in the form of JPEGS, GIFs, tweets, virtual trading cards, images of physical objects, videos and more.
Now, fungible tokens, like Bitcoin, are cryptocurrencies. The cryptocurrency has an equivalent fractional value to one another the same way four quarters make up $1 and ten $1 bills are equivalent to a $10 bill, therefore making the currency “fungible” or interchangeable.
In so many words NFT is the designer bag, OpenSea is the store and the cryptocurrency is the cash.
What Does NFT Stand For?
NFT stands for non-fungible tokens. They are unique, non-interchangeable and associated with digital files like photos, videos and audio.
How Do NFTs Work?
Two NFTs are not the same. Remember the Mona Lisa? Because of its fame, it is housed in the Louver’s largest room, the Salle des États. However, it is not the only painting in the room. Also in the same room are a collection of Venetian paintings such as “The Wedding Feast at Cana” by Paolo Veronese.
Though both are extremely valuable, rare and one-of-a-kind objects of admiration they have a unique signature and style therefore that makes the two pieces of art difficult to be confused with each other exchanged for or equal to another.
And despite an artist in the 21st Century’s efforts to reproduce with the same emotions of the original masterpiece like an NFT, there is a uniqueness to the piece that makes it impossible to pass it on as the authentic piece.
Consider NFTs to be like the Mona Lisa and The Wedding Feast at Cana — but only digital. So instead of finding a spot on the wall for an actual oil painting the NFT collector gets a digital file instead. And with that digital file, the collector gets exclusive ownership rights of the NFT.
Are NFTs A Good Investment?
Considering NFTs are digital assets that act as secure documentation of ownership, they can be an excellent investment for those interested in diversifying their blockchain investments. (See next question for more details on NFT investments.)
How Do You Make Money With NFTs?
There is money to be made in NFTs. Turns out that making money isn’t just for creators. Beyond the creators, there have been several entrepreneurs and investors who have utilized NFTs like stocks and have been known to profit off them by buying and selling them.
Bottom line, investors can make money with NFTs by creating their digital art, or metaverse where there’s only one definitive actual version. An excellent example is the Bored Ape Yacht Club, BAYC. A year after launching as a set of 10,000 NFTs, BAYC once valued at $200 is now at $200,000 minimum. Last October, the most expensive NFT, BAYC’s Bored Ape #8817, sold for a whopping $3.4 million on Sotheby’s Metaverse marketplace.
What Is The Point Of NFTs?
Besides supporting the arts and artists you like, NFTs are a contemporary approach to investing in art. In fact, in 2021 digital artist Mike Winkelmann, Beeple’s, unique work, “EVERYDAYS: THE FIRST 5000 DAYS,” sold for $69.3 million as a single lot sale on Christie’s Auction House. This digital art sale made history and forever changed how people sold their art and approached NFTs, the blockchain and cryptocurrency.
What If You Screenshot An NFT?
Even if you take a screenshot of the NFT, you are not the rightful owner of the artwork or have enough proof to show you bought the artwork. The thing is NFTs have a digital footprint that leaves no room for anonymity. When NFTs are sold and bought here is digital data that will verify whether you’re the owner or not.
What Happens When You Buy NFT?
First, NFTs can only have one owner at a time. So just like the original Mona Lisa, it can only hang at the Louver Museum in Paris unless otherwise. So essentially, NFTs are the same — as one-of-a-kind physical art collectors, but digitally. The sole owner also gets exclusive ownership rights. You can resell and get what you can or hold on to the NFT to see if the value increases.
How Do You Know If An NFT Is Real?
Proving an NFT is real is simple. Proving ownership is similar to proving you have ETH or money in your account. So when you purchase the NFT it comes with a unique token that is transferable to your wallet through your public address. That’s the token that proves that your copy of the digital file is the original.
What Is An Example Of An NFT?
Sold online and digitally, examples of NFTs include —
- Collectible items/trading cards
- Event tickets
- Music & media
- Virtual Fashion
- IRL assets and product pairings
- Domain names
Why Are NFTs So Expensive?
It’s not that the NFT is expensive per say, but remember the Mona Lisa? It’s one of a kind. Meaning NFTs are valuable because the authenticity of a non-fungible asset is verified. There is only one in quantity and one owner, therefore, the value of the NFT has what may be deemed an “expensive price tag.”
How Do I Buy NFTs?
To buy non-fungible tokens, NFTs, find a marketplace which is where the transactions take place. Collectors can purchase Ethereum on crypto exchanges like Coinbase. Once crypto tokens are purchased, transfer them to a crypto wallet like MetaMask. Metamask is like a digital checking account that stores and transfers cryptocurrency.
Then register and connect your wallet to an NFT marketplace like OpenSea, Rarible or SuperRare. And like scrolling through Amazon, browse through the marketplace to find an NFT of your liking and make the purchase. When the transaction is completed, the cost of the NFT will be debited from your digital wallet. Depending on the marketplace, you may have to also pay a “gas fee” or transaction fee to the marketplace.
Buyer Beware: Keep This In Mind
There is no assurance the NFT you buy will appreciate with time. Be prepared for the possibility that you could lose money. So while there is a possibility to make a boatload of cash, NFTs run similar risks as investing in the stock market. Educate yourself and understand the value of the underlying asset you are buying before purchasing the NFT.
Have more questions on NFTs? Email us at firstname.lastname@example.org. We’ll get you answers.