NFTs have been gaining recognition lately as celebrities are pouring money in buying NFT artworks.
Recently, Stephen Curry has purchased an artwork called the “Bored Ape Yacht Club” for $180,000 USD and used it for his Twitter avatar.
The “Bored Ape Yacht Club” artwork is an example of an NFT.
Another example of an NFT artwork is the Nyan Cat GIF. It has been sold for about $580,000 USD (that’s over half a million USD).It’s crazy how someone would buy it for half a million dollars!
NFT are like collectibles items, but only digital items. Instead of collecting cars, or physical paintings to hang on a wall, the owner of an NFT own the digital files instead. (It HAS to be digital!)
So, what does NFT stand for?
NFT stands for non-fungible token.
What does “non-fungible” mean?
Before thoroughly explaining what an NFT is, I would like to explain the concept of non-fungible.
Here’s a synonym: “non-replaceable”.
From now on, when we say “non-fungible” think of it as “non-replaceable”.
Let’s say you want to buy this orange jacket from Uniqlo that costs $39 USD.
Uniqlo factories make thousands of the same orange jacket to sell in their various stores.
When a customer purchases this orange jacket, he/she won’t care which orange jacket out of the thousands they produced, as long as the jacket is in good shape, clean, and in “new” condition.
This means the jacket is “replaceable” or “fungible”.
However, let’s say there is a limited-edition jacket, and the company only produced ONEjacket, this jacket is also considered as non-fungible.
Therefore, this jacket is “irreplaceable” or “non-fungible”.
Supermarket goods are typically “replaceable” or “fungible”.
The Mona Lisa painting on the other hand is a non-fungible item, there’s only one Mona Lisa painting in this world.
Items that are “irreplaceable” or “non-fungible” are usually more valuable.
Now that we understand the word “non-fungible”, what’s token?
An NFT operates on the “blockchain” network. It uses Ethereum’s technology (Smart Contracts) to facilitate all transfers, which means the Ether coin is the currency when one wants to buy or sell an NFTs.
Keep in mind that an NFT is NOT Ethereum and an NFT must be a digital item. You can’t buy or sell physical objects in the NFT marketplace.
Token essentially means that the NFT is “exchangeable” between different individuals.
There are many types of NFTs, such as art, music, domain names, virtual worlds and collectables, some are more valuable than others.
If I bought an NFT artwork online, and I would like to give it to my friend, I could do that because NFT is “exchangeable” between parties (aka it’s a token).
The “exchange” function adequately allows us to “buy” and “sell” NFT items online.
#Funfact: Did you know that to keep the NFT network running, it costs 33 Terawatts of electricity per hour. That’s the same amount of electricity consumption of Serbia.
NFT users must be aware that the value of sustaining the NFT network comes at a cost.
Why are people buying NFTs?
Anyone on this planet can purchase or sell NFTs.
Not all NFTs are valuable, the higher the demand, the more valuable it is. Currently, like the dotcom boom, it is very hyped up, and no one knows where it’s going or where it will end up.
Recently, Stephen Curry purchased an NFT artwork to use for their Twitter avatar!
How to Purchase and Sell NFTs?
NFTs are commonly purchased on the largest online market place (Opensea.io), you will need to create a MetaMask crypto-wallet.
You will first need to download the MetaMask Chrome Extension (Supports iOS or Android too) onto your browser and transfer some Ethereum into your wallet.
After that, you can freely purchase any type or kind of NFT sold on Opensea.io.
How to Earn Money from NFTs?
Earning money from this “hype” is not easy and is very risky.
To earn a profit from NFTs, you can create your own artwork or unique collection and sell it to individuals who enjoys your artistic style.
If you’re a speculative investor or trader, you could purchase a trendy NFTs and try to resell it at a higher price when demand is high.
Imagine you’ve purchased a Bored Ape Yacht Club NFT for less than $50,000 USD and resold it at $180,000 USD. That’s a neat $130,000 USD profit or 72% return on investment (ROI).
Be extremely careful with NFT as it is still speculative and new.
Who’s a NFT holder here? Let me know down in the comments what NFT you have.
As NFT is too risky, I don’t plan to hold any NFT assets on my portfolio for speculation. But if you do, tell us down in the comments how are you planning to use NFTs as!