Investors are now focused on digital assets more than ever. Almost every big investor has a certain percentage of their entire portfolio invested in digital assets, such as the crypto market. However, digital art or NFTs (Non-fungible tokens) are becoming the next big thing.
In the second quarter of this year, the NFTs market reached $2.5bn in sales. In 2020, the market was just at $13.7m, and then it jumped to a Billion dollar mark at the start of 2021. Some people call it a bubble that may burst in the upcoming years. However, digital art has become a completely new industry from ashes, and its growth potential is endless.
Let’s explore everything about NFTs and what makes them so special and unique that their trading volume crosses tens of millions every 24 hours.
NFTs are digital assets that are exchanged using cryptocurrencies. These digital assets are represented using real-world objects, whether it’s art, images, or videos. Every NFT owner owns the complete rights of their digital assets with a uniquely identified token that is associated with their identity.
The NFTs create the scarcity that allows owners to own the complete copyrights of their digital assets. Beeple (Mike Winklemann) is well-known for his digital art, and he sold one of his NFTs for a whopping $69.3 million in Christie’s auction. The art included 5000 drawings that Beeple created every single day. The buyer of this art technically owns it because he has a uniquely identified signature that is associated with his identity.
These Non-Fungible Tokens are trying to revolutionize the way we exchange art. Art is meant to be scarce, and NFTs are also trying to digitally replicate these qualities to allow buyers to purchase art digitally using cryptocurrencies.
NFTs use the same technologies and protocols as other cryptocurrencies. Even NFTs are based on Blockchain and each exchange or transaction is stored on Blockchain Ledger that cannot be altered without authorization.
Although NFTs are not supported by various blockchains, Ethereum Blockchain is still leading the NFTs market. NFTs can represent both physical assets and non-physical assets such as digital images, videos, and video games.
A few examples of NFTs include Art, Video Games, Tweets, Images, Videos, Music, and more. These assets may not have a physical availability, but they can have particular ownership with a unique digital signature on the Blockchain.
These Non-Fungible Tokens contain single ownership. This ownership might be held by a corporation or an individual. Moreover, corporations can further break down their NFTs into small pieces to allow their buyers to invest funds and own a small part of a big asset, just like crypto firms. However, the major ownership is held by a single entity.
You might be wondering that NFT images, videos, tweets, and other digital assets are easily available to everyone. Everybody can download, view, share them wherever they want. So what makes NFTs so unique that people are spending millions despite all the digital copies of media that are readily available?
NFTs are all about ownership. It does not matter whether people are downloading and sharing certain NFT memes, images, or videos, but they own no digital rights to that particular asset. The owner has all the rights, and he also has proof of ownership in the shape of digital signatures that are held on the Blockchain ledger.
Therefore, it may seem that NFTs can be downloaded, uploaded, and shared by anyone, but they cannot be owned by any single entity without that special signature. So, this digital art is more focused on the ownership rights rather than the actual presence of the image, and these rights make digital assets scarce.
Many expensive NFTs are either popular or so unique, such as Beeple’s Art. However, not all NFTs are expensive. There are many new NFT marketplaces where artists publish their work and buyers can purchase it for just a few dollars.
NFT memes are also bought by people for millions of dollars because these memes hold great significance, and they are popular all across the globe. However, their real worth is still questionable, but many investors also like to buy the hype without realizing the actual worth of the art.
Some type of digital art is unique and appreciable, as in our given example above. Such unique masterpieces are made by artists after a lot of hard work and dedication. Therefore, such pieces hold real worth of millions of dollars. Just like a physical art piece, digital art also holds great significance but currently, the NFT market tends to overprice a lot of useless pieces that cannot be considered as Art.
All our cryptocurrencies are fungible because they have the capability to be traded for one another on a crypto exchange. The same goes for your own physical money that is traded across the globe.
However, NFTs are non-fungible, one NFT can’t necessarily be traded for another NFT until or unless their actual worth is the same. Each NFT has its own worth with a unique digital signature attached to it. Hence, they cannot be interchangeably exchanged just like Bitcoin, Ethereum, Dogecoin, or other cryptocurrencies.
NFTs can be bought from NFT marketplaces. These Non-Fungible Tokens can be purchased by using cryptocurrencies such as Ethereum, Bitcoin or Cardano, etc. Many NFT exchanges accept Ethereum as their underlying currency, however, it can vary from platform to platform.
Here’s how you can buy NFTs step by step:
- Find a reliable NFTs platform where you want to buy your digital asset.
- See what currencies that NFT platform accepts, is it Ethereum, Bitcoin or some other currency?
- Find a trusted cryptocurrency exchange to buy that particular crypto that is valid on your chosen platform.
- Sign up and use your bank account, card or PayPal to pay and buy that needed cryptocurrency to be used on the NFTs platform.
- Move that cryptocurrency to your NFTs platform address, and we are ready to buy our first NFT
This is just one way to buy NFTs, however, there are many other easy ways as well. Such as, one can use a crypto wallet that directly connects to the NFT platform (only if they accept payments from that wallet). MetaMask is a recommended wallet for this purpose, with easy integration and a single-click connection.
All exchanges and NFTs platforms will charge you a certain transaction fee. Hence, make sure you check that fee before you make any transaction. Also, try to choose a reliable marketplace that charges less fee without compromising on any features.
There is a range of NFT marketplaces where sellers publish their art and other types of digital collectibles that could be bought by paying in cryptocurrency. We’ve shortlisted three of the best NFT marketplaces to buy crypto:
OpenSea is a large NFT marketplace that was established in 2018. It is also currently one of the biggest marketplaces with millions of users. They offer a range of digital collectibles in various categories such as Art, Music, Domain Names, Virtual Worlds, Trading Cards, and more.
The platform also supports most of the popular wallets such as Metamask that can directly be connected to the site for buying or selling any NFTs. Above all, the platform is trusted and they have lower trading fees than most of their competitors.
Rarible was launched in 2020 and the main goal of this platform is to become completely decentralized so that customers can mutually take decisions for the platform. The platform uses its own currency RARI which can be purchased on multiple exchanges. However, it can also be converted using your wallet.
It is a distributed marketplace without any middleman. Hence, all the transactions are between the buyer and the seller. Overall, it’s a great marketplace to start with.
SuperRare is not a regular NFTs marketplace, as it only focuses on pure art with a history attached to it. The history of art is also saved on the Blockchain that can be viewed by the buyer. The artists are allowed to use VR (Virtual Reality) to display their unique ideas.
Also, artists are paid for each resale of their art. The art includes a smart contract that tracks all the buyers and the artist is rewarded whenever the art is resold to another buyer.
NFTs come in all different forms. People can attach digital signatures to many digital items to make it an NFT by using a process called minting. Also, buyers can attach their own smart contracts to get a commission percentage for everything the art gets sold.
There are some additional costs for buying NFTs such as the gas fee for Ethereum which is charged on each transaction. Also, many things such as Tweets from famous personalities can also be sold as NFTs and many famous people have already made a ton of money by selling the oldest or unique tweets.
There are a variety of reasons behind all the controversial talk regarding NFTs. Many people deem it as worthless and they call the NFT industry a bubble that will burst soon. Also, the NFTs consume a lot of energy while they are processed. A single piece of NFT can consume up to 192 kWh of energy. Therefore, NFTs tend to leave a large carbon footprint which is not good at all.
Also, cryptocurrencies used during the transactions of these NFTs are built upon a Proof of Work model where computers need to solve many complex problems in order to make a transaction happen. NFTs may create a digital space for artists to cash their real worth, but it could also do a lot of harm in terms of processing power that it requires operating.
NFTs are also a way for money-launderers to hide their black money. There are many ways it can be misused. Physical art also carries these downsides. Therefore, digital art might not be entirely clean but artists will certainly thrive using new marketplaces where they can portray their imagination.
The NFT industry is exponentially growing, but the industry is still fresh and there is not a lot of data to back up all the promises. However, it carries a lot of potential for real artists who want to portray their digital art to investors.
Many investors are also going crazy, and they are buying the hype instead of real digital artwork. Some investors may end up wasting their capital on useless collectibles, but it all comes down to one’s taste and the amount of luxury they can afford. Only the future will tell about the true potential of this thriving industry.