Many people still find it hard to imagine that someone is actually buying video clips or GIF animations that can simply be downloaded online. The creators of the mysterious NFT earn millions of dollars, and their brainchild has become one of the most discussed online trends. It is also surprising that so far only a few have been able to fully understand what NFT is and why the future lies behind it.
What is unique
NFT are non-interchangeable tokens that confirm the relationship of the subject to the property, in this case - to digital objects, namely: a variety of pictures or photographs, sound recordings, text information, digital art objects, financial assets and tools, characters from the computer computer games or any game elements, etc.
To make it clearer what the concept of "irreplaceability" means, let's look at the opposite example. There are interchangeable cryptocurrencies, the same bitcoin, on the account of one user, will be equal to bitcoin in the wallet of another (if you do not take into account the tracking of origin through blockchain analytics tools). In the case of an NFT token that belongs to one painting, it will not be equal to another NFT token, because it represents a completely different picture of another artist, and therefore has a different value.
Each of the NFT tokens is exclusive and exists in only one instance. It is impossible to copy a non-interchangeable token, because it contains identification data recorded in reasonable contracts. It is this information that makes all NFT "entities" different and unique.
The advent of NFT has greatly simplified the procedure for confirming property rights to a digital art element. The blockchain contains information about the user who owns them and his tokens, and the replacement or removal of this information is not technically possible.
How it all became a reality
Initial manipulations of NFT became possible after the launch of financial platforms such as Colored Coins and Counterparty, which were add-ons to the Bitcoin protocol and gained the most popularity in 2013 and 2014, respectively.
At the Ethereum blockchain, the first NFT project was CryptoPunks in 2017. There were a total of ten thousand cryptopunks, and at first they were distributed among users for free, but now they are a valuable blockchain rarity. However, the first popularity of NFT was brought by the CryptoKitties project, which was launched four years ago. The idea of the project was to "breed" cats, that is, the user can get offspring from two NFT-cats, which differ in the degree of rarity, and then keep it or sell it. This gave rise to other experiments with NFT breeding mechanics and the addition of new game elements.
Further development has led to the mass emergence of bubble games, in which each new NFT buyer has to pay more than the previous one. That is, after buying NFT from developers, the price of this asset automatically increases with each resale, and the increase in value is regulated by a given algorithm.
A huge leap was made thanks to the tokenization of digital art, as it became much easier to create NFTs, trade them and receive rewards for the use of patents. As of today, the NFT production and trading environment includes a huge number of projects, and all types of digital items can be purchased or sold on marketplaces.
What is NFT and blockchain
Blockchain technology has existed for over twelve years, and during this period has become a worthy alternative to the classic financial environment. Not the least role in its development was played by the fact that centralized financial institutions are increasingly subject to criticism and a growing level of distrust on the part of the population.
Blockchain technology is the basis of cryptocurrency. In essence, it is a database consisting of interconnected blocks, where each such block carries information about the previous one. The database is stored only on some computers that are members of the system, ie it is decentralized, which also applies to transactions that are performed. That is why such a system is much harder to break, it is transparent and has reliable protection.
NFT and crypto art
The industry is actively developing, so for several years we can see the emergence of various startups that use blockchain tools to justify the authenticity of digital art. To transfer any type of content to the blockchain, it must be "tokenized". This is done in two ways:
- Issuance of one token for one artistic masterpiece;
- The division of the product of creativity into a number of tokens, which opens up opportunities for its sale in joint ownership.
Thanks to this opportunity, artists engaged in digital painting have received an alternative way to sell their works. After all, now it is not necessary to exhibit your work in the gallery, but you can "tokenize" the work on one of the crypto-marketplaces, determine its value and wait for a potential buyer.
After purchasing an NFT object, the user is given a blockchain certificate, which is stored in a digital wallet and confirms ownership of the object. In this case, all participants in the system will have free access to information about ownership and possible changes. And the work of art itself, regardless of format, will continue to be available on the Internet.
NFT tokens: instructions on how to make and sell
Token issuance sites and marketplaces are conventionally divided into several types:
- Aggregators (collect and group tokens, which allows them to buy and sell);
- Universal release protocols (allow you to create NFT);
- Marketplaces aimed at a particular area, they are also called niche.
How to make money on NFT? In theory, any ETH wallet owner has this capability. In fact, trading can take place in any currency, but you can pay for tokens only in ETH. The presence of such a wallet is also necessary for writing content in tokens, because a commission is set for this procedure on the Ethereum blockchain.
There is no single reliable way to make money on NFT, because such assets are characterized by low liquidity, and the value of each item in no way depends on objective criteria. Among the most common options for earnings are:
- Creating your own token for sale. How to create an NFT token? In fact, this is not a very difficult task, for this you need to go to one of the available trading platforms for NFT-tokens and take care of the availability of cryptocurrency ETH;
- NFT tokens can be bought at various marketplaces, and in the future to sell more expensive;
- Buy tokens that give the right to partial ownership, that is, allow you to "divide" NFT into several parts. Thus, a specific share of one non-interchangeable token can theoretically have an unlimited number of owners.
- Provide credit to an interested NFT user and provide tokens as collateral. If the borrower does not fulfill the obligation, the property right to NFT will pass to the user who provided the loan.
It is impossible to say for sure whether you can increase your capital by buying and selling NFT tokens. Conservative entrepreneurs are wary of this tool, because in their view, it could become another "soap bubble". But many startups consider it really very promising.
Of course, understanding what NFT is will be useful for anyone, because the technology provides completely new opportunities for the market use of digital assets. Some have no doubt that in the near future art will be completely transferred to digital format, as this does not require additional costs for the maintenance and servicing of tangible works of art, as well as new opportunities and directions for the realization of creative ideas.