There is a GIF of a flying cat with a Pop-Tart body. And it cost more than 600,000 euros. Millions were paid for a tweet with five words. What the heck is NFT and why do they have value?
Many may have already heard of NFT during 2021, but for many it may still be unclear what exactly they are. Finvesting has compiled this article to find out!
NFT raises many questions – is it an art form? Or a platform? Is it possible to invest in them, and should I invest in them?
What is NFT?
Let’s start with the basics:
NFT comes from the words Non-Fungible Token. The word does not have an actual Finnish translation, so let’s go through it with an example.
Non-Fungible is something that cannot be replaced by another similar one – so it is unique. For example, Bitcoin, or more traditionally a euro coin, can be exchanged for another similar one, so then it is not an NFT.
But if you have a trading card that there is only one in the world, it is a unique and hence you can talk about NFT. Although the NFT refers to virtual objects, not 80s trading cards…
NFT indicates the exclusivity of certain digital content (e.g., a work of art, an in-game purchase, or a tweet). You can buy an NFT at a certain price, but since it is not convertible, its market value is likely to fluctuate.
Thus, cryptocurrencies like Dogecoin are not NFTs because they are not unique. However, this GIF image of Dogecoin is NFT!
How does a Non-Fungible Token work?
NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency like Bitcoin or Dogecoin, but its blockchain also supports NFT. Ethereum’s block chain stores more information, so it works a little differently. However, it should be noted that other cryptocurrencies can create their own NFT block chain, as some have already done.
How is NFT defined?
An NFT can be any digital object or thing. It is often said that this is virtual art. NFT can be drawing, music, image, video or an item in game. As long as it’s just a single, unique piece! In a boring, technical sense, each NFT is a unique code in the blockchain.
These individual codes can then be sold and bought, just like those trading cards. Since this is still a relatively new thing, prices can fluctuate really a lot. Of course, demand determines the price in this case too!
I bought my first NFT – am I now an art collector?
NFT is often specifically digital art, so yes. Someone paid $ 390,000 for a 50-second Grimes video, and $ 6.6 million has been paid for a Beeple video. Because they are unique individual pieces that no one else can own, I think NFTs can be counted as a virtual art to be collected.
Can the NFT be copied?
The GIF image of Dogecoin above is NFT, as we already mentioned. But how can it be a unique when anyone can scroll this page up a bit, right-click on the image and press “Save Image As” – It is not unique as I have it too?
Good question. You can copy a digital file as many times as you want, including NFTs. But NFTs are designed to give you something that can’t be copied: ownership of a work (although an artist can still retain copyright and copying rights, just like with physical art). Let’s think about it again in terms of physical, traditional art: anyone can get a copy of the Mona Lisa for themselves, but there is still only one original edition. And that’s the only thing that matters.
Traditional works of art, such as paintings, are valuable precisely because they are unique.
But digital files can be easily and endlessly copied.
With NFT, art can be “tokenized” and a digital certificate of ownership can be created that can be bought and sold.
The GucciGhost NFT below was last sold for $ 3,600. Now the new owner is asking for $ 16,300! And yes, this picture is just a copy of the original, and therefore not worth anything!
NFT from the artist’s perspective
Non-Fungible Token can be a great way for many small artists to turn their own art into money, as traditional markets are known to be very competitive and relatively small. If you come up with a really great digital sticker idea, what are you going to do? Do you sell it from the iMessage App Store?
If you sell your work as an NFT, you can enable the feature, earning yourself a certain percentage each time the art changes ownership! If your art becomes popular, you can still earn large sums in years to come!
NFT from the buyer’s point of view
Digital art is definitely interesting nowadays. One advantage of buying an NFT is also the financial support for the artist. By purchasing NFT, you also get access to an image or video, so you can use and present it freely! Authentication is performed using an entry found in the blockchain.
If you buy an NFT, you are a collector. Why do collectors buy art? Part because they can, part because they enjoy it and part because art can be a good investment. Since NFT is still a fairly new thing, you are very likely to sell the art you bought at a profit in the future. Not a investment tip!
Where can I buy a Non-Fungible Token?
The Non-Fungible Token became possible thanks to the Ethereum blockchain. Today, there are already several marketplaces where NFT can be traded.
The best known of these are:
- Nifty Gateway
The payment methods are traditional payment cards (Visa/Mastercard), PayPal and often Skrill. Of course, many of these also accept cryptocurrencies, but technically anyone can sell an NFT and they can ask for any currency.
How popular are they?
It depends on who you ask. Especially younger people interested in cryptocurrencies know what they are and why investing in them can be worth it. But if you ask your mom about it, you’ll probably get a slightly different answer.
However, it is worth bearing in mind that many large brands as well as public figures have already launched their own NFTs. For example, Marvel and Wayne Gretzky are good examples of this, as well as YouTuber Logan Paul. While the Non-Fungible Token will hardly ever be as normal as a smartphone, it seems to be becoming more common with cryptocurrencies at the same rate – at least for now.
Yes you can! Anyone can buy NFT, above you will find a list of trading venues that allow it.
This can be a good investment target as their popularity is only growing. However, Finvesting does not share investment tips, so always make your own decisions!