So-called non-fungible currencies (NFTs) caused quite a stir in 2021, and today it’s hard to imagine the crypto sector without them. From art and music to tacos and toilet paper, these digital goods sell like exotic 17th century Dutch tulips—some for millions of dollars.
But are NFTs worth the money — or the hassle? Some experts say digital goods are a bubble that could burst at any moment. Others believe that NFTs are here to stay and will change the investment world forever.
What is a non-fungible code?
Non-fungible in German means: not replaceable or interchangeable. A symbol is a unit of value. The term first appeared in the field of Digital currencies on me.
A “non-fungible token” is a digital asset that represents real-world objects such as art, music, in-game items, and videos. Tokens are bought and sold online, often with cryptocurrency, and are usually coded with the same underlying software as many cryptocurrencies.
How long have NFTs existed?
NFTs have been around since 2014. However, they have only now gained prominence, particularly in the art field. Among connoisseurs, works of art such as photographs have recently been sold digitally. Since November 2017, $174 million has been spent on NFTs.
NFTs tend to be unique or at least available in very limited editions and have unique identification codes. “Essentially, NFTs create digital scarcity,” says Ari Yu, president of the Washington Technology Industry Association. This increases the value if there is a corresponding demand.
What are the most expensive NFTs?
In its early days, NFTs were digital creations that already existed in some form somewhere else, like explainer videos from NBA games or trusted versions of digital art that were already on Instagram.
For example, popular digital artist Mike Winkelmann, better known as “Pebble,” created a collection of 5,000 drawings to create what may be the most famous digital asset of the era. Titled Every Day: The First 5,000 Days, the work fetched a record $69.3 million at Christie’s.
What are the advantages of NFTs?
Anyone can view individual photos – or even the entire photo collection online for free. So why would people want to shell out millions for something they can easily screenshot or even download?
Answer: An NFT allows the buyer to not only own the original item, but also has built-in authentication that serves as proof of ownership. Some say collectors value the opportunity to show off their digital possessions more than virtually the item itself.
How is NFT different from cryptocurrency?
NFT stands for Non-Fungible Token. The code is programmed (generated) in a similar way to the Bitcoin or Ethereum cryptocurrencies. But this is where the similarity ends.
Physical money and cryptocurrencies are fungible (fungible), which means they can be traded or exchanged with each other. They are also of equal value – one bitcoin is always worth the same as another bitcoin.
Unlike NFTs. Each token contains a digital signature that makes it impossible for NFTs to exchange with each other. An NBA clip, for example, doesn’t equal Everyday artwork, even though they’re both iconic.
How does NFT work?
NFTs are located on the so-called Blockchain, a general ledger (ledger) that records transactions. You may already be familiar with blockchain from the world of cryptocurrency.
In particular, NFTs are usually based on Ethereum-Blockchain, although other blockchains support it as well.
NFT can refer to items that are actually physical or digital in origin. They include, for example:
• GIF images
• Video clips and sporting events
• Virtual avatars and skins for video games
• Designed sneakers
Even tweets count. Twitter co-founder Jack Dorsey sold his first tweet as an NFT for more than $2.9 million.
Basically, NFTs are like physical collectibles, only they are digital. So instead of having an actual oil painting on the wall, the buyer gets a digital file instead.
Whoever buys the token also gets exclusive royalties. So NFTs can only have one owner at a time. NFT’s unique signatures make it easy to verify ownership and transfer tokens between owners. The original owner or artist can also store certain information on the token. For example, artists can sign their artwork by including their signature in the NFT metadata.
Where are NFTs used?
Blockchain and NFT technology provide artists with a unique opportunity to monetize their work. Artists no longer have to rely on galleries or auction houses, but can address consumers directly thanks to NFTs. This means that the artist does not have to pay brokerage or mediation fees.
Additionally, artists can program in royalties so that they receive a percentage of sales when their artwork is sold to a new owner. This is an attractive feature because artists usually do not receive future royalties after selling their artwork for the first time.
Art is not the only way to make money from NFTs. American brands like Charmin and Taco Bell have been auctioning themed NFT art to raise money for charities. Charmin described his offer as “NFTP” (non-negotiable toilet paper) and The Art of Taco Bells NFT It sold out in minutes, with the highest bids reaching 1.5 envelopes of ether (WETH) – the equivalent of just over $3,000 at the time of writing.
Nyan Cat, a 2011 GIF of a cat with a body that looks like a toast (a pop tart), sold for nearly $600,000 in February 2021. The photo series The best picks in the NBA Its sales reached more than 500 million US dollars at the end of March. One of basketball player LeBron James’ best moments has brought in a single NFT of more than $200,000.
Even celebrities like Snoop Dogg and Lindsay Lohan are jumping on the NFT bandwagon, posting unique memories, artwork, and moments as NFTs.
How and where can you buy NFTs?
If you want to start your own NFT pool, you must first acquire some basic equipment.
First you need a digital wallet (wallet) allows you to store NFTs and cryptocurrencies. Since NFTs are usually paid for with cryptocurrency, you should check which cryptocurrency is accepted and which cryptocurrency Buy cryptocurrency. a favour Cryptocurrency exchange In Germany octopusesAnd the CoinbaseAnd the binanceAnd the BSDEX or bison.
Note: Most exchanges charge at least a percentage of the transaction amount when buying cryptocurrencies.
Popular NFT Markets
Once you have set up the wallet and deposited your cryptocurrency there, you can get started. There are plenty of NFT sites where tokens can be purchased. Currently, the largest NFT markets are:
• OpenSea.io: The peer-to-peer system describes itself as a provider of “rare digital items and collectibles”. In order to purchase tokens, you need to create an account that allows you to browse NFT pools. You can also sort by amount already sold and discover new artists if needed.
Rare: Similar to OpenSea, Rarible is an open marketplace that allows artists and creators to post and sell NFTs.
• Establishment: Here the artists have to collect enough votes or get invited from other creators to post their artwork. The community’s exclusivity and additional fee—artists must purchase “gas” to mint the NFTs—means you may find more valuable or well-known artwork there. For example, Chris Torres, the creator of Nyan Cat, has been selling NFTs on the Foundation platform.
Although these and other platforms bring together thousands of NFT creators and aggregators, you should carefully research the NFT before purchasing. There have been fakes and scams. For example, works of art were sold without the artists knowing about it.
It is appropriate that there are different levels of effort involved in verifying oneself as an artist on the platforms. Some platforms are stricter than others. For example, OpenSea and Rarible do not require verification of ownership for NFT offerings. There is hardly any real buyer protection.
Should you buy NFTs?
It depends, says expert Yu. “NFTs are so risky, it’s hard to predict what will happen in the future. So far, there is little empirical value because the tokens have only been on the market for such a short time,” she notes. However, you can invest small amounts to experience this novelty.
In other words, investing in NFTs is largely a personal decision. If you have money left and the token has a special meaning for you, you can consider such a digital redemption.
But note: the value of an NFT just depends on what someone else is willing to pay for it. Thus demand determines the price and not some economic factor and corporate strategies that can influence share prices.
NFTs are also subject to income tax — at least that’s the conventional wisdom among tax professionals. Just like bitcoins or other cryptocurrencies, if you make a profit selling these assets and own them for less than a year, this is called a private sale.
You only need to be taxed on the profits if they exceed 600€. Below that, an exemption limit applies. See also what we’re about Bitcoin taxes I wrote.
Frequently asked questions about NFTs (FAQs)
How do I make money with NFTs?
As with cryptocurrency trading, you can make money with NFTs by buying them cheap and selling them at a higher price. The special feature: NFTs are always available for free in ad campaigns. However, resale prices are often low.
Why are NFTs so expensive?
Can anyone create NFTs?
What does Bill Gates think of NFTs?