NFTs are experiencing significant growth, and investors are willing to spend millions to acquire them. Discover everything you need to know about this technology: definition, operation, applications, but also how to take a training course to learn how to invest or create your own tokens.
In the digital age, new technologies are disrupting established norms. Blockchain is transforming the world of finance and art. In addition to cryptocurrencies, NFTs are one of the primary applications of this technical innovation.
What is a NFT ?
The term NFT stands for “non-fungible tokens,” which can be translated as “non-fungible tokens.” It is a cryptographic asset based on Blockchain technology, much like cryptocurrencies such as Bitcoin and Ethereum.
The difference is that cryptocurrencies are fungible, unlike NFTs. It is entirely possible to replace one Bitcoin with another Bitcoin, just as two one-euro coins are interchangeable, while each NFT has unique properties.
An NFT is created through the “minting” process on the Blockchain, inspired by the way traditional coins are minted. Any type of digital content can be converted into an NFT: artwork, music, an image, a video game… Twitter co-founder Jack Dorsey even sold the very first tweet as an NFT for nearly 3 million dollars.
In general, NFTs are comparable to physical collectibles. The only difference is that they are in digital format.
Each token is associated with a certificate of authenticity created by Blockchain technology. It is impossible to counterfeit or alter an NFT.
Most NFT transactions are conducted in cryptocurrencies like Bitcoin on specialized platforms like OpenSea.
As an example of a well-known NFT, we can mention the Cryptopunks collection, consisting of 10,000 collectible characters, each with specific randomly generated traits.
This collection has inspired countless similar projects, with the most popular ones being Bored Ape Yacht Club, Mutant Ape Yacht Club, Cool Cats, and Azuki.
How do NFTs work?
Most NFTs are based on the Ethereum blockchain, which is also the foundation for the cryptocurrency of the same name. This distributed public ledger keeps a record of each transaction.
The Ethereum blockchain is generally preferred because it is compatible with ERC-721 tokens. The specificity of these tokens is that they are all unique. However, other blockchains like Binance Smart Chain have begun to support NFTs. Some of them even have lower transaction fees than Ethereum.
NFTs are individual tokens that store information. Therefore, it is possible to verify the ownership of each NFT, and the transfer of tokens between users is entirely secure.
The value of NFTs is primarily linked to supply and demand, similar to a traditional work of art. Like cryptocurrencies, it is a risky but potentially very profitable investment.
Minting an NFT is the process of creating the token. You simply choose a digital asset or create one and then register it on the blockchain. Subsequently, the NFT can be sold or traded.
What are NFTs used for?
NFTs are attracting both cryptocurrency traders and art collectors. Furthermore, this technology allows digital content creators to generate income by selling their creations on dedicated platforms.
The video game industry is closely interested in NFTs, and many developers have already started integrating this technology into their games. For example, it is possible to obtain in-game items for your character, such as weapons or clothing, in the form of tokens. Some video games like Axie Infinity are entirely based on NFTs and cryptocurrencies. This new genre of gaming is called Blockchain Gaming.
NFTs can also be used to immortalize historical events or sports performances. For instance, the NBA collaborated with Dapper Labs on the Top Shot project. The best shots from NBA basketball players were immortalized as NFTs and put up for sale. In total, this project has already generated over 230 million dollars. LeBron James’ “cosmic dunk” video sold for $208,000.
Several brands like Charmin or Taco Bell have also used NFTs to raise funds for charitable causes. In February 2022, the 2011 GIT Nyan Cat sold for the equivalent of $600,000.
The different types of NFT
There is a wide variety of NFT categories. In reality, any digital content can be converted into a non-fungible token and minted on the blockchain.
One of the main use cases for this technology is virtual real estate in the metaverse. For example, in the virtual world of Decentraland, players can buy land in the form of NFTs and then resell them to each other.
In November 2021, a piece of land was sold for the equivalent of $2.3 million in the game Axie Infinity. Similarly, a month later, a batch of 100 virtual islands in the Sandbox metaverse was sold for $4.3 million. Virtual real estate is a thriving market.
Even physical real-world property can be sold as NFTs. In Florida, a four-bedroom house was recently sold with an accompanying NFT for $653,000 paid in Ethereum. This property is registered as a token on the blockchain, theoretically allowing the house to be resold with a simple electronic transaction.
Another flagship category of NFTs is collections, such as the Bored Ape Yacht Club. The first NFT collection, known as CryptoPunks, was created in 2007 and consists of 10,000 digital characters in the form of NFTs.
These collectible characters are traded at astronomical prices on platforms like OpenSea and others. In February 2022, a CryptoPunk NFT was sold for 8,000 Ethereum, equivalent to $23 million at that time. It had originally been sold for $1,656 in 2017 by its original owner.
Furthermore, many sports moments are immortalized as NFTs. Organizations like the NBA or ATP sell their best videos as tokens. Recently, the Australian Open sold items from the tournament, such as the court or an umpire’s chair, as NFTs.
Finally, NFTs are particularly transforming the gaming world. Many crypto-gaming games are emerging, allowing players to earn cryptocurrencies or NFTs by playing.
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What are the differences between NFT and cryptocurrencies?
Like cryptocurrencies, NFTs are based on blockchain technology and are created using the same programming languages. However, despite these similarities, NFTs and cryptocurrencies are very different.
Firstly, cryptocurrencies are fungible. Taking Bitcoin as an example, it means that one Bitcoin can be exchanged for any other Bitcoin because they have the exact same value.
This is not the case with NFTs because each token has its own digital signature. Each NFT is unique and cannot be exchanged or replaced by another.
NFT and the Ethereum blockchain
NFTs are based on the Ethereum blockchain because it offers several advantages. It enables token portability and simplifies transactions.
Once a transaction is made, it becomes impossible to manipulate the data to falsify ownership. Additionally, this blockchain is always active, allowing NFTs to be bought and sold at any time.
What is NFT minting?
Minting is the process of recording an NFT on a blockchain. This term is inspired by the way traditional coins are minted.
Various NFT marketplace platforms automate and streamline this process as much as possible. It only takes a few clicks to upload the file to the platform, give it a name, add a description, set the price, and start the sale. It’s important to carefully choose the blockchain on which to mint your NFT and the marketplace on which to sell it.
Why are NFTs so popular?
Over the past few months, NFTs have become a true cultural phenomenon. Even celebrities like Eminem, Snoop Dogg, or Justin Bieber are investing in this new technology.
In reality, NFTs first appeared in 2015, but several factors have driven their popularity to new heights. The rise of cryptocurrencies and blockchain technology has shed light on this technology, along with the enthusiasm of fans.
In 2021, the NFT market generated $41 billion in sales, approaching the value of the traditional art market.
Furthermore, investors want to own unique digital content that could appreciate in value. NFT holders can also earn royalties because they have the intellectual property rights to the content.
It is impossible to counterfeit an NFT because it contains information that authenticates it on the blockchain. Each token is truly unique, and its owner can assert their rights.
NFT creators also earn a commission on each sale made on platforms like OpenSea, allowing them to enjoy a continuous income over time.
Why are NFTs so expensive?
Some NFTs are sold for the equivalent of several million dollars, such as images from the Bored Ape Yacht Club collection. Similarly, digital artist 3LAU sold a collection of 33 NFTs for over $11 million, and singer Grimes totaled $6 million by selling her collection of digital art for $7,500 each.
Digital artist Beeple even sold an NFT for $69 million. These non-fungible tokens can indeed reach astronomical prices.
The price of NFTs is influenced by several factors. Firstly, many people buy NFTs because they appreciate the content. For example, an NBA fan may be thrilled to buy an NFT featuring their favorite player.
The blockchain authenticates the NFT and its creator, proving ownership, which adds value to these digital files.
Furthermore, an NFT is not limited to an image or other multimedia content. It can also have utility. For example, an NFT linked to a video game can allow players to progress in the game or obtain rare items.
Similarly, some NFTs can generate passive income. For instance, CyberKongz NFTs generate $BANANA tokens that can be sold by their owners.
An NFT can also provide access to private events or various perks. Buyers of Bored Ape Yacht Club NFTs can mingle with other members, including celebrities like Snoop Dogg and Eminem.
However, in general, the price of NFTs is linked to speculation. Many investors spend large sums to acquire tokens in the hope that they will appreciate in value in the future.
How to buy NFT?
Purchasing NFTs is done on specialized platforms. Before you start investing in these digital assets, you need to create a crypto wallet to store your NFTs and cryptocurrencies.
Next, you’ll need to fund this wallet by buying cryptocurrencies like ETH. This purchase can be made on an exchange platform like Coinbase, Kraken, PayPal, or OpenSea. It’s worth noting that these platforms take a commission on each transaction.
Once your wallet is funded, you can proceed to buy NFTs on one of the specialized marketplaces. The most popular one is OpenSea, which offers a vast catalog of collections.
Rarible, on the other hand, is a marketplace open to everyone, allowing artists and creators to sell their NFTs. Users can influence the platform’s rules and specifics, such as commission amounts.
Another reputable NFT platform is Foundation. To access it, artists must receive invitations from other registered creators. This makes it an exclusive platform where you can find rarer and more expensive tokens.
How do you create NFTs?
Creating your own NFTs can be very profitable, provided you have a good idea and the technical skills to bring it to life. To get started, choose the digital content you want to transform into a token.
It can be any content you’ve created or own the intellectual property for: a photo, painting, drawing, music, GIF, tweet, and so on.
Next, choose the blockchain on which you want to register your NFT. This is the minting process. Among the most commonly used blockchains for creating NFTs are Ethereum, Tezos, Polkadot, or Binance Smart Chain.
If you don’t already have one, set up a crypto wallet like Metamask, Math Wallet, AlphaWallet, Trust Wallet, or Coinbase Wallet. Then, purchase cryptocurrencies on an exchange.
The next step is to choose an NFT marketplace like OpenSea, Rarible, or Foundation. Connect your wallet to the marketplace to pay the necessary fees for minting your NFT.
Follow the marketplace’s instructions to upload your digital file, which you can then convert into an NFT.
Finally, you can start the sale. You can set a fixed price or put it up for auction. You can also choose the percentage of royalties you want to receive on each secondary sale.
However, keep in mind that minting can be expensive and complex. Some platforms charge listing fees, minting fees, take a commission on the sale, and transaction fees for transferring money from the buyer’s wallet to the seller’s wallet.
So, take the time to carefully examine the costs to ensure your project is profitable, especially considering the volatility of cryptocurrency prices.
While highly sought-after NFTs can reach astronomical prices, remember that many don’t sell at all. It’s entirely possible to lose all the money invested in your project. To avoid this disappointment, take the time to come up with an original and appealing project idea.
Why and how to take an NFT training course?
Creating or trading NFTs can indeed be very profitable. However, while some projects generate millions of dollars, others fail miserably and don’t earn a cent. Therefore, it’s crucial to acquire technical skills and knowledge before diving in.
By taking an NFT training course, you can learn all the intricacies of how blockchain works and gain a better understanding of NFTs. Subsequently, you can launch your own project or offer your talents to other creators. Moreover, expertise in NFTs will help you make better investment choices in various projects.
Now you have all the information about NFT training. For more details on the subject, check out our articles on Blockchain and cryptocurrencies.