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NFTs actually have been around for a while, but it burst in popularity over the last two years, and even more so in the first quarter of 2021.
What exactly are NFTs?
- In simplest terms, NFTs, or Non-fungible tokens, are like digital trading cards, with each one being a unique and possibly valuable asset.
- NFTs are traded and created on the blockchain, meaning that it uses the same blockchain technology that is used in traditional cryptocurrencies like Bitcoin or Ethereum.
- However, unlike Bitcoin and Ethereum, where every coin is identical, each NFT is entirely unique and cannot be replaced. This is because it holds additional data, which is stored in the blockchain. This data inludes ownership history.
- This means that each NFT gains or loses value as an independent entity rather than as an entire network.
- For example, the most valuable NFT ever sold is a digital art piece called “Everydays: the First 5000 Days” by Mike Winklemann, which sold for a whopping US$69.3 million.
- NFT’s have quickly been gaining popularity as some organizations, such as the NBA, have been using them to create limited-edition, online trading cards.
Why are they so popular?
- NFTs actually have been around for a while, but it burst in popularity over the last two years, and even more so in the first quarter of 2021.
- It first got media attention when crypto It all kind of started back in 2017 with everyone’s favorite pet that thinks it owns you: cats.
- Speaking to TMS, Dr. Richard Smith, a risk-based investment adviser, explained, “NFTs have been used to create scarcity in digital assets such as art, video snippets of NBA stars, video game assets, and CryptoKitties.”
- CryptoKitties first made waves back in 2017 as a blockchain-based virtual game where players can adopt, raise, buy and sell virtual and unique cats. Some of these cats were extremely rare variants, with some selling for over a million dollars.
- Now, NFTs have evolved massively, with sports league NFT marketplaces and high-profile artists all getting involved in the scene.
- Perhaps the most popular NFT trading marketplace has been NBA Topshot, which allows people to buy specific moments that have occurred in basketball games like they were online trading cards with videos instead of images.
How do you get started?
- If you know anything about cryptocurrency trading, NFTs kind of follow a similar principle meaning you can trade directly or you can trade on a marketplace.
- “NFTs can be bought and sold peer to peer, but most are bought and sold via online marketplaces that are kind of like stock exchanges,” said Dr. Smith. “You can also market your own digital creations on OpenSea and see if anyone is interested in giving you some ETH for your creations.”
- OpenSea is a massive NFT marketplace where people can list their NFTs or people can go and buy any NFT that they find interesting.
- When it comes to getting started with NFTs, experts believe that these marketplaces are typically the safest and easiest routes to get started, but in order to start trading NFTs, you have to have a secure wallet to store them in.
- MetaMask is seen by many as a safe, secure introduction into digital wallets, and it even has a Chrome plug in that specifically works for digital kittens from CryptoKitties.
What do people think about them?
- It’s hard to give an accurate analysis of what experts think of NFTs because they typical fall in one of two camps.
- Mark Cuban falls into the first camp of people who think that NFTs are the future of the art industry, and he believes that people should start heading in that direction.
- “I think the collectible side of it is going to completely turn the [art], music and movie industry upside down,” said the billionaire celebrity investor. “That’s exactly what I’d be doing right now – anything I could make digital.”
- The other camp points at the massive problems that come with this new form of digital trading, which includes the impact cryptocurrencies have on the environment and art theft.
- A user on Twitter noticed that some of the unique art they had created was being “tokenized,” or turned into an NFT, without their explicit permission.
- “Cool new scam artists should be aware of,” wrote RJ Palmer. “Any rando can now turn your tweet and by extension, your artwork into an NFT by tagging this account @/tokenizedtweets”
What comes next for NFTs?
- It’s hard to give a solid answer about what is in store for NFTs.
- But, as long as large organizations such as the NBA are involved with trading them, there will likely also be continued user interest in them as well.
- Speaking with TMS, Hong Kong-based blockchain expert Christian Ng, the principle at GBV Capital explained that “whenever you put money into NFTs, expect to lose everything.”
- Ng also admitted that NFTs at this point, is unpredictable. “You never know what’s gonna happen in the future too. Maybe some new token comes out and it’s decided to be adopted for a lot of other different things.”
- His main investing advice when it comes to these new digital assets is just to try and see what works for you.