In the past few months, non-fungible tokens (NFTs) which were first built on Ethereum (ETH) have exploded onto the digital asset domain, ushering in a new era of technology. The token represents a cryptocurrency trading marketplace that facilitates the trading of digital assets. The digital property is dubbed to be a one-of-a-kind asset and is stored on the digital ledger. Featuring a wide range of artworks, this NFT is a trending investment opportunity for millions of dollars. NFTs skyrocketed with some exhilarating deals like sales which were worth USD 6 million. Sales included images and short videos of Grimes, skyrocketing the auction to soaring levels earlier this year. NFT witnessed a gold rush for a series of digital assets in February.
The artwork ‘Death of the Old’ that featured flying cherubs, swords, crosses, and glowing lights made proceeds of over USD 380,000. In total, the short videos ‘Earth’ and ‘Mars’ reaped around USD 5.18 million in sales. Similarly, the ‘Nyan Cat Meme’ which originated on YouTube was sold for USD 600,000 as a one-of-a-kind edition of the famous GIFs. People are still baffled by the new cryptocurrency art platform. Consequently, experts have varying opinions about whether it is a bubble or a solid investment platform forged to change the game of cryptocurrency trading.
What is an NFT?
NFT is a platform that enables sales of unique artworks like images, videos, music, painting, photos, graphic creations, among others that are available for an established amount for which the buyer has copyrights on the piece of art. The copyrights are the crucial reason for collectors of such artworks to invest an exuberant amount on items that are anyways available on the internet. The new-fangled platform is gaining momentum at present even though it has been in the market since 2014. Since 2017 there has been a financial inclusion of a whopping USD 174 million on NFTs. In contrast to ordinary digital creations, which are unlimited, each of the unique assets is identified by a unique code making them scarce. According to this model, a hypothetical value is created in the market based on consumer demand assumptions. As a result of the high demand, the investor bids for the NFT in hopes of a better profit.
How to Create One?
The trendsetting cryptocurrencies in 2021 saw a boost in sales since last year. This resulted in a 55% surge in value, from USD 250 million to USD 389 million. Creating an NFT may sound complicated, but it is a straightforward process that allows anyone with no prior experience in the cryptocurrency business to create unique digital assets. The first step is to determine which blockchain technology will be used to issue the token. The NFT tokens are currently based on Ethereum, Solana, and Polygon. Hence, the coins are issued using Ethereum, Solana, and Polygon. A plethora of blockchain technologies such as Binance Smart Chain, Flow by Dapper Labs, Tron, EOS, Tezos, and Cosmos, can have a similar effect and can be explored by designers. There are definite compatible marketplaces and wallet services for each of the NFTs.
The Process of NFT Creation
- Pick the asset: This platform primarily benefits the designers, photographers, and artists who wish to earn money by selling their artwork. Thus, picking the digital assets is the first step in NFT creation. The assets can be any digital creation that can be converted into a multimedia file.
- Cryptocurrency: To be able to mint the NFT, the seller must pay for the platform or the marketplaces. Since Ethereum is the only technology delivering high yields at present for NFTs, it is advised to have a digital wallet to purchase Ethereum. It can be connected to the platform that one desires. Due to the highly variable nature of NFT pricing, the operating price may not be the same every day and during the minting process.
- Create a digital wallet: For instance, one can create a digital wallet after downloading the MetaMask application and utilize the digital wallet by agreeing to its security terms to set up the account. The cryptocurrency must then be added to the account. Just like how one can add ETH to other digital wallets like Alpha Wallet, Pillar, Trust Wallet, and Enjin, funds can also be added. Usually, one can buy ETH with a debit card or digital payment options like PayPal, etc.
- Pick a marketplace: The next step requires choosing a marketplace that allows the creation and listing of the NFT token. Some of the marketplaces for NFT are NBA Top Shot for basketball, Sorare for football, Decentraland for virtual real estate, Axie Infinity for video games, Valuables for tweets, and the Musician Marketplace for music. Other popular options are Mintable, Rarible, or OpenSea. In this case, since the wallet provider is MetaMask, the wallet must be connected to the MetaMask platform.
- Create the NFT: The marketplaces offer options to create a digital collection in the account profile. For instance, after connecting the wallet to the OpenSea marketplace, the menu lists various options to build digital assets. The sellers must complete the information and save it to start the minting process. The next step is to load the artwork with comprehensive and necessary details and create it. Describing the artwork is as important as the whole process as this will enhance sales.
How to sell one?
Getting ready for the sale can be accomplished in multiple ways. The seller can choose to sell even the newly minted token for a fixed price, auction, or royalties after it has been created. Fixed price allows the sellers to sell the art pieces instantly on platforms like eBay. An auction allows the sellers to pick the best bid, followed by a timed auction where the seller places an ambitious price for a certain period for buyers to bid. Invariably, the option ‘Unlock Once Purchased’ provides the potential buyer to get the original artwork via a secured link. The platform charges a listing fee, a commission on the sale, and a transaction fee for transferring funds from the buyer’s account to the seller.
What is the Future of NFT?
Global trends in the NFT marketplace paint an optimistic view of the future. The factors that contribute to the growth can impact the NFT ecosystem. Additionally, the value creation by big brands like Warner Music, Formula 1, Louis Vuitton, and so on see a bright future in investment opportunities. Nevertheless, underlying challenges like massive carbon emissions cause environmental challenges through the system. However, it promises efficient business transactions in various sectors like real estate, entertainment, finance, and technology. The boom in the market gives investors a positive outlook. Despite the amusing financial gains depicting the sales volumes of USD 2.5 billion this year, NFTs have some setbacks.
Thus, the continuous development of NFTs and a deeper understanding of sustainability are essential factors in expanding the market. Also, the decentralized mechanism of the platform may increase the trading of virtual assets. By solving challenges such as energy consumption and taxation, NFTs could face a promising future in growth.