Out of nowhere, NFTs are the latest hot thing. By now, you’ve seen the news reports – digital artworks, GIF sports cards, and other online assets are now selling for MILLIONS.
But what’s the fuss about? GIFs and online art have been around for ages – so why are internet strangers suddenly throwing seven figures at them? To understand this weird phenomenon, we first must understand what an NFT is.
What on Earth is an NFT?
This is the biggest puzzle of all. When most learn that NFT stands for non-fungible tokens, their eyes glaze over. If you’re among them, no worries – you’re far from alone.
So let’s translate “non-fungible token” into lay terms. A fungible object is part of a set of similar objects. Take a dollar bill – if I exchange my dollar for yours, you essentially have the same thing. Sure, the piece of paper may be “different”, but as far as a shopkeeper is concerned, it’s the same dollar bill.
Now let’s assume you have the original manuscript of Ernest Hemingway’s famous novel, A Farewell to Arms. Meanwhile, I have a 2004 paperback edition of Farewell to Arms. If we exchange our copies, you now have something worth far less than the manuscript.
A dollar bill is fungible. A legendary author’s manuscript is non-fungible. Understand the difference?
Next, let’s talk about tokens. On the blockchain, tokens establish ownership of digital assets. If you own Bitcoin, Ether, or even Dogecoin, thesetokens haveblockchain code that proves ownership.
Like cryptocurrency, NFT also runs on the blockchain – mainly Ethereum and lesser-known platforms like Flow. By looking at NFT code, you can prove that (a) a specific artist/creator made a specific item and (b) that a specific person now owns that item.
Now, it’s true any idiot can copy digital art. However, they can’t copy/overwrite its NFT. Whenever you change anything on a blockchain, earlier entries are retained. As a result, NFTs are effectively unhackable, which ensures proof of ownership.
Why NFTs Have Blown Up Lately
Remember Bradford Exchange plates? Whenever anyone bought these collectibles, they came with a “certificate of authenticity”. This piece of paper distinguished their product from imitators, which boosted its value over the average dinner plate.
Thanks to NFTs, digital artists now have their own “certificate of authenticity”. Because of this, certain digital art pieces, GIFs, virtual sports cards, music, and other online assets have exploded in value.
Recently, Jack Dorsey, founder of Twitter, sold the first tweet he ever made for just over 2.9 million USD. But it just isn’t famous people that are hitting it big. Victor, an 18-year-old digital artist from Las Vegas, sold the NFT of his work, The EverLasting Beautiful, for 550,000 USD. Not bad for someone still in high school.
And then, there is the ultimate digital art story. For well over a decade, Midwestern digital artist Mike Winkelmann posted a daily art piece online. Better known as Beeple, he recently put a series of works up for auction as NFTs.
In a few weeks, the clout Mr. Winkelmann built over many years made him into a deca-millionaire. Several pieces sold for six and seven figures, but none held a candle to his 5,000-day anniversary piece. On February 16, Everydays – The First 5000 Days sold for an astonishing 69 million USD.
With that sale, Mike Winkelmann is now the world’s third-most valuable living artist.
How Do I Get Into NFT Investing?
Not artistically gifted? Don’t worry – you can still get in on the NFT craze. However, before we begin, a warning: the NFT market is currently in a major league bubble – even Beeple himself admits this. So don’t invest with money you can’t afford to lose.
With that covered, there are two main ways to invest in NFTs. The first (and most obvious) method is to buy an NFT. How do you do this? Start by creating an account on an NFT exchange – Nifty Gateway, SoRare, and Opensea are the most popular.
Then, fund your account. Some platforms allow fiat (USD) payment methods, but others don’t. In the second case, you’ll need to buy crypto (like Ether) before you can buy anything.
Finally, browse the exchange and buy NFTs you like. When shopping for an NFT, consider quality, rarity (is it part of a limited set?), and mass/niche appeal (important if you’re flipping).
Don’t have the stomach to ride out the coming NFT crash? Try investing in NFT stocks instead. Long after the current NFT bubble pops, the concept behind NFTs will retain their value. By investing in companies that are building NFT platforms or are contributing to this technology, you could earn significant profits.
Wait a Second – Are NFTs a Scam?
Anywhere money changes hands, you’ll find them. Since the dawn of civilization, con artists have made a living separating marks from their money.
And so, it’s not surprising that outright scammers are getting in on the NFT game. As we speak, unwitting digital artists are having their pieces ripped off by impersonators.
However, currency counterfeiters print millions of USD per year. And yet, fiat currency hasn’t come crashing down. As time progresses, NFTs will likely have safeguards built into them to defend against these scams.
NFTs Are Here to Stay
Like bitcoin, NFTs are riding a massive hype train right now. But like bitcoin, NFTs will survive the coming crash. NFTs are a groundbreaking innovation – at long last, digital creators have a way to prove their work’s authenticity.
Because of this, we expect NFTs not just to survive but thrive in the years ahead.
