What’s An NFT and Why Are They Worth Millions?

It seems like the world has gone crazy for NFT’s. If you’re not sure what i’m talking about, let me explain. NFT is an abbreviation for Non-Fungible Token which is basically a digital asset that lives on the blockchain. Fungible is something that can be exchanged for something else of the same kind. Non-fungible means the item has unique properties and can’t be interchanged with anything else. Let’s look into it further…

Essentially an NFT is a one of a kind digital asset that you can trade and collect. You can even make regular purchases with an NFT using a compatible wallet app. Because each NFT is unique, the possibilities are endless. There are many marketplaces out there such as Opensea, NFTz, Rarible etc where users can mint their creations as NFTs.

The first thing to note is NFTs are incredibly diverse and open up a whole new world of digital collectibles. The reason they’re so diverse is how they actively encourage collaboration. The engagement between the communities who hold them and their artists increases value. In March 2021, a piece of art by the famous street artist Banksy was burnt and destroyed in a live streamed video. It was then sold as an NFT for $380,000. In the same year rock band Kings of Leon released their album ‘When You See Yourself’ as an NFT. They were the first band to sell music as an NFT. Ownership of the band’s digital asset unlock special perks such as limited-edition vinyl and front row seats to future concerts. 

What is an nft and why are they worth millions

Let’s go back to basics… 

A NFT is a digital asset that lives on a blockchain – a secure database which records information and transactions and makes it difficult or impossible to change, hack or delete. The blockchain stores smart contracts which are digital contracts similar to that of contracts used in the real world. However, they are used digitally and remove the need for third party intermediaries. NFTs are powered by smart contracts which handle the transfer of ownership and verification of the digital token. 

Who can sell an NFT?

The process of creating an NFT is called minting which can take place on any of  legitimate NFT marketplace. Artists, designers, musicians and gamers etc can create NFTs and put them up for sale. The creator will usually attach a commission reward to the piece of work which essentially works like royalties and allows the creator to earn commission each time the NFT is sold. Once the NFTs are uploaded to a marketplace they can be viewed by anyone and can be bought or sold a bit like stocks. They are collectibles which are also valuable investments and over time can increase in popularity due to rarity and therefore they become higher in price.

Example of an NFT

The best way to think of these unique assets would be like CryptoKitties where each one has its own unique DNA (genetic code). You even have the ability to breed two CryptoKitties together and create a brand new CryptoKitty with new attributes and characteristics from each parent. This means you can have a completely new animal with specific traits that don’t exist anywhere else in the world! For example, you might end up with a cat that has fur that glows in the dark, this might be a super rare attribute which has never been seen elsewhere and therefore will increase the value. 

You might be thinking why can’t anyone just copy a digital illustration and sell it on as if it were the original NFT? It doesn’t work like that because the original is embedded on the blockchain. The tokenising process of the NFT (aka minting) is where the creator has to pay “gas fees” (the fee you have to pay for minting smart contracts into the blockchain) for the token process which seals the authenticity of the NFT and allows all information to be stored on the blockchain.

How much are NFTs worth? 

In February 2021 an animated Gif of Nyan Cat was auctioned and sold for $500,000. The one-of-a-kind edition was to mark the special occasion of the iconic 2011 meme turning 10 years old.  A few weeks later Grimes sold her digital art for more than $6 million. According to Forbes the NFT market generated over $23 billion in trading volume.

The value behind an NFT is its scarcity and utility. The ease in selling it will make it have an increase in value.  The rarity of a token is determined by its circulating supply, which could range from one of a kind to millions of tokens for each series. Artists and creators determine the supply of an NFT along with the supply curve.

Can anyone sell an NFT?

Anyone can create and sell an NFT however it’s the status of the creator which initiates the growth and value. In other words you won’t make mega bucks if you have no kind of online following or community presence. Hence why so many celebrities or well known artists can make thousands, even millions of dollars from an NFT sale. However, with NFT culture rapidly going mainstream there are new opportunities rising for anyone to enter the NFT world. 

Take Stori for example, a web3 social Dapp built on the DeSo blockchain with an integrated NFT marketplace. Stori allows users to earn money from sharing content such as Storis which can be in video or photograph form, as well as users own creations such as Stori stickers, filters and templates which you can also mint as NFTs. If you’re sharing valuable content with the world then you should be able to monetise it quickly and easily without any big corporations owning it, and this is what Stori allows you to do. Find out more about Stori here.

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