By Gabby Parsons // October 12, 2022
Learning about NFTs for the first time can be an intimidating task, especially if you are new to cryptocurrencies or investing. Non-Fungible Tokens lie at the junction of many fields and have many applications, from financial investments and art pieces, to technology advancements and web 3 gaming.
Table of Contents
What is an NFT?
Non-Fungible Tokens (NFTs) are by definition, tokens of data that exist on a blockchain that cannot be replicated. The data held within an NFT can be an image, video, or other file types. Think about NFTs like an item with a serial number, that uniquely identifies it amongst others in a collection. Now, consider that the NFT also functions as a receipt or ledger, recording its previous owners and price history. This data is then stored on a blockchain, meaning it is decentralized, private, and shareable (We will explain more about blockchains later!).
Most people are familiar with NFTs because of the NFT art craze that took over social media throughout 2020 and into early 2022. To truly understand NFTs, you should understand that NFTs have many more applications than just art. In the future, NFTs will become more seamlessly integrated into peoples lives in helpful ways. Gym memberships, vehicle titles, concert tickets, etc. can all be NFTs. Currently, some collections offer NFTs as access passes to games, or allow you to play as your unique character pictured in your NFT.
Can’t I just screenshot it?
One of the most common questions about NFTs is, “Can’t I just screenshot it?” and the answer is, yes. Nothing is stopping anyone from screenshotting an NFT, or right-clicking and selecting to download the image. However, a screenshot of an NFT does not come with any of the authenticity data that was attached to the original NFT. There is no way of proving that a screenshotted image of an NFT is legitimate, so the holder of that screenshot would not get to benefit from the original’s various utilities. The screenshot cannot be resold on NFT marketplaces and technically holds no value.
What makes an NFT valuable?
What makes NFTs so valuable isn’t usually the artwork, but the utility offered to the holder by owning the NFT. A utility is a benefit or real life application associated with the NFT and can be offered in many different ways. Some NFTs provide holders with exclusive access to events, some include licensing and IP rights, and some yield cryptocurrencies the longer you hold it. There are other aspects that make some NFTs more valuable than others. Let’s touch on each briefly…
Solid projects have solid founders. Credibility within the space is important, especially since the NFT space has been plagued by scammers and rug-pulls. A rug pull is when the project founders leave a project after launch, taking the proceeds with them. The best way to avoid being the victim of a rug pull is to look for doxxed (publicly named) founders with a history in the NFT space.
Many people join the NFT space to become part of a community. A flourishing and active community is a good indicator for the longevity of a project. The NFT community encourages people to DYOR – do your own research, before making an NFT purchase. Looking into the community is an important part of doing your own research, and can offer a lot of additional information about the project. Look for an official Discord Invite link on the official website of the collection you’re interested in. **Beware of scammers who regularly create fake websites, discord servers, and social media profiles impersonating popular NFT collections.**
Unfortunately, digital media has sometimes been dismissed in the past as “not really art” when compared to physical art mediums. It definitely hasn’t helped though that the NFT space has been plagued since its inception with pump-n-dump projects with poorly generated artwork. In terms of investing, aside from a reputable artist, you will want to consider whether the artwork is on par with current trends. Trending collections will often have a new take on NFT artwork. In 2021, 2D collections topped the leaderboards. Eventually, 3D rendered avatars became popular, and now in late-2022, moving, dynamic and AI NFT collections regularly peep the eye of avid NFT traders.
There are endless utilities that can be offered by an NFT. This is because the functions of NFTs are so unique, interchangeable, and combinable. NFTs go hand-in-hand with the concept of Web 3 – a vision for a decentralized future to the internet, utilizing cryptocurrencies, blockchains, and NFTs. NFTs can function as access passes to private events, be used in web 3 games, be staked to yield additional cryptocurrencies, and much more.
OpenSea: NFT Marketplace
Want to browse collections that are currently available, all in one place? Look no further than NFT marketplaces – and there’s a sea of them that have popped up over the past year! From X2Y2 to CoinbaseNFT, there are many NFT marketplaces, the most popular being OpenSea.io. On OpenSea, you can browse trending collections and look into a projects overall trading statistics. OpenSea is a secondary marketplace, meaning it is a place to resell an NFT after buying or initially minting it.
NFTs Provide Creators Royalties
NFTs are appealing to creators and artists as a new way to not only share their work, but also monetize it! Most of the time, founders of NFT projects can determine a royalty percentage that they will receive each time an item from their collection is resold on a secondary marketplace like OpenSea. This helps artist earn more from their art overtime, not just from the initial sale. Royalties can also help ensure the longevity of a project by encouraging founders to remain attentive.
Buying an NFT for the First Time
The best way to learn about NFTs and get involved in the web 3 space is to buy your first NFT! Follow these simple steps to set up your crypto wallet for the first time.
- Download a Crypto Wallet App: MetaMask or Coinbase Wallet
- There are lots of crypto wallet options currently available! We recommend MetaMask or Coinbase Wallet which are two great options for beginners and seasoned professionals alike.
- When creating your account (wallet), you will be provided a 12 word Seed Phrase. This is your unique password to gain access to your wallet. You will want to record this and store it in a secure location.
- IMPORTANT: Anyone with your seed phrase will be able to access your wallet, including any cryptocurrencies and NFTs you hold!
- Buy Ethereum or another Cryptocurrency
- NFTs are purchased with cryptocurrencies. Many NFT collections are on the Ethereum blockchain and are therefore purchased with Ethereum. Others reside on and accept Solana and other cryptocurrencies. Since Ethereum is the most popular currency for NFTs, we will continue to use Eth as an example.
- To make an NFT purchase, you must have enough Eth in your wallet to cover the price of the NFT as well as any Gas Fees.
- Gas fees are like transaction fees. They are based on how much energy is required to complete your transaction. Many factors impact gas fees, from how many users are trying to buy from a collection at once, to whether or not the collection is using an Optimized Smart Contract.
- Fun fact: In September 2022, Ethereum energy consumption dropped 99.99% due to the Ethereum Merge. Without getting into the nitty gritty, this transition within how Ethereum transactions are verified reduces gas fees significantly!
- Connect Your Wallet
- Whether you’re buying an NFT off a secondary marketplace like OpenSea, or buying directly from the creator on their official minting site, you will need to connect your wallet. Connecting your wallet will allow you to make your purchase using your cryptocurrency. Your wallet will also be home to your new NFT!
- Buy an NFT
- Now that you’re all set up, it’s time to buy your first NFT! Be sure to only purchase NFTs from official links, or from verified sellers on the marketplace you are purchasing from.
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