What are NFTs? Evrything you Need to Know About Non-Fungible TokensNFTs are non-fungible tokens. Unlike cryptocurrencies that have finite or infinite numbers, NFTs are individual and unique.
These are essentially cryptographic assets on blockchain with unique identification codes and metadata. These codes and metadata make them individual and unique.
One characteristic of an NFT, therefore, is that it cannot be copied or duplicated.
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An example of an NFT from the real world would be a piece of art, such as the Mona Lisa. While Leonardo Da Vinci is known for numerous pieces of art, there is only one Mona Lisa.
While you can trade one Litecoin for another, you can’t trade one Mona Lisa for another Mona Lisa.
For the world of blockchain, a key advantage of NFTs is that they cannot be copied. And so, unlike the Mona Lisa, NFTs can be bought and sold without the possibility of fraud.
In the art world, a lot of money is spent to authenticate pieces of work before being sold. An NFT does not need middlemen to ensure authenticity.
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What is fungible vs. non-fungible?
According to the Cambridge Dictionary, fungible or fungibility means simply interchangeable. “This is a characteristic of most financial instruments and market assets.”
By contrast, non-fungible property/assets/funds are not easy to exchange or mix with other similar goods or assets.
In other words, stocks, Certificates of Deposits, Cryptos, etc. are fungible assets.
An example of a non-fungible asset would be land or even diamonds. While land is a simple one to classify, each individual diamond is also unique. Each diamond has a different cut, size, grade, and so forth and therefore can’t be interchangeable with another diamond.
How Are NFTs Created?
NFTs are very simple to create, unlike blockchains and cryptocurrencies.
A number of NFT market places allow users to freely create an NFT and no programming knowledge is required.
Market places that currently allow users to freely create NFTs include OpenSea, Raible, or Mintable.
Creating art NFTs is particularly popular and these market places cater for just that.
How do NFTs work?
NFTs are digital tokens that are on a blockchain ledger. Once created, the market then trades the NFTs across market places.
Once an NFT is created, there is a proof-of-ownership that must be stored securely in an NFT wallet.
It is the proof-of-ownership that is ultimately the tradeable and non-fungible asset.
Once created, the blockchain ledger records the NFTs and their unique identifying codes. The blockchain ledger then also records each sale and resale and ownership.
This not only prevents the copying of an NFT but also removes fraudulent claims of ownership or even claims over creation.
Why do NFTs have value?
This is simply a case of supply and demand. The key here is the supply side that drives up the value of NFTs. Since there is only one individual asset, high demand can lead to significant increases in value.
Taking the Mona Lisa as an example, experts estimate the value of the Mona Lisa at more than $800m. Had Leonardo da Vinci painted numerous Mona Lisa paintings to exactly the same quality, these would be fungible. Their value would also be significantly less than the single painting thought to be edging towards $1 billion.
As the NFT market expands, the number of NFTs are likely to increase significantly. At this stage, demand will likely become the key price dictator.
Market appetite will continue to dictate value. A unique NFT of interest versus one of little interest to collectors and investors will vary significantly in price.
For example, Twitter CEO Jack Dorsey recently tweeted a link to a tokenized version of his first-ever written tweet.
Bids have reportedly reached in excess of $2.5 million. Other Jack Dorsey tweets are unlikely to have a collectible value, however, even though each tweet is unique.
How do I buy or trade NFTs?
For those looking to buy or trade NFTs, identifying the right marketplace is the first step.
There are numerous market places at present that cater to different areas of the collectible world.
For instance, NBA Top Shot is a marketplace for those looking to buy video highlights. Cryptoslam! is a site that lists the largest market places by sales volume for those looking to enter the NFT space.
There is also Sorare, which is a fantasy soccer marketplace, where you can manage, and buy and sell virtual teams. At the time of writing, Sorare ranked fifth on the all-time sales list, with $24.41m in total sales.
CryptoPunks ranks 2nd on the all-time sales volume list has 10,000 uniquely generated characters. Each can be officially owned and proof of ownership is logged on the Ethereum blockchain.
While there are many market places, those wanting to purchase an NFT will need an NFT wallet in order to store any purchased NFTs.
There are a number of NFT wallet providers in the marketplace. As with cryptos, NFT holders must store-purchased NFTs securely. Hard wallets would be more secure, protecting NFT holders from hackers.
When it comes to purchasing NFTs, some market places support purchases with a credit card. Others, however, require purchases with Ethereum.
For Ethereum purchases you will need to fund your NFT marketplace account with Ethereum to proceed.
To purchase your NFT, most market places sell NFTs in an auction. You simply need to place your bid and wait until the conclusion of the auction.
If your bid was successful, your account would be debited and your NFT wallet credited with your newly purchased NFT.
What are the most expensive NFTs?
Of late, NFT market news has flooded the crypto and mainstream newswires. With tech-savvy investors looking to be first to market, there have been a number of eye-watering bids for NFTs.
The largest NFT market places ranked by sales volume (all-time) at the time of writing include:
- NBA Top Shot: Total sales $386.55m.
- CryptoPunks: Total sales $161.32m.
- Hashmarks: Total sales $43.71m.
For a full list of the largest marketplace NFT sales over the last 24-hours, 7-days, 30-days, and all-time, visit Cryptoslam.io.
Here you can view sales over a specified time period, the price change over the specified time period, and the number of buyers and transactions.
Taking a look at NBA Top Shot, there have been a total of 2.46m transactions that have led to total sales of $385.56m.
What is NBA Top Shot?
An NBA-Dapper Labs collaboration, delivering an on-line platform for trading virtual basketball cards.
These all exist on the blockchain making them unique and impossible to copy. More importantly, for some, authentication is immediate.
With the added advantage of virtual tech, it’s not just virtual basketball cards that are drawing attention.
There are also “moments” that are selling for 6 figure sums. Moments are video clips of the more popular players from the NBA.
One LeBron moment reportedly sold for $208,000…
Looking at the numbers for the broader NFT market, the last 30-days has been headline-grabbing.
From the $385.56m total sales across NBA Top Shot, more than $300m came from the last 30-days.
Looking at individual NFT sales
Christie’s Auction sold Beeple NFT for a whopping $69.3m. This is by far the largest sale to date.
The next 4 largest NFT were the sales of CryptoPunk characters. Sale prices ranged from $7.6m for CryptoPunk #3100 to $1.3m for CryptoPunk #4156.