Why Is Everyone Going Crazy About NFTs?
What’s So Trendy About NFTs That Everyone Going Crazy Over ?
This sounds insane and almost unbelievable, however, its all verifiable with the blockchain. Researching NFT profits, I've found hundreds of users that have made a commission of $100,000+ profit in just one trade.
Digital artist Mike Winkelmann, who goes by the name Beeple, is a believer in a more sustainable future for NFTs. His work “Everydays: The First 5000 Days” was the one that got the eye-popping $69 million bid at Christie’s.
NFTs have created many overnight millionaires that are artist to creators of digital art as well as from the arbitrage trading. I figured, lets give people an entry into NFTs.
What are Non-Fungible Tokens (NFTs)?
Non-fungible tokens are unique and one of a kind cryptographic hash that cannot be replicated under any circumstance, Hash? Correct! Each NFT has a digital signature authenticating that item to be only one true copy. There is running joke from critics that claim they can right click a photo and magically they own that NFT. Incorrect, the value is not the photo, it’s the cryptographic hash that represents its authenticity on a certain blockchain (most common being Ethereum blockchain currently).
Physical money and cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They’re equal in value — one dollar is always worth another dollar; one Shiba Inu coin is always equal to another Shiba Inu coin.
NFTS ARE DIFFERENT…
NFTs are different. Each has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another (hence, non-fungible). One NBA Top Shot clip, for example, is not equal to EVERYDAYS simply because they’re both NFTs. (One NBA Top Shot clip isn’t even necessarily equal to another NBA Top Shot clip, for that matter.)
Fungibles are items you can trade without changing their value or devaluing them (for example, the cash in your wallet or gold coins).
On the other hand, non-fungible items contain unique features and properties (for example, a painting, a house, or an airplane ticket), which enable each item to have a specific value. Also, remember that fungibles can be created through cloning while non-fungibles cannot.
SMART CONTRACTS are the backbone of NFTs
NFTs are based on smart contracts, ownership transfers become easy by incorporating the use of smart contracts. Ownership transfers can be completed upon fulfillment of specific conditions between buyer and seller outlined in smart contracts.
As non-fungible tokens started to gain interest, Ethereum intends on making them more widely available for developers and users by creating a standard called ERC-721 that would apply to all non-fungible tokens.
The Benefits of NFTs
Clear property rights
Since they are unique, non-fungible tokens can be used to define the ownership of an item clearly. With most items, it is hard to determine who owns what rights when multiple people use them. For example, if you were sharing a house, there would be confusion about who gets how much of the payment.
The NFT royalties are automatic payouts to the author made on secondary sales. These are coded into the smart contract on the blockchain. Each time a secondary sale happens, the smart contract ensures that the terms of the NFT are fulfilled. If a royalty is specified, a cut of the profits goes to the artist who created them.
There are no intermediaries needed nor does this depend upon the wishes of whoever is transacting them. Please do note that, not all NFTs yield royalties. It has to be specifically written into the terms. Once the smart contract terms are clearly written into the blockchain, the rest is taken care off automatically.
This works equally well for digital content, gaming accessories, physical items etc. NFT royalties are a never-before-opportunity to maximize the earnings of artists and content creators. Artists have the benefit of getting returns for something they produced once on a recurring basis. Also as their popularity grows they end up getting increasing returns on their work.
Imagine that you have created an NFT artwork on Rarible. A fan of your art, buys the artwork for say 10ETH. So you have made 10ETH (Ether). You also have coded into the NFT the term that anytime a sale occurs you will get 10% of the proceeds. Now your buyer auctions your art for an even higher price in the marketplace. Presumably, your reputation has grown and hence the value of your work has gone up as well. Imagine that your buyer sells it for 200ETH. Since you have already precoded a 10% royalty into the NFT, you will receive 20 ETH from this sale. How long is this royalty active for? FOR THE LIFE of that NFT.
Since NFTs can be traded, users can quickly post and withdraw offers on these tokens. This is particularly useful for those who want to sell their non-fungible items immediately to get a certain value instead of holding them for an indeterminate time (which might result in the items losing value). Currently, if you wanted to purchase a $1,000,000 piece of art, you’ll be relying on auction houses to host the event. However, imagine you need to sell this painting for some good old USA dollar, you’ll have to wait in till the auction house will accept your conditions to list the item. Instant liquidity !!! In NFTs resale websites, you can buy an NFT and sell it within 5 minutes, the liquidity is something that is possible by the digital nature from the underlining technology. Quick liquidity is why auction houses will be extinct in my opinion. There will be no point to ever wait for liquidity with ONE OF A KIND asset classes such as Paintings and many other assets.
Because these tokens are so flexible, it is possible to divide them into smaller groups or even parts of a token which would be more convenient for smaller transactions.
Ex: Fractional.art currently sells fractioned NFTs that would be out of financial reach for ordinary retail investors. You can find numerous Cryptopunks NFTs (Starting price is $400,000 to $100,000,000 for an alien CrytoPunk) fractions available for purchase. Now, imagine buying a 200-unit apartment building and making that an NFT for your investors. No longer will you need to find one investor who can afford the apartment building, You can find thousands on the open market that will help you acquire the capital through fractionalizing the project into NON-FUNGIBLE TOKENS.
Since NFTs are decentralized tokens, they can be used without third parties such as banks, brokers, and other intermediaries. Yes, middleman and their ridiculous fees such as the music business with labels controlling so much of the artist revenue streams. NFTs are a true liberation for painters, artists, creators and many more creative humans we have walking this fine earth.
Why Blockchain is Important for NFTs
The enhanced security offered by blockchain stems from how the technology actually works: Blockchain creates an unalterable record of transactions with end-to-end encryption, which associate ownership to a single account. Most important of all, NFTs are indivisible and could not be distributed among multiple owners. At the same time, the ownership advantages of NFTs ensure that buyers are safe from the concerns of fake NFT
With this system, it also becomes easier to track transactions and even automatically execute functions associated with NFTs. This is why more companies are considering using decentralized applications to give users back control over their items instead of depending on the company itself.
In short, blockchain is used for transparency book of record that can be audited freely by any source. There will be advancement in NFTS to cater clients that require a certain anonymity in regards to their owned assets because they will not like to broadcast their wealth to preying eyes. The transparency of the blockchain is an issue we will need to solve, not everyone will love people seeing what they own in their digital wallets.
All this is possible because of the blockchain technology. It is also sometimes referred to as the Distributed Ledger Technology or DLT. Blockchain technology is basically an unalterable and transparent ledger that is decentralized.
Examples of Popular Games that use NFTs
Cryptokitties — Collect and breed digital cats!
Axie Infinity — Axie Infinity reportedly become a way for people in the Philippines to earn money after losing their jobs during the COVID-19 pandemic. The NFT-based game works on the play-to-earn model, which means players can convert their tokens in real-life money and provide for their families. Currently, Axie Infinity has around $40,000,000 USD of trading volume, that means millions of dollars are being generated for their players.
Solana is currently turning up the heat for Ethereum and its blockchain by focusing on gaming NFTs. The space is evolving so quickly and the scale is just something that no one could of imagined just a year ago. Imagine, a new company being more lucrative than Ebay, Etsy, Craigslist and many other resale marketplaces within a few months, however, this is the exact case for NFT resale platform OpenSea.io
Concerns over non-fungible tokens
One of the concerns against the use of blockchain technology is that it might not provide users with enough privacy because blockchains make transactions transparent or visible which means you cannot keep your transactions private.
Another issue is that some NFTs are not interoperable, so you need to use certain games or applications for specific items.
Furthermore, more research and development still need to be done regarding how NFTs can scale considering the limited resources on current blockchains such as Ethereum.
Where Do I Start if I Want To Buy Some Myself!
If you’re interested in buying some NFTs or tokens, there are plenty of exchanges that list them. Some of the most popular ones include OpenSea NFT marketplace, they are the largest secondary NFT resale marketplace with $5Billion of trading monthly.
Solanart.io is going to be launching 6ix9ine NFT drop called “TROLLZ” on October 27, 2021. Currently, there is an astonishing 90,000 discord members awaiting NFT drop. You can bet, Solana will benefit largely from the rapper choosing their blockchain to launch his NFT project.
While there are already many people who trade NFTs, you can also check out some unique ones, such as Crypto Punks, Bored Apes Yacht Club, Chill Frogs NFT and of course the MekaVerse NFT which broke all types of launch records in October, 2021.
Many NFTs are available on the blockchain, such as the NBA Top Shots, unique art pieces from Andy Warhol, and even unique land deeds that can be purchased via Decentraland for boring $200,000 for a plot of land. Correct, real estate prices in metaverses such as Decentraland, Cryptovoxels, Sandbox are heating up.
A Few Words from a Crypto Expert About How NFTs will Change our Future Economy for Better or Worse!
Cybercriminals can copy an NFT token, and people can end up buying the fake NFT tokens, which practically do not have any value as an asset. So people should check the authentication of an NFT token before buying anything digitally. I’ve been in crypto for over 7 years, yet, when I was buying Chill Frogs Nft on OpenSea, I GOT SCAMMED. Ashamed to admit it at times but I rushed my purchase and didn’t verify if the NFT was from the correct author. Scammers replicate projects by assigning the identical pic to the NFT, however, OpenSea is fixing this by putting verified check marks on NFT projects that are authentic.
View below, the blue checkmark on OpenSea is the seal of approval for this being the AUTHENTIC artist / group behind this NFT drop.
Legal and regulatory challenges
Intellectual Property or IP rights
Cybersecurity and fraud risks
Anti-money laundering (AML) and CFT challenges
Smart contract risks and NFT maintenance
Consideration of NFTs as securities
Environmental Social Governance (ESG) challenges
One final point about non-fungible tokens is that they will lead to problems regarding ownership and authenticity. For example, what happens when the NFT is no longer an asset but a real object? What happens when someone copies or duplicates the NFT? Who do you sue if there is a conflict with the token’s ownership?
These are just some of the many challenges that can happen in our future economy, thanks to non-fungible tokens. While this technology might be revolutionary, it is still in its early stages with many issues that need to be addressed.
- Authenticity & Immutability, Immutability in blockchain-based NFTs ensures that they are immune to modifications, removal, or replacement. Therefore, NFTs can easily showcase their authenticity as the most valuable quality.
- Transferability & Liquidity, It is easy to trade NFTs freely on particular markets with a wide range of options for trading. For example, NFTs could solve the problem of ‘walled gardens’ in the case of games. They can also eliminate auction houses in art as you can purchase $10 million token and sell within a few minutes. NFTs are based on smart contracts, ownership transfers become easy by incorporating the use of smart contracts. Ownership transfers can be completed upon fulfillment of specific conditions between buyer and seller outlined in smart contracts.
- New Revenue Streams For Artists, NFTs were partially created to help artists create a direct to consumer relationship and cut out the middleman. Artists have the ability to build a community with INSTAGRAM and sell their NFTs. Beeple, an Instagram artist has sold an NFT for $69Million in 2021, blowing minds away.
- Royalties Built Into NFTs, The NFT royalties are automatic payouts to the author made on secondary sales. These are coded into the smart contract on the blockchain. Each time a secondary sale happens, the smart contract ensures that the terms of the NFT are fulfilled.
- Hacks Happen, scammers are working hard to steal your funds and your NFTs these days by coding exploits into smart contracts or good old fashion social hacking. Social hacking is pretending to be a moderator or maybe person of significance in the project, once the trust is gain and the user feels comfortable, the scammers will ask for their passphrases and the user will have their wallet hacked. In no circumstance do you ever give away your seed phrase.
I can certainly write about this subject for hours but the truth is, you must read and study this new industry in till you’re comfortable purchasing an NFT.
SUPPORT: my name is borkie and you can find me on twitter @borkie, don’t be shy to send me a dm. Clubhouse is definitely the best support system for you if you feel lost about this space. Once you register on clubhouse, add @borkie to your contact list and please join the group @ CRYPTO CE — We are moderators of the group looking to help any new crypto investors or NFT buyers. We don’t have the answers to all questions but we damn sure will try :)