What are NFTs? How to buy?

O que são NFTs? Como comprar?

NFTs: The New Digital Revolution

Non-fungible tokens (NFTs), or non-fungible tokens in Portuguese, seem to have exploded this year by being sold at high prices, practically comparable to the eccentricity of selling Dutch tulips in the 17th century. In the art world, NFTs caught the public's attention when March 11, 2021, Christie's announced the highest sale ever achieved of a non-physical artwork, in this case a jpeg file, from a digital collage by artist Beeple (Mike Winkelmann), for $69.4 million (€58.6 million). Many questions arise with the emergence of this new type of investment: Will it be profitable and lasting or is it simply overkill? Should I buy NFTs? In this article we will approach this new virtual reality to understand what are its benefits and how you can and should invest in Non-fungible tokens .


What is a non-fungible token ( NFT)?

A non-fungible token is a digital file that represents real-world objects such as art, music, game items, and videos. These are bought and sold online, often with cryptocurrencies, and are usually encoded with the same software as these. However, unlike cryptocurrencies such as Bitcoin, NFT is not interchangeable, having a collectable nature and being used in the virtual world. This technology has been around since 2014, however it has recently gained greater notoriety, as more and more people are buying and selling digital works of art.


The reason to buy NFTs

Initially, the first NFTs derived from existing digital creations, such as video clips from NBA games or versions of digital art circulating on social media. So does Mike Winkelmann's EVERYDAYS: The First 5000 Days , which sold at Christie's for a record $69.3 million. The five thousand daily drawings that make up this famous piece are available and accessible for online viewing by anyone for free. So what drives a person to spend millions on a work that can be easily viewed? Because an NFT is the original item that contains built-in authentication, it serves as proof of ownership. In contrast, with most digital creations that are endless on offer, NFTs are generally unique, or at least limited and with a unique identification code. Since November 2017, an incredible amount of 174 million dollars has been spent on NFTs. In 2020 alone, the NFT market grew 299%, to 250 million dollars (212 million euros), according to a study by NonFungible, signaling that the expansion continues.

Mike Winklemann | P55 Magazine | P55 - The Platform of Art

Everydays: The First 5000 Days of Beeple (Mike Winkelmann)


What is the difference between an NFT and a cryptocurrency?

NFTs are generally built with the same type of programming as cryptocurrency, such as Bitcoin or Ethereum, but that's the only similarity between them. Physical money and cryptocurrencies are fungible, meaning they can be traded or exchanged with each other. The value is also the same - one euro is one euro, one Bitcoin is always equal to another Bitcoin. NFTs are not fungible like coins, as having a unique digital signature is impossible to exchange, even if they are the same. A video cannot be exchanged for EVERYDAYS: The First 5000 Days , despite being both NFTs.

How does an NFT work?

NFTs exist on a blockchain, which is a public book that records transactions. Normally these are kept in the Ethereum blockchain, although other blockchains support them as well. An NFT are items to collect in digital format such as art, gifs, videos, music, video game skins , among others. So, instead of putting a painting on the wall, the buyer gets a digital file with exclusive ownership rights. NFTs can only have one owner at a time, making it easy to verify ownership and transfer between them. The owner or creator can also store specific information within them, such as artists signing their work.


The Advantages of NFTs for Artists

Blockchain technology and NFTs offer artists and creators a unique opportunity as they can sell directly to the consumer, allowing them to keep most of the profits. Another very attractive feature is the possibility of being able to program to receive a percentage of the profits of their own art, whenever it is sold to a new owner.

Matt Kane | P55 Magazine | P55 - The Platform of Art

Right Place-Right Time by Matt Kane

How to buy NFTs?

If you want to start your own collection, you first need to get a digital wallet where you can store NFTs and cryptocurrencies. So, you have to buy some cryptocurrencies that your NFT provider accepts. These can be purchased using a credit card on platforms such as Coinbase, Kraken, eToro, PayPal and Robinhood. After setting up your digital wallet, there are several sites to buy NFTs like OpenSea.io , Rarible and Foundation . Verification processes for NFT creators and listings are not consistent across platforms, so care must be taken. Some artists have been victims of imitations of their work that have been listed and sold without their permission. OpenSea and Rarible, for example, do not require owner verification for NFT listings.


Should I invest in NFTs?

NFTs are a recent technology and their future is uncertain, however it may be worth investing small amounts to try out the market. Like any investment, it's a largely personal decision, and it can be worth considering, especially if a work of art has meaning to you. If you are thinking about buying NFTs to resell, keep in mind that the value is driven by demand. You may end up reselling for less, more or even not being able to sell if there are no investors to do so. Finally, one has to take into account the attribution of the value of the cryptocurrency used and that NFTs are subject to tax, as well as when selling shares at a profit.


Older post Newer post