What are NFTs? How to start buying NFTs?

NFTs: The new digital revolution
Non-fungible tokens (NFTs), or in Portuguese, non-fungible token, seem to have exploded this year when they are sold at high prices, practically comparable to the eccentricity of the Dutch tulip trade in the 17th century. In the art world, NFTs gained public attention, when on March 11, 2021, Christie's announced the highest sale ever achieved of a non-physical work of art, in this case a jpeg file, of 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 simply overkill? Should I buy NFTs? In this article we will approach this new virtual reality to understand what its benefits are and how you can and should invest in it. Non-fungible tokens.

What is itnon-fungible token (NFT)?
Onenon-fungible tokenis 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, the NFT is not interchangeable, having a collectible nature and use in the virtual world. This technology has existed 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. The same goes for the work. EVERYDAYS: The First 5000 Days by Mike Winkelmann, 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 viewing. online by anyone free of charge. So what drives a person to spend millions on a work that can be easily visualized? Because an NFT is the original item that contains built-in authentication, which serves as proof of ownership. In contrast to most digital creations which are endless on offer, NFTs are usually unique, or at least limited and with a unique identification code. Since November 2017, an incredible $174 million has been spent on NFTs. In 2020 alone, the NFTs market grew by 299%, to 250 million dollars (212 million euros), according to a study by NonFungible, showing that the expansion continues.

EVERYDAYS: The First 5000 DaysinBeeple (Mike Winkelmann)

What is the difference between an NFT and a cryptocurrency?
NFTs are usually built with the same type of programming as cryptocurrency such as Bitcoin or Ethereum, but that is the only similarity between them. Physical money and cryptocurrencies are fungible, that is, they can be traded or exchanged with each other. Value is also equal - one euro is worth one euro, one Bitcoin is always equal to another Bitcoin.NFTs are not fungible like coins, as having a unique digital signature makes it impossible to exchange, even if they are the same. A video cannot be exchanged for the work EVERYDAYS: The First 5000 Days, despite being both NFTs.
 
How does an NFT work?
NFTs exist on a blockchain, which is a public ledger that records transactions. Typically these are held on the Ethereum blockchain, although other blockchains support them as well. An NFT is digital collectibles such as art, gifs, videos, music, skins video games, among others. So, instead of putting a painting on the wall, the buyer gets a digital file with exclusive property rights. NFTs can only have one owner at a time, making it easier to verify ownership and transfer between them. The owner or creator can also store specific information within them, such as which artists signed 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 the lion's share of the profits. Another very attractive feature is the possibility of being able to program to receive a percentage of the profits from their own art, whenever it is sold to a new owner.
 

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 websites where to buy NFTs like OpenSea.io , Rarible It is Foundation. Verification processes for NFT creators and listings are not consistent across all platforms, so care needs to be taken. Some artists have fallen victim to imitations of their work being 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 test the market. Like any investment, it's a largely personal decision that may be worth considering, especially if a work of art means something to you. If you're thinking about buying NFTs to resell, keep in mind that 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.