A Summary Before the Deep Dive
Non-fungible tokens, or NFTs, are a type of digital asset that are unique and cannot be replaced by another identical asset. They are stored on a blockchain, which is a decentralized and digital ledger that records transactions. NFTs can represent ownership of a wide range of digital assets, including artwork, music, videos, and even tweets.
One of the key benefits of NFTs is that they allow digital assets to be bought and sold just like physical assets. This opens up new opportunities for artists, musicians, and other creators to monetize their work in ways that were previously not possible. For example, instead of selling a digital artwork as a one-time purchase, an artist can sell it as an NFT and allow the buyer to resell it at a later date. This creates a secondary market for digital assets and allows creators to earn royalties on their work.
They also provide a way for artists to prove ownership and authenticity of their work. Because NFTs are stored on a blockchain, they provide a tamper-proof record of ownership and provenance. This helps to protect artists from copyright infringement and ensures that their work is properly credited.
It is worth noting that the NFT market is currently in a state of flux, with many people questioning their long-term value and use cases. Additionally, there are concerns about the environmental impact of NFTs, as they do require a significant amount of energy to create and transfer.
Overall, NFTs represent a new and exciting opportunity for artists and creators to monetize their work and engage with their audience in new ways. While there are still many questions to be answered and challenges to be addressed, the potential of NFTs is undeniable and it will be interesting to see how the market develops in the coming years.
The Creative Uses of NFTs
Digital art and collectibles: NFTs can be used to authenticate and sell digital artwork, such as digital paintings, animations, pixel art, and GIFs. This allows artists to monetize their work in a way that may not have been possible before. Although there are many, Beeple is one of the most disruptive artists so far. He was already a successful digital artist but selling an NFT for $69 Million at Christie’s turned a lot of heads.
Gaming: They can be used as in-game items such as weapons, armor, and virtual real estate. This allows players to own, trade, and sell these items on blockchain marketplaces. There are projects working on integrating the two but there are also gamers who are completely opposed to this. The biggest success I’ve witness so far is Axie Infinity. I’ve never played it so I can’t endorse it but I remember it being extremely popular about a year ago. (Full Disclosure: Even though I haven’t played it, I’ve bought a few tokens for it)
Music and video: People are able to sell digital assets such as music and video recordings, allowing creators to monetize their content and fans to own a piece of it. An example is the musician, LATASHÁ. She has become one of the highest paid unsigned music artists in Web3. A limited collection of a verse from her song “Culture” has made 38 ETH to date. If you look through her Twitter page and read her interviews, you’ll see that she has put so much care and time to connect the NFT space with her art. Not only is she a musician, but an integral part of the NFT community.
Virtual reality: Represent virtual assets such as 3D models, virtual real estate and other items in virtual reality platforms. Multiple metaverse projects are available to jump into at any given moment. Most people have heard of Facebook’s Meta but the general consesus I’m seeing from the NFT space is that they’d like a more decentralized way to join in. The most popular one’s I’ve seen lately are Decentraland, Sandbox, and Voxels. The graphics aren’t as good as the games we’ve grown accustomed to but all of this is very new so I try to keep that in mind. (Full Disclosure: I’ve bought tokens for both Decentraland and Sandbox)
Certificates and credentials: Use them to verify certificates, degrees, and other credentials, allowing for secure and tamper-proof verification of qualifications and achievements.
Sports trading cards: They can be used to represent unique trading cards, allowing collectors to own and trade a piece of history. NBATopShot has gotten a lot of people into NFTs and some people have even compared NFTs to sports trading cards.
The Differences Between NFTs and JPEGs
NFTs are a type of digital asset that are unique and cannot be replicated or replaced, whereas JPEGs (Joint Photographic Experts Group) is a type of image file format that is commonly used for digital photos and images.
Another difference is that NFTs are stored on a blockchain, which is a digital ledger that records all transactions, while JPEGs are stored on a computer or server. NFTs can also be bought, sold, and owned, while JPEGs can be shared freely. NFTs also can have additional metadata such as the artist's name and information about the artwork.
Both traditional art and NFTs are unique and one-of-a-kind items that can be bought and sold. Both can also be used as a form of investment and can appreciate in value over time. Physical art and NFTs can be authenticated and verified as genuine and can be enjoyed for their aesthetic value.
Understanding the Mechanics of Buying and Selling
NFTs are bought and sold using blockchain technology. A blockchain is a decentralized digital ledger that records transactions across a network of computers. Each transaction is grouped together with other transactions in a "block" and added to a "chain" of blocks in chronological order.
When an NFT is created, a unique digital asset is generated and assigned a specific token on the blockchain. This token serves as a certificate of ownership for the digital asset. To buy one, a person must send a transaction to the blockchain with the appropriate amount of cryptocurrency (usually Ethereum) to the address associated with the NFT. Once the transaction is confirmed and added to the blockchain, the NFT is transferred to the new owner's digital wallet.
To sell an NFT, the owner must list it on a marketplace where people can browse and purchase them. When someone buys it, they send a transaction to the blockchain with the appropriate amount of cryptocurrency to the address associated with it. Once the transaction is confirmed and added to the blockchain, it’s transferred to the new owner's digital wallet and the seller receives the cryptocurrency.
Gas Fees
A lot of people who are new to NFTs get blindsided by gas fees because they aren’t aware of them. Even though they aren’t nearly as high as they were, it’s still important to factor them into the final price. I’ll use Ethereum as the example here since the prices are typically higher than other cryptocurrencies.
Gas fees on the Ethereum blockchain are fees that are paid to the network in order to process transactions and execute smart contracts. These fees are paid in Ether (ETH), the native cryptocurrency of the Ethereum network. The amount of gas required for a given transaction or smart contract execution is determined by the complexity of the operation.
The higher the complexity, the more gas is required. Miners on the network, who process transactions and execute smart contracts, are incentivized to prioritize transactions with higher gas fees. This results in a system where users can bid for priority processing by offering higher gas fees. Gas prices can fluctuate based on network congestion and other factors.
They are typically measured in Gwei, which is equivalent to 0.000000001 ETH. The current gas price can be found on Ethereum gas price trackers such as EthGasStation. The total cost of a transaction in ETH can be calculated by multiplying the gas cost (in Gwei) by the gas price (in Gwei).
Keep in mind that, even though gas prices fluctuate, you will be shown what you’re most likely to pay before you hit the button to execute the transaction which makes it much easier.
How to Begin Buying and Trading
First and foremost, safety is going to be the most important thing you should focus on. I don’t care if you only have .0001 ETH and 1 NFT in your wallet, one day you might have a lot more. If you aren’t taking the steps to keep everything secure now, someone could breach it now and steal everything later. I’ve seen many people get everything stolen because of one mistake.
You may be smart but know that the scammers are always going to be one step ahead of at least one unlucky person. There are a few different scams that involve the technical side and others that are all about manipulation. It hasn’t happened to me but I’ll never think that it couldn’t. For the technical side, I recommend getting a hardware wallet. The go-to brands at the moment are Ledger and Trezor.
Hardware wallets store your private keys offline, making them immune to hacking attempts. Never buy these second hand. Only buy them from the official websites. You never know what the previous owner did to it. People have been hacked from the previous owner. Plus, it may not even be genuine.
Here are a few other safety tips to keep in mind regarding the hardware wallet:
Keep your private keys private: Do not share your private keys with ANYONE, and make sure to store them in a safe place.
Enable two-factor authentication: This adds an extra layer of security to your account by requiring a code from your phone in addition to your password.
Use a smart contract with a freeze function: Some smart contracts have a feature that allows the owner to freeze an NFT, making it impossible for anyone else to transfer it.
Use a reputable marketplace: Be sure to only buy and sell NFTs on reputable marketplaces that have a track record of keeping users' assets safe.
Keep backup copies of the NFTs and their metadata. (I haven’t done this but I should. Here is an article from Async Edition that goes more in depth about it if you’re interested.)
Even with all these precautions, there is always a risk of hacking or theft in the crypto space. It's always a good idea to keep an eye on your assets and to be vigilant about potential threats.
Cryptocurrencies you can use to buy NFTs
This isn’t an exhaustive list because that can get overwhelming so I’ll save that for another time.
Ethereum (ETH) - The most popular cryptocurrency for buying NFTs, as most NFTs are built on the Ethereum blockchain.
Bitcoin (BTC) - Some NFT marketplaces accept Bitcoin as a form of payment for NFTs.
Other ERC-20 tokens - Some NFT marketplaces accept other ERC-20 tokens in addition to ETH. (Ex. Solana, Tezos, and Polygon)
Not all NFT marketplaces accept the same types of cryptocurrency, so be sure to check the specific marketplace you plan to use before making a purchase.
Speaking of marketplaces, here is a list of a few that come to mind.
Most popular NFT Marketplaces at the moment:
A few others that are popular:
How to Use a Digital Wallet
Along with the hardware wallet, you will also use a digital wallet to purchase or sale NFTs. The digital wallet of choice for most people is Metamask. No other wallet even comes close at the moment.
Metamask allows users to securely store, manage, and exchange cryptocurrency assets. It operates as a browser extension for Chrome, Firefox, Brave, and Edge, and enables users to interact with decentralized applications (dApps) on the Ethereum blockchain. It also allows users to easily switch between different Ethereum networks, such as the main Ethereum network and test networks like Rinkeby and Ropsten.
How to Get Started With Metamask
Install the Metamask browser extension.
Connect Metamask to your Ethereum hardware wallet.
Go to the website of the NFT marketplace where you want to buy an NFT.
Select the NFT you want to buy and click on the "Buy" button.
Metamask will pop up and ask you to confirm the transaction.
Review the details of the transaction, including the cost in ETH and the recipient address.
Click "Confirm" to sign and broadcast the transaction.
Wait for the transaction to be mined and confirmed on the Ethereum blockchain.
Once confirmed, the NFT will be transferred to your Ethereum wallet and will be visible in your Metamask account.
Since NFTs are stored on the blockchain and not in your wallets, you will be able to see it in your Metamask wallet, Hardware wallet, and on the marketplace you’re connected to assuming they have that feature.
Sometimes you will need to manually connect your Metamask to another network to see them but you should always be able to view them in your hardware wallet by using a dApp. I use a Ledger and I like Zerion the most. You can use it in the software for your computer that comes with the hardware wallet.
Criticism of NFTs
I’d be doing a disservice to the NFT community if I didn’t bring up the criticisms we’ve received. I’ve done my best to compile a few reasons why people are not on board with them. I encourage you to look into anything further if it concerns you.
Environmental concerns regarding the energy consumption required for their creation and transaction
Perceived lack of tangible value or utility
High prices and perceived speculative bubble
Concerns about their use in money laundering and illegal activities
Lack of regulation and legal framework
Limited secondary market and potential for fraud
Ethical concerns about ownership and provenance of digital assets
Lack of understanding or knowledge about the technology
Environmental Mitigation
Luckily, there are people within the sphere of NFTs that truly care about the environment and it’s better for people who understand the impacts to be involved so we can work on fixing it.
Here are some examples of ways to lessen the footprint of this new technology:
Developing NFTs that are more energy efficient.
Using renewable energy sources to power NFT mining.
Creating NFTs that can be recycled or repurposed.
Offsetting the carbon footprint of NFT transactions through carbon credits or other mitigation methods.
Educating people about the environmental impact of NFTs and encouraging them to take action to reduce it.
Implementing NFT standards to promote more sustainable practices in the industry.
Creating NFTs that support environmental causes or organizations
Using NFTs in a way that reduces the need for physical products.
I recently found an article called “A Guide to Ecofriendly CryptoArt (NFTs)” from Branch if you’re interested in reading further.
Where Do People Go to Talk About NFTs?
There are several online communities and forums where people meet on. Some popular platforms include:
Reddit: r/cryptoart, r/nftmarket, r/nftinvestors
Telegram: NFT Community, NFT Investors, CryptoArt Telegram
Discord: NFT Hub, NFTs Only
Twitter: #NFT, #cryptoart, #cryptomemes
Clubhouse: NFT rooms
You can also find some NFT communities on platforms like OpenSea, Rarible, SuperRare and other marketplaces for NFTs.
I personally use Twitter and Discord the most. If you want to learn as fast as possible, I would create a separate account just for NFTs to keep it more organized.
As with anything on the internet, continue to stay aware in these places, do your own research, and take everything with a grain of salt. I'm not saying this half-heartedly. Where there is a way to spend money, there will be people trying to scam you out of it. As exciting and fast-paced that this space can be, you have to be able to step back and remember that this will all be here tomorrow and you have time to learn.
If you're getting into NFTs to try become an NFT art collector and monetary value is important to you, remember you don't have to "ape in"(I’ll write an article about the slang used in this space later) to a project just because someone with a lot of followers and clout does. Especially if they're celebrities.
No matter how hyped up a project looks on Twitter, stay calm and look at the details. I've seen many projects come and go that use FOMO and large amounts of people to promote it knowing they're all going to sell. Finally, never ever spend what you can't afford to lose.
Thank you for taking the time out to read this article, I hope it helps clear up some questions for people who are interested in learning about all of this. If you have any other questions or think anything else should be addressed, comment below and I’ll do my best to write more. A special Thank You to ChatGPT for helping me organize my ADHD thoughts.
