NFTs are hotter than hot. $2.5 billion of transactions in the first half of 2021.
So, what’s the story with NFTs? And how do you monetize them?
We’ll get to that second question, but let’s start from the beginning.
And check the glossary — on the right or below, depending on your device — for terms you don’t know.
NFTs are not Cryptocurrencies
Both NFTs and cryptocurrencies are digital records stored on a blockchain, a digital ledger of transactions.
Cryptocurrency consists of fungible tokens that are identical to each other.
NFT is an acronym that stands for non-fungible token. A non-fungible token is a digital asset, a token that is unique unto itself, so long as only one copy was created when it was added to the blockchain. An NFT transforms a work of art or other collectible or asset into a one-of-a-kind verifiable digital asset. NFTs are unique, indivisible and scarce.
It’s relatively easy to make an NFT.
- Pick a blockchain. Ethereum is currently the most popular for NFTs, but there are plenty of others, such as Binance Smart Chain, Polkadot, Tron, EOS, and Tezos. You’ll want to choose carefully, as the sale of the created NFT may be limited to platforms that support the chosen blockchain.
- Then, pick a compatible digital wallet and marketplace. Depending on the blockchain you’ve chosen, there may not be much of a choice.
- Upload your content.
- Follow instructions and mint your token on the blockchain, thereby turning it into an NFT.
- Store the NFT in your digital wallet.
The use of NFTs is in its early stage, but the following areas have already been identified:
- Film and video clips
- Music and audio clips
- Physical assets like real property, cars and racehorses
The NFT is not the actual item, for example; it’s a digital record of the item and a digital asset on its own. Owning the NFT, in general, gives you certain rights in the underlying work. Depending on the NFT, the rights may include control, access, ownership and possession of the underlying work.
NFTs are not just about art. They can be used to represent the ownership of any unique item, even licenses and real estate.
Making Money from NFTs
So, how do you make money from NFTs?
One way is to be an artist. Create NFT versions of your work and sell them. Or sell unique portions of your work through NFTs. Recently, for example, in March 2021 an NFT of Beeple‘s Everydays:The First 5000 Days sold for $69 million. (No, I don’t know why.)
Another way is buy and sell NFTs, as you would any other asset. These can be individual NFTs or portions of a bundle of NFTs. Some people buy NFTs, like stock shares and collectibles, with the expectation of selling at a profit.
Yet another way is to facilitate the purchase and sale of NFTs to others, as a broker or clearing house.
So long as people can make money from NFTs, they’ll be around. Clearly, being able to “digitize” their work can be a benefit to artists, regardless of the genre. As for speculators, there will always be people who are willing to take a chance, to shoot for the moon, and hope for the best.
Any questions or comments, please reach out.
- Blockchain: A growing list of records, called blocks, that are linked together using cryptography. Each block contains a cryptographic hash of the previous block, and transaction data. The timestamp proves that the transaction data existed when the block was published. As blocks each contain information about the block previous to it, they form a chain, with each additional block reinforcing the ones before it. Blockchains are resistant to modification of their data because once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.
- Cryptocurrency: A digital asset designed to work as a medium of exchange. Individual “coin” ownership records are stored in a computerized database using strong cryptography to secure transaction records, control the creation of additional coins, and verify the transfer of coin ownership.
- Cryptographic: A mathematical technique for encrypting and decrypting data in order to keep it private when transmitted or stored electronically.
- Digital Marketplace: A digital marketplace is an avenue for the marketing and sale of digital goods and services.
- Digital Wallet: A software-based system that securely stores a user’s payment information and passwords for various payment methods and websites.
- Fungible: The property of a good or a commodity whose individual units are essentially interchangeable, and each of its parts is indistinguishable from another part. For example, gold is fungible since a specified amount of pure gold is equivalent to that same amount of pure gold, whether in the form of coins, ingots, or in other states.
- Non-Fungible Tokens: Digital assets that cannot be replicated. They represent something unique and special and are, thus, not fungible. One non-fungible token cannot be exchanged for another because each contains something unique in itself.