Introduction About NFTs
You could not have missed the recent hype around all kinds of NFTs! From apes to games, from basketball to pokemon, NFTs have taken the world by storm, and not many people have fully grasped its reach. While young artists are making millions, some crypto investors are sticking to trading tokens. If you want to know about NFTs before making an informed investment decision then read on:
What are NFTs?
Non-fungible tokens (NFTs) are digital assets. It is a virtual representation of real-life objects or events. The different types of NFTs range from memorabilia, in-game features, art, or digital products. NFTs function on the same core concept of blockchain technology and crypto assets, which is why they are considered a part of the industry.
NFTs are also considered the way to access web3.0 since digital assets form a significant part of the Web3.0 virtual world. NFTs are meant to be unique, one-of-a-kind assets which are why they are considered extremely valuable. But how does a regular digital asset become an NFT? Let’s find out!
How do NFTs Work?
Most NFTs are created on the blockchain through smart contracts. When a digital asset is created, it is converted into a piece of code to keep it secure so that no one replicates it and uses it as their own. The smart contract uses this code and makes the NFT transaction-ready so that the artist can seamlessly get royalties, sell the NFT and use the blockchain technology to set up traceability. Ethereum investments (Ether tokens) are typically needed to buy and sell NFTs, but other cryptocurrencies are also gaining prominence with NFTs.
Therefore, if you buy an NFT, you will be the sole owner of that digital asset, and this transaction, like any other transaction on the blockchain, is irreversible and recorded forever. You can choose to sell your NFT once it increases in value.
How do NFTs Get Their Value?
A meme that became an NFT, Shiba Inu or better known as “Doge”, is valued at $4 million, making it the most expensive NFT ever.
So, is popularity the only benchmark that drives the value of an NFT?
Yes and no.
There are several ways in which NFTs get their value. Some of them are:
1. Their Uniqueness:
How similar is your NFT to another one? A potential buyer could always just settle for the cheaper option if given a choice. This is a classic demand and supply situation. By increasing the demand and keeping the supply to a minimum, the value of the product is bound to increase.
2. Their Utility:
What are the benefits that come with owning the NFT? For example, the most popular NFTs today are either community-based NFTs or game-based NFTs.
Community-based NFTs offer access to an entire community, much like the membership of a club. The community could offer exclusive discounts on future NFTs from within the community. Sports NFTs could offer passes to sports events, or some NFTs could offer a chance to vote for vital functional decisions taken by the blockchain linked to the NFT.
Gaming-based NFTs offer special power-ups in the game through NFTs, exclusive access, and many benefits within the game itself for those who own the NFTs.
Even if your NFT offers many benefits and is extremely unique, the NFT market is so flooded that many NFTs get missed. It is imperative to market your NFT the right way so that it gains popularity which will be the final element that drives up its value.
How do NFTs Work For Artists?
If you are an artist and not just a mere NFT collector, you can leverage NFTs as an artist too. Look at the latest trends and create a unique piece of art that rides on the popularity of an existing NFT. For example, the Bored Ape Yacht Club NFT led to Mutant Apes NFT. But note that many others are doing the same, so will have to figure out a winning marketing strategy to grab the attention.
You could also create an NFT that targets an extremely relevant use case and offers a unique but necessary utility. Look for what the Web3.0 space might need once it booms. Be sure to always charge royalty if you want to keep generating passive income from the art you create.
Whether you buy and sell or create NFTs, it is extremely crucial not to get carried away and understand the importance or the value of an NFT before investing time, money, or efforts into it. Our eyes are on the NFT prize, carefully watching and studying the NFT Marketplaces. Stay tuned to ZebPay for more!