The NFT revolution took the world by storm. In 2021, with Beeple Art sold out for $69.3 million, NFTs became so popular that people thought buying and selling NFTs was the best way to secure money. With the explosion of NFTs, several questions have been raised about their authenticity, whether they are a good investment instrument or a scam, and so on.
This blog delves into some of the basic frequently asked questions about NFTs that would help you set your foot in the NFT industry.
1. What are NFTs and how do they work?
NFT is the acronym for Non-Fungible tokens.
The blockchain revolution paved the way for NFTs. Non-fungible means that which cannot be replaced or exchanged for something. For example, bitcoins are fungible, you can replace 1 BTC with another equivalent of 1 BTC. However, NFTs are unique and you cannot replace one NFT for another.
NFTs are records of digital assets stored on the blockchain, usually Ethereum. They represent various items like videos, music, art, collectibles, images, and more. Each NFT carries a digital signature, which verifies the asset’s ownership. Hence, there are no duplicate copies. Other blockchain platforms like Cardano, Algorand, Solana, etc. also have implemented NFTs.
2. Why does NFT art have value? Why are they so expensive?
There are primarily four factors that contribute value to NFTs. The first is a market-driven value that depends on the speculated resale value. Second, subjective value refers to the moral statement conveyed by the NFT. Third, the objective value is the technical skills and expertise that have gone into creating it. Finally, the historical value that digital art holds.
Of late, crypto investors feel that you need a lot of money to buy a really valuable NFT, including the gas fee. That’s true because, in business, you need money to make more money. So you invest more to get greater returns.
3. What are NFTs used for?
NFTs are used as digital replicas of rare items in the real world like art, collectibles, etc., where the creator retains the asset’s copyright. This means purchasing an NFT includes the copyright, however, it does not mean the copyright gets transferred to you. You can sell the NFT but cannot reproduce or sell its content.
4. Are NFTs a good investment? What is the risk of NFTs?
NFTs are a good investment, yet risky too. Investing in NFTs requires understanding the nitty-gritty of NFTs and the cryptocurrency industry. Though some NFTs like Beeple Art made Mike Winkelmann, its creator, rich and famous overnight, that’s not always the case. Experts also warn that NFT enthusiasts should not be over-optimistic about the high prices. The price depends on its worth, scarcity, and, most importantly, how much the buyer is willing to pay for it.
If you are interested in investing in NFTs, check out some of the best projects like Decentraland, MekaVerse, and Creative World.
5. How to make money with NFTs?
NFTs can be bought and sold like shares or stocks – buy low and sell high to reap profits. While you can create NFTs by minting them, there are some additional costs like account setup fees, royalties, site fees (range from free to $900), listing fees, gas fees, and other factors to consider when looking to make profits.
Whether you buy now and sell later or plan to make your NFT, you must understand the dynamics and how the NFT industry works. Therefore, it is recommended to seek some professional help before getting started.
6. Where do you buy NFTs?
NFTs are bought with cryptocurrency and with Ether (ETH) mostly. Some exchanges like Gemini, Coinbase, and Kraken allow you to convert US dollars into ETH.
There are some well-known NFT marketplaces like OpenSea, Rarible, SuperRare, Axie Marketplace, and more.
7. Can I create my NFT? How much does it cost to create an NFT?
Yes, absolutely. You can create NFTs and sell them for a profit, too.
Steps to make or mint your NFT:
- Choose a platform where you wish to sell your NFT
- Set up a wallet
- Connect your wallet
- Create an NFT ( the cost of creation depends on the size and quality of the artwork )
- List the NFT
There are some popular NFT hosting sites that let you create NFTs for free.
8. How much energy or power do NFTs use?
As per the research by Memo Akten, a computational engineer and artist, the minting of NFTs uses 263,538 kWh of energy on average and results in 163,486kg of CO2 emissions.
9. What is the environmental impact of NFTs?
Similar to Bitcoins, NFTs also involve energy-intensive transactions. Minting, bidding, and transferring of ownership – all require a lot of power and electricity.
Thus, NFTs are likely to cause serious harm to the environment unless the process can be made eco-friendly. In addition, the recycling and production of the hardware used in the process also adversely impact the environment.
10. How can I get NFTs for free?
There are multiple ways you could get NFTs for free:
These NFT games offer in-game assets like characters, costumes, and other items as NFTs as the players win them by participating in the game or crossing various levels. They foster NFT trading and the adoption of NFTs.
Examples include Mobox, My Neighbor Alice Collection and Axie Infinity.
Create your NFTs
You can mint your own NFTs and list them for sale on marketplaces like OpenSea, which offer lazy minting that does not require any upfront fees from the creator.
Giveaways and Airdrops
Several NFT projects offer NFT giveaways and free airdrops to encourage user participation on platforms like Twitter and Reddit to promote their collections.
11. Can JPEGs be NFTs?
No. While most people relate NFTs to the external media like tickets, documents, or JPEG files they are tagged to, they are much different and valuable in reality. They are tokens stored on a secure blockchain network.
12. Can NFTs be copied?
Yes and No. As such, the technology of NFTs cannot be replicated, though you can copy the media it is tethered to. For example, say you have a Van Gogh painting that is original. You can create millions of duplicates and iterations of it, but the original is always only one. Likewise, you may copy the contents of the NFT creator. However, you cannot fake their wallet.
NFTs contain unique codes that are stored on the blockchain in an immutable form, making it possible to trace them back to the creator.
13. Will NFTs last?
As there are several uncertainties around NFTs, it creates mixed opinions on whether they will last and, if so, how long.
Experts say that the durability and survival of NFTs depend on the project’s value. While best NFT projects could last longer and fetch good benefits to their investors, there’s some negativity around the relatively weaker ones.
NFT collections that lack utilities will likely lose their value and presence.
14. Can I make money in NFTs as much as Crypto Coin?
Many crypto investors wonder if they could make more money with NFTs or coins. Making money with crypto calls for patience. So it’s quite natural that some NFT enthusiasts might be looking to start a marketplace of their own.
All this is possible. However, the truth is you make great money when your NFT sells! When OpenDao offered free $SOS tokens to OpenSea’s active users, not everyone qualified for the airdrop. Why? That’s because everyone bought the NFTs, but not all sold them. So, selling the NFT was an integral aspect.
You don’t need special expertise to buy or sell NFTs. Musicians, social media influencers, and artists – everyone can mint an NFT. All you need to have is the right to ownership of the NFT.
15. What is the future of NFTs?
Experts like Alex Atallah, Co-founder of OpenSea, an NFT marketplace, say that the possibilities with NFTs are unlimited, as they can be used to log the ownership of assets. Some common use cases of NFTs include event tickets, software licenses, and other memberships.
The emergence of the Metaverse is expected to take NFTs a long way. NFTs would be the only source of identity in the blockchain-enabled metaverse. It is believed that people might soon use their NFT avatars as profile pictures on social media.
Nike, Microsoft, and Apple are companies already using NFTs in their realms of business. Facebook rebranded itself as Meta to get started with Metaverse and started letting users make use of NFTs in its subsidiary company, Instagram.