The concept of non-fungible tokens has been known to cryptocurrency fans for several years, but NFTs (as they are also called) have only become really popular in 2021. The new industry trend has become so well-known that some of the rarest NFTs sell for tens of millions of dollars. What are the reasons for such a high cost and whether this trend has a future? Let’s try to find out in our article today.
What is a NFT?
The concept of non-fungible tokens is behind the acronym NFT (non-fungible tokens). “Fungible” in English is commonly used to refer to goods or assets that cannot be distinguished from one another by their properties. For example, two bills of the same value of five dollars each have the same purchasing power. It makes absolutely no difference which of these bills you take out of your wallet to pay for an item at the checkout counter in a store.
On the other hand, there are goods whose properties are unique, which makes them valuable in the eyes of investors. For example, art objects. One painting created by a famous artist exists in a single copy. The fact that there are no other objects with such properties in the world gives the painting its value.
NFT is a non-fungible token on a cryptocurrency blockchain that supports the appropriate token standard. Ethereum blockchain remains the most popular platform for NFTs, although it already has competitors in this area. For example, you can find NFTs on the blockchains of projects like Solana or Cardano. What distinguishes NFT from a regular token is the presence of unique IDs, which can be used to trace the history of the token’s creation or its owners.
A non-fungible token can exist on its own, but in 2021, amid the surge in popularity of this trend, NFTs are most often associated with digital objects tied to non-fungible tokens. This can be anything from simple images to animations, videos, or even parts of an audio file.
Why are NFTs so important to the development of the Internet? Before the advent of non-fungible tokens, any digital content could be copied as many times as you wanted. This was a problem for the creators of such content. For example, an artist who creates digital paintings could not quickly and conveniently monetize his work, because anyone could download his images. Now, a painting can be linked to a non-fungible token. Such an object of digital art has a better chance to find a buyer because the NFT record will remain in the blockchain forever and the picture linked to it will become really unique.
Can someone else’s NFT be copied?
It can be copied. Or rather, you can copy and save the content attached to the token. In order to create and then sell your own token, you need at least three things: the object itself for linking to NFT, a cryptocurrency wallet in the necessary cryptocurrency, and a service intermediary. The latter can be popular platforms like OpenSea or Mintable.
When creating an account on the intermediary platform, the user automatically generates a unique key. The same key will be assigned to any NFT he owns. From this information, it is easy to trace the chain of token owners. NFT itself has three important parameters – tokenID, its smart contract address, and copyright status. The first two parameters refer directly to the object, its seller, and current “owner”, but the copyright status is directly responsible for the use of the asset attached to the token.
In other words, NFT (in this context) allows one to assert a right to a digital object. But who governs this right? After all, no one prohibits you from downloading content tied to an NFT and using it for your own purposes. In fact, the value of NFT so far is shaped entirely by the demand for the token and the hype around it. What remains desirable is not even the “unique” content itself, but its identifier – the token in the blockchain. It can no longer be copied and the information about the owner of the NFT will remain in it forever.
How to create an NFT? It is very easy to create your own non-fungible token even without knowledge of programming and the basics of cryptocurrencies. To do this, you can use Binance’s centralized platform for NFT at the link. Here you attach your file to NFT, come up with its name and description. Binance creates non-fungible tokens on the Binance Smart Chain, so there are minimal commissions for token issuance.
Why is the price of non-fungible tokens rising?
NFT buyers are paying for uniqueness. NFT’s popularity flourished during the bull trend of the crypto market when the industry created a huge number of new millionaires after its rapid growth. What do millionaires like best? Most are a way to show their status.
If previously the only status symbol was the number of zeros in a bank account or the size of a park of luxury cars, now it can even become a digital object. It’s convenient – you want to buy NFT ETH, everyone sees the transaction and wants to buy a unique object, too. It is similar in its properties to an expensive jewel, but it does not need to be kept in a safe, transported somewhere, and so on. The NFT stays on your cryptocurrency wallet. In the same way, bitcoins used to be a symbol of wealth, like a huge mountain of money in the possession of a millionaire.
Is NFT a scam or not? Note that NFTs are useful not only as a means of confirming ownership of digital art, but also as a separate phenomenon. That is, non-fungible tokens have a fairly wide scope of application. They can be used to confirm a person’s identity – for example, to specify in each token their unique information in the form of date of birth, name, background, and so on. The concept of a digital passport on NFT appeared before the hype around non-fungible tokens last year.
NFT can also be turned into a kind of “ticket” for a closed event. And this already has precedents – for example, for the purchase of a non-fungible token you can be admitted to an exclusive party in the meta-universe of The Sandbox project. Recall that an active supporter of it unexpectedly became famous rapper Snoop Dogg, who owns a lot of NFT for millions of dollars.
Finally, NFTs can be a great tool for tracking goods in the supply chain. Let’s say you want to buy sneakers from a well-known, expensive brand, but you’re wary of running into counterfeits. Recording the product on the blockchain as an NFT from the manufacturer with a unique identifier in the form of a QR code on the package easily solves this problem.
The biggest deals with NFTs
To gauge the scale of the growth in the popularity of non-fungible tokens, just take a look at the statistics of the average number of transactions per week across the most popular NFT platforms. In just a few months, by the beginning of last summer, this figure crossed the mark of 1 million units.
But for the average user, the sales value of the most popular NFTs last year looks much more impressive. Here is a small ranking of three of these tokens.
CryptoPunk #7804 – sold for 4,200 ETH
This is a non-fungible token from the CryptoPunks collection released in 2017. The creators of the project from Larva Labs studio have issued exactly 10,000 CryptoPunks. The most interesting thing is that at the start they were distributed to early subscribers of the startup for free! In 2021, the value of the cheapest CryptoPunk on the hype around NFT grew to hundreds of thousands of dollars.
This piece sold for 4,200 ETH or $10.3 million at current Ethereum exchange rates. It is a pixel art image of a special series of rare (within the collection itself) “alien” cryptopunks. There are only 9 of them – such a high price of NFT token is justified by this fact. The owner of the token will get the right to a copy of digital art, which has only 8 other analogs in the world.
Beeple (Human One) – sold for $28.9 million
This NFT linked to the digital art object Human One was sold at Christie’s auction last year. As you can see, the hype around the non-fungible tokens led to the fact that the trend has interested even one of the oldest auction houses in the world. Moreover, quite successfully – Christie’s got quite a huge share of attention from the cryptocurrency community, and also bypassed many major auctions and NFT exchanges.
NFT Human One was created by a digital artist and designer under the nickname Beeple (real name Mike Winkelmann). He uses references to current political and social themes in his work and is often compared to Banksy, another famous creator of internet subculture content. Banksy himself has also been in the news related to NFT, but his work failed to reach the enormous heights of Beeple in terms of value in the eyes of investors.
Beeple (EVERYDAYS: THE FIRST 5000 DAYS) – sold for $69.3 million
This work went down in the history of the most expensive art objects in the world, sold while the artist was still alive. It, too, went under the hammer at Christie’s. NFT itself is associated with a collage of 5,000 digital images of Beeple, which he created between 2007 and 2021. In a sense, it’s a composite image of Internet culture for the entire decade.
The buyer of NFT was someone named Vignesh Sundaresan (also known as MetaKovan). He is one of the most famous collectors and has recently become the man with almost the most expensive NFT collection in the world. According to his 2021 interview, MetaKovan believes the value of EVERYDAYS: THE FIRST 5000 DAYS may well rise to hundreds of millions of dollars in the coming years. The reasons for this growth have already been mentioned in our article – the rarity of the digital object, which puts it on par with conventional works of art by world-renowned artists.
What’s the best way to invest money?
Looking at the rapid growth of various NFT-collections, a simple investor asks an expected question – how long will the hype last and can non-fungible tokens be considered a profitable long-term investment? In fact, the answer to this question is rather ambiguous.
On the one hand, people have always liked things that have no more analogs in the world. On the other hand, an NFT is not a bar of gold or a gem. The concept of a non-fungible token exists only in the digital space, where trends change almost at the speed of light. In addition, non-fungible tokens are one of the lowest liquid assets. Their value is argued entirely on the demand side of a potential buyer.
One can argue because Bitcoin’s price is also formed in a similar way, how can investing in NFT be worse than investing in the main cryptocurrency? The thing is that Bitcoins are interchangeable, that is, you can sell your coins in any case, if there is someone in the world who wants to buy crypto. But absolutely any NFT with a 100% guarantee will not be able to be sold quickly, even if there will be hype about this trend in the world up to now.
For the average investor, that is, a person who is not enthusiastic about creating his own digital collection, the safest strategy will be diversification. In this case, other areas of the crypto market come to the rescue, such as cloud-based Ethereum mining. It is an investment in the computing power of the equipment of large mining centers, which are able to “survive” even during crisis times in the market (which cannot be said about individual miners).
For example, you can invest in our Hashmart platform and start mining Ethereum right now. The platform will pay you a daily profit in cryptocurrency, which you can either keep in your wallet until the coin’s price rises or sell right now at the market. With such a secure source of passive income, you’ll already be assured of a good annual return with minimal risk. Profits from mining can be used to buy popular NFTs – who knows, maybe in a year, they will increase in price by hundreds of times.
How to earn NFT for free? It is also possible to get NFT for free. Many projects give away their non-fungible tokens at the launch, which then give investors exclusive rights, such as the opportunity to invest their money in the project before anyone else. To do this, you need to constantly monitor new startups and follow their social networks.
To repeat our lesson – investors should first take care to limit their own risks and have several sources of profit. The most affordable one is cloud mining Ethereum, the riskiest one is investing in NFT. By starting with cloud mining, you can protect yourself from substantial losses in case the hype around non-fungible tokens really comes to naught in the next few years.
Go ahead and explore the investment plans on our site, look for a profitable investment and start making profits with Hashmart today!