NFTs are the hottest new asset class and serious money is being invested into them. From art to music, games to whole companies. This article will teach you all about NFTs and how to invest in them.
What is the Meaning of NFT? Non-Fungible Tokens.
NFT stands for non-fungible token, and they are assets on a blockchain that are essentially proof that a digital item is one-of-a-kind or limited edition. They can be likened to a certificate of authenticity combined with the work itself.
They are “non-fungible” because unlike fungible (non-unique) assets (like cash, or Bitcoin for example), non-fungible assets are verifiably unique and exist only as one-of-a-kind or as a limited edition. Some basic understanding of blockchain technology is useful to understand NFTs, but not required.
The bottom line is that almost any sort of original digital content can be “minted,” or turned into an NFT. Non-fungible tokens can be bought and sold like any other asset, when a willing seller finds a willing buyer (more on that later).
In March of 2021, Christie’s Auction House sold an NFT for $69.3 million – the highest price ever for a non-fungible token asset. Clearly big money is ready to pour into NFTs, and serious collectors are getting into the game.
Beeple (b. 1981)
EVERYDAYS: THE FIRST 5000 DAYS
token ID: 40913
wallet address: 0xc6b0562605D35eE710138402B878ffe6F2E23807
smart contract address: 0x2a46f2ffd99e19a89476e2f62270e0a35bbf0756
non-fungible token (jpg)
21,069 x 21,069 pixels (319,168,313 bytes)
Minted on 16 February 2021. This work is unique.
Price Realized: USD $69,346,250
Closed: 11 March 2021.
The image above is the record setting work, and it’s likely to be just the first of many ultra-expensive, unique pieces of art that will be sold as an NFT in coming months and years. Non-fungible tokens sound scary, but at the end of the day, they’re just an authentication technology that gives the holder ownership (so don’t lose your account keys if you buy or create an NFT).
Almost all NFTs are on the Ethereum blockchain using ERC-20 tokens, making it the defacto standard for new non-fungible tokens. Minting is the act of creating a new NFT. It means that the content gets tokenized and stored on the blockchain forever, endowing the holder of the account keys with ownership.
This process is typically not free, and artists have to pay a fee to have their work tokenized and placed on the blockchain. This is important to keep in mind when analyzing an investment. Art and media creators have minted NFTs for art, music, virtual real estate, game assets, domain names, and much more. If you can create a digital asset, you can likely have it minted as an NFT.
How to buy or invest in an NFT:
Buying an NFT can be both rewarding and confusing the first time. Several marketplaces for NFTs have been created, and some NFTs are also being listed at traditional auction houses (see the Christie’s NFT story above) and websites like eBay.
Whether you should buy an NFT at an NFT specific marketplace, or an auction house like Christie’s is likely a function of the amount of money you’ll be spending. NFT Marketplaces will have art priced across the spectrum, while auction houses will only focus on the most expensive and well known art.
Just like an artist selling prints of their work, some artists choose to have “editions” of their NFTs, while others will choose to have 1 of 1 created. These will fetch different prices due to their rarity, although in terms of quality, all digital editions would be equivalent.
When investing in NFT assets, you’ll obviously want to look for the most rare asset you can find. One thing that’s important to note is that artists can choose to create a programmatic commission that will be paid to them any time the work is resold in the future. The commission commonly ranges from 10-30%.
To bid on or buy NFT assets, you’ll need to buy some Ethereum. It’s really simple to do, just go to Coinbase, and open an account. You can buy Ethereum (ETH) within just a few minutes. Buy as much Ethereum as you’re comfortable spending on your NFT, keeping in mind that you may have to pay small fees to complete your transaction on the NFT marketplace.
Once you own some Ethereum, sign up to your preferred NFT marketplace (several are linked below) and find the NFT you want to acquire. The process to buy the NFT varies a little bit between marketplaces, but they’re all very straight forward.
Saturday Night Live wrapped it up better than we ever could. Enjoy!
Where can I buy NFT art? Where can I invest in NFTs?
If you’d like to buy NFT art, there are several marketplaces that specialize in non-fungible tokens. They are listed below:
Rarible – This is one of the leading platforms for NFTs. It’s got a great selection of work, and shows you rankings so you can see who the leading sellers are, which could be an indication of future value.
SuperRare – A leading marketplace for NFTs, that’s got a strict application process for artists so you know you’re getting top quality works.
Async Art – This platform is somewhat unique as it’s for living art – that is, art that adapts to data. The art is still an NFT, but the instead of only tokenizing an entire work, you can tokenize all layers of a work. The master work is composed of layers and those layers can change according to many variables – like temperature, time, the stock market. Artists create rules governing how layers of a masterwork change, and the resulting artwork will react to those rules.
KnownOrigin – Another leading marketplace for NFTs, KnownOrigin is making a quick name for itself with exceptional works. This one is worth checking out.
Mintable – This is a creation and auction platform for NFTs. It’s got some unique works, and is working hard to distinguish itself as a solid marketplace.
NFT Showroom – This marketplace is built on Hive, rather than Etherium. There may be some advantages to using Hive, but only time will tell if it really catches on.
OpenSea – Claims to be the largest NFT marketplace in the world. Unlike most of the other markets, OpenSea has a wide selection of assets in addition to art. Those include domain names, virtual worlds, trading cards, sports, and some business related assets like fonts.
eBay – Everything imaginable is on eBay, including NFTs. There are many editions, resales, and 1-of-a-kind works being auctioned here every day.
I bought an NFT, what do I do now?
Congratulations on your new NFT! Just like with physical art, the fun part is displaying it. Since NFTs are digital, you have endless options as to how you’d like to display your new art. A few options are listed below:
Digital photo frames / TVs – You can buy large format digital screens to display your art. Samsung’s “The Frame” was built for just this purpose. While it’s pretty pricey, there are cheaper digital photo frames too.
Above: Samsung Frame for displaying digital art
You can also post the NFT on your website, or just show your friends on your phone or tablet. Some have chosen to get high-resolution prints of their NFTs too. You could even buy a billboard and put your NFT on that to show the world. Your options are open!