What are NFTs?Sep 28, 2022
What Are NFTs? A Beginner's Guide
NFTs are everywhere today and you probably recognize how they’re slowly changing our lives. Maybe you’ve sat in on a conversation about NFTs and thought, “Hey, what are they talking about, and how do I learn about NFTs?” That’s how I felt when I first heard about NFTs, so I did some digging and learned a few things.
As NFTs have gained popularity in the recent past, their uses have widened, projects have expanded their utility (benefits of ownership), and their potential for how we conduct our future business has become more evident. Whether looking to buy, create, or sell, the NFT space holds many opportunities. This booming market is reportedly valued at $2.25 billion and has staggering potential for continued growth. You’ll want to learn all you can about the NFT market to take advantage of the opportunities related to them and the ins and outs of NFT projects themselves.
Let’s start with some basic information.
What Are NFTs?
NFTs are non-fungible tokens meaning that something you own is unique and irreplaceable. I can pick up a print of Picasso’s work in many different places. Those prints are fungible because they’re mass-produced, and anyone can get one. Even though the prints look nice and there’s a market for them, they’re not scarce. However, if I own the original Picasso painting of The Old Guitarist, I now own something non-fungible. It’s a one-of-a-kind original painting that I cannot replace. Think of NFTs as you would this original painting. Like the original painting, NFTs are unique and irreplaceable.
These NFTs are digital assets bought and sold on the internet, typically with cryptocurrency, and the blockchain records the purchase and sale of each one. To make things simple, think of the blockchain as bank records showing transactions that are verified by computers all over the world.
There are tons of different NFTs to choose from, and most of them are part of a collection called a “project.” A project is a group of NFTs with the same smart contract (or a self-executing contract with written code containing the terms of an agreement between the buyer and seller), creators, and community.
Project creators determine the art, number of NFTs in the collection, mint price, and all other aspects of the collection. Some communities run their project and let the holders guide all their decisions.
Most NFTs exist on the Ethereum blockchain. To buy or mint one of them, you'll typically use ETH (the currency on Ethereum). Lately, marketplaces are accepting other forms of payment. For example, Opensea allows NFT sellers to offer card payments in addition to crypto payment options.
Where To Start In NFTs
Getting started in the NFT market can be a confusing process, at least it was confusing for me. They come in lots of forms such as collectibles, virtual avatars and video game skins, GIFs, music, and more. Much of the excitement now is surrounding digital art.
There are many NFT projects available to consumers, and you’ll want to keep a few things in mind when making your purchases. Before you jump into buying that hot new project, you should take a look at the following:
- Founder Transparency - Doxxed founders reveal their identities, demonstrating good faith in promoting their projects
- Project Utility - This may come with the purchase of your NFT and includes perks such as educational courses, access to exclusive events, or investment deals.
- Community - An active community helps to elevate the standing of an NFT project, and often helps to increase the value of your project.
Once you’ve spotted a project with doxxed founders, learned a bit about their community, and examined some of the benefits of the utility they offer, you can start the purchase process.
How to Buy NFTs
NFTs are typically held on the Ethereum blockchain, but some other blockchains that support them. If you purchase an NFT based on the Ethereum blockchain, such as the Bulls and Apes Project, you may want to secure enough of this token to begin the NFT buying process. You can do this on a platform such as Coinbase, Kraken, or eToro. As I mentioned earlier, some platforms are starting to allow credit card payments in addition to crypto payments, so you’ll want to do your research in this area.
You will also need an NFT wallet, or a “hot wallet.” Wallets are apps or programs made for holding cryptocurrency tokens. There are several wallets, such as Metamask, you can use to carry your cryptocurrency tokens. Consider also purchasing a cold wallet, such as a Ledger or Trezor, to transfer your NFTs after you acquire them. Moving your NFTs from your “hot wallet” into your “cold wallet” helps to keep them more secure.
When you’ve chosen your project, secured your cryptocurrency or determined whether or not you can pay with a credit card, and obtained your hot and cold wallets, you’re ready for the fun part - searching for your first NFT. Be mindful of the percentage of fees charged based on your purchase. You can either buy from a project’s mint directly through their website, or head over to a platform such as OpenSea.io to search for NFTs on the secondary market. You’ll need your “hot wallet” information to complete this process, and by the end, you’ll see your transaction recorded on the blockchain. The NFT will be sent to your wallet, and you’ll have the chance to store it in our “cold wallet” for safekeeping.
Take Advantage of Project Utility
The definition of “utility” is “the state or quality of being useful.” While this definition may not sound so exciting it can be because utility also applies to NFT projects. Project utility includes the benefits of holding an NFT and the utility offers can be useful to holders. Project teams are coming up with so many ways to encompass new utility in their projects, so you’ll want to investigate what each project might offer.
To be clear, some projects have no utility and are just about the art. For others, the utility can create significant value for holders over time and may motivate those in this space to buy into a project. Some of the utilities NFTs can offer are:
- Connection to a tangible, physical asset
- Educational opportunities and courses
- Exclusive investment opportunities
- Community and networking connections
- Real-world meetups and events
- Metaverse wearables and in-game value
Taking advantage of your project’s utility can help open doors to you that may have previously been inaccessible. Finding a project with utility you could benefit from is one more reason it’s important you closely research NFTs that interest you. Although the market doesn’t tend to value utility, you might find it an important factor in whether or not to choose a particular project since you may get the most value from an NFT from its utility.
Are you ready?
There’s a lot to absorb and by now, your head might be spinning from all this new information. You can learn even more about NFTs by checking out the free NFT 101 course from the Bulls and Apes Project. While you’re there, check out the rest of their project. The Bulls and Apes Project art is incredible, and their community offers many opportunities for personal and professional advancement.
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