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NFT Explained

Non-fungible tokens or NFTs are a new type of digital assets that are extremely popular. Learn what NFTs are, their key attributes and how these work.

This presentation is for you, if you want to

• Learn about what NFTs or non-fungible tokens are.
• Understand the key attributes of these tokens and how these function.
• Learn about the key elements within the NFT ecosystem.

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Non-fungible tokens are a new form of blessing from blockchain technology. We previously had various versions of digital assets such as cryptocurrencies, stable coins, tokens, etc. However, NFTs are quite different than typical tokens. They are a new means to tokenize any form of asset whether it physical or digital. Now, NFTs are bringing a new type of marketplace with added security and new opportunities. Here, we are explaining how non-fungible tokens work and how you can use them for your own benefits whether you’re a creator or a business owner.

Learn About the Concepts Underpinning Non-Fungible Tokens

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Beginner's Guide to NFTs: What Are Non-Fungible Tokens?

Non-fungible tokens, or nfts, are digital assets that are provably unique. they can be used to represent both tangible and intangible items..

• Non-fungible tokens (NFTs) are cryptographically unique tokens that are linked to digital (and sometimes physical) content, providing proof of ownership.
• They have many use cases, including artwork, digital collectibles, music, and items in video games.

Decrypt’s Art, Fashion, and Entertainment Hub.

Cryptocurrencies, utility tokens, security tokens, privacy tokens… digital assets and their classifications are multiplying and evolving right alongside cryptographic and blockchain technology.

Non-fungible tokens (NFTs) are one of the fastest-growing sectors in the crypto industry. In this guide, we explore what they are, how they work, and how they're being used.

What are non-fungible tokens?

Non-fungible tokens are digital assets that contain identifying information recorded in smart contracts .

It’s this information that makes each NFT unique, and as such, they cannot be directly replaced by another token. They cannot be swapped like for like, as no two NFTs are alike. Banknotes, in contrast, can be simply exchanged one for another; if they hold the same value, there is no difference to the holder between, say, one dollar bill and another.

Bitcoin is a fungible token. You can send someone one Bitcoin and they can send one back, and you still have one Bitcoin. (Of course, the value of Bitcoin might change during the time of exchange.) You can also send or receive smaller amounts of one Bitcoin, measured in satoshis (think of satoshis as cents of a Bitcoin), since fungible tokens are divisible.

Typically, non-fungible tokens are not divisible, in the same way that you cannot send someone part of a concert ticket; part of a concert ticket wouldn’t be worth anything on its own and would not be redeemable. However, in recent months some investors have experimented with the concept of fractionalized NFTs , though they remain a legal grey area and could be seen as securities.

CryptoKitties collectibles were some of the first non-fungible tokens. Each blockchain-based digital kitten is unique; if you send someone a CryptoKitty and receive a CryptoKitty from someone else, the one you receive will be a completely different CryptoKitty from the one you sent. Collecting different digital kittens is the point of the game.

Just now announced in the Telegram group. The very first fancy cat that is extremely rare in the Cativerse, check it: https://t.co/wO2UI87Xgm pic.twitter.com/bYp65BYA3u — CryptoKitties (@CryptoKitties) November 14, 2017

The unique information of a non-fungible token, like a CryptoKitty, is stored in its smart contract and immutably recorded on that token’s blockchain. CryptoKitties were originally launched as ERC-721 tokens on the Ethereum blockchain, but have since migrated to their own blockchain, Flow , to be easier for crypto newcomers to access.

Did you know?

The trading volume for non-fungible tokens hit $10.67 billion in Q3 2021, an increase of 700% from the previous quarter.

What makes NFTs so special?

Non-fungible tokens have unique attributes; they are usually linked to a specific asset. They can be used to prove the ownership of digital items like game skins right through to the ownership of physical assets.

Other tokens are fungible, in the same way as coins or banknotes. Fungible tokens are identical, they have the same attributes and value when exchanged.

In March 2021, digital artist Beeple sold an NFT collage of his work for $69 million , making him the third most expensive living artist at auction, after David Hockney and Jeff Koons.

How are non-fungible tokens used?

As well as representing digital collectibles like CryptoKitties, NBA Top Shot and Sorare , non-fungible tokens can be used for digital assets that need to be differentiated from each other in order to prove their value, or scarcity. They can represent everything from virtual land parcels to artworks, to ownership licenses.

They're bought and sold on NFT marketplaces. While dedicated marketplaces such as OpenSea and Rarible have hitherto dominated the field, recently some of the leading cryptocurrency exchanges have begun to muscle in on the space. In June 2021, crypto exchange Binance launched its own NFT marketplace, while rival Coinbase announced its own plans for a NFT marketplace in October 2021, with over 1.4 million users signing up for the waitlist in the first 48 hours.

How do NFTs work?

Tokens like Bitcoin and Ethereum-based ERC-20 tokens are fungible. Ethereum’s non-fungible token standard, as used by platforms such as CryptoKitties and Decentraland, is ERC-721.

Non-fungible tokens can also be created on other smart-contract-enabled blockchains with non-fungible token tools and support. Though Ethereum was the first to be widely used, the ecosystem is expanding, with blockchains including Solana , NEO , Tezos , EOS , Flow , Secret Network , and TRON supporting NFTs.

Non-fungible tokens and their smart contracts allow for detailed attributes to be added, like the identity of the owner, rich metadata, or secure file links. The potent of non-fungible tokens to immutably prove digital ownership is an important progression for an increasingly digital world. They could see blockchain’s promise of trustless security applied to the ownership or exchange of almost any asset.

As is the challenge of blockchain to date, non-fungible tokens, their protocols and smart contract technology is still being developed. Creating decentralized applications and platforms for the management and creation of non-fungible tokens is still relatively complicated. There is also the challenge of creating a standard. Blockchain development is fragmented, many developers are working on their own projects. To be successful there may need to be unified protocols and interoperability.

How to buy NFT tokens

Non-fungible tokens can be purchased on a huge number of NFT marketplaces , including OpenSea, Rarible, and SuperRare.

Here's how to get your digital hands on some using Rarible:

Step 1: Head over to the Rarible website and click the 'Connect' button on the top right. From here, select the wallet you want to connect to the platform and log in.

You'll need to accept the terms of service before you can log in.

In our example, we'll connect using Metamask , a popular web and mobile wallet.

Step 2: Once logged in, search the platform for the NFT you're looking to purchase.

In our example, we'll show how you might purchase 'Hand of Fate' by Jango. The process will be similar regardless of which NFT you wish to purchase (assuming it is available to purchase outright).

Once you've selected the NFT you wish to purchase, click the 'Buy now' button.

Step 3: A confirmation window will pop up, asking you to double-check the details of the order.

If you're happy to continue, click the 'Proceed to payment' button to move ahead to the final step.

Step 4: Your wallet click will then pop up asking you to confirm the transaction. Again, if you're happy to continue, simply confirm the transaction and it will be processed.

Once it has confirmed, your NFT will be deposited directly to your Ethereum address and will be yours to keep.

Note: you may want to avoid buying your NFTs during peak times—otherwise you may end up with an inordinately high gas fee (as per our example below).

Who's making waves in the NFT space?

Cryptopunks.

Dating back to 2017, profile picture (PFP) series CryptoPunks is one of the earliest NFT projects in existence. Created by development studio Larva Labs , CryptoPunks are a series of 10,000 24x24 pixel art images depicting "punks" with randomized attributes, including gender, headgear and eyewear.

Originally released for free, CryptoPunks now command huge sums; at time of writing, the cheapest punks are on offer for six-figure sums, while the rarest punks, including aliens, apes and zombies, sell for millions of dollars. Even payments giant Visa has got in on the action, snapping up CryptoPunk #7610 as part of its collection of "historic commerce artefacts".

Over the last 60 years, Visa has built a collection of historic commerce artifacts - from early paper credit cards to the zip-zap machine. Today, as we enter a new era of NFT-commerce, Visa welcomes CryptoPunk #7610 to our collection. https://t.co/XoPFfwxUiu — VisaNews (@VisaNews) August 23, 2021

But what can you  do with CryptoPunks? They're chiefly used for "flexing"—demonstrating membership of an exclusive fraternity, with owners using them as avatars on social media sites. Indeed, the craze has prompted Twitter to roll out plans for verification of NFT avatars , to prevent people from passing off saved CryptoPunk images as the real deal. And we could be seeing them on the silver screen soon; Larva Labs has  signed with United Talent Agency to explore bringing its properties to film, television, video games, and more.

Bored Ape Yacht Club

Like CryptoPunks, Bored Ape Yacht Club is a series of NFT avatars—in this case, taking the form of disinterested-looking apes. And, also like CryptoPunks, there are 10,000 of them, each one has a randomly generated set of attributes, and a thriving community has sprung up around them.

Perhaps most importantly, owning a Bored Ape NFT makes you eligible for drops of additional NFTs, such as Bored Ape Kennel Club (a series of dog NFTs), and Mutant Ape Yacht Club (a series of, er, mutant apes). Think of it as a ticket to an exclusive club that offers perks for members.

That exclusive club has become increasingly exclusive in the past year, with a growing number of celebrities scooping up Bored Apes—including Eminem , Snoop Dogg and Stephen Curry . Like CryptoPunks' Larva Labs, Bored Ape Yacht Club creator Yuga Labs has secured Hollywood representation , with an eye on extending the brand into film, TV and other entertainment formats.

In December 2021, the floor price of Bored Ape NFTs overtook that of CryptoPunks for the first time, a mark of the PFP collection's growing popularity.

Axie Infinity

NFT collectibles like CryptoPunks and Bored Apes are one thing, but non-fungible tokens have a wide variety of applications—one of which is to represent digital objects in video games. And the biggest NFT video game around right now is Axie Infinity , which became the most traded NFT collection ever in Q3 2021, with trading volumes over $2.5 billion.

The game itself is a Pokémon-style affair that sees you collecting cute monsters called Axies, pitting them against each other in battles, and breeding them to create new Axies. The game's "play to earn" mechanic has seen players in countries like the Philippines making a living from breeding and trading Axies. However, the game itself has a steep learning curve , and with individual Axies trading for hundreds of dollars, assembling a team to get started isn't cheap.

NFTs and DeFi

Non-fungible tokens are also making waves in one of cryptocurrency’s most intriguing and innovative spaces, the decentralized finance ( DeFi ) space.

One example of how NFTs are being used in DeFi is Aavegotchi , an experimental startup funded by DeFi money market Aave . Aavegotchis are NFT crypto-collectibles used in a game universe; every Aavegotchi also has Aave's aTokens staked inside them as collateral, meaning that each one generates yield on Aave. If the owner liquidates their stake, the Aavegotchi disappears.

1/ Play to Earn 🎮💰 The Aavegotchi universe is closed loop, designed to reward active participants. Buy $GHST to start, then earn it by playing games, voting, and engaging in rarity farming - a novel variant of liquidity mining that rewards the rarest Aavegotchis with $GHST . pic.twitter.com/X5mYRZGqev — Aavegotchi 👻 💜 (@aavegotchi) September 10, 2020

Another service that's aiming to bridge the DeFi and NFT communites is Rarible , a decentralized app (or dapp ) that enables users to sell digital artwork in the Rarible market.

In July 2020, Rarible launched RARI, a governance token that's used to reward creators and collectors; it can only be earned through active participation on the platform, a process Rarible terms "marketplace liquidity mining."

Welcome $RARI : the first governance token in the NFT space, designed to reward active creators and collectors with a voice in Rarible's future. Make proposals, vote, curate, moderate –– the power is in your hands now. Learn more: https://t.co/LeQUmMvBEn pic.twitter.com/iVxA8aMiVO — Rarible (@rarible) July 15, 2020

Recent developments

The NFT space grew explosively in 2021, with trading volumes in Q3 hitting $10.67 billion, according to DappRadar—a year-over-year increase of over 38,000%. In August, top NFT marketplace OpenSea recorded trading volume of over $75 million in a single day—more than its  entire  trading volume in 2020.

Meanwhile, NFTs began to trade hands for eye-watering sums. In March 2021, digital artist Beeple sold a single NFT artwork for $69.3 million at auction, propelling him into the ranks of the top-selling living artists overnight. CryptoPunks, Bored Apes and Art Blocks traded hands for millions of dollars . Scenting a new market, venerable institutions such as auction houses Christie's and Sotheby's have embraced NFTs, hosting sales and (in the latter's case) launching its own NFT platform . Art galleries wrestled with the thorny question of how to display digital artwork .

Big money was accompanied by ever-bigger names, as artists and celebrities rode the wave of enthusiasm for NFTs. Rapper Snoop Dogg outed himself as an NFT collector and released NFT tickets for a party in crypto game The Sandbox; Ashton Kutcher and Mila Kunis launched their Stoner Cats cartoon as an NFT ; and NFL star Tom Brady launched his own NFT platform, Autograph .

The future of NFTs

For the time being, much of the attention around non-fungible tokens is focused on artwork, gaming and crypto collectibles. Increasingly, recognizable brands are licensing their content for NFTs; fantasy soccer game Sorare has signed up over 100 football clubs to its platform, while the likes of the Smurfs , Minecraft , and the BBC's Doctor Who have all been rendered as NFTs. Twitter launched its own collection of NFTs in June 2021; months later, it announced plans to verify users' NFT avatars .

For gaming, non-fungible tokens could be used to represent in-game items like skins, potentially allowing them to be ported to new games or traded with other players.

Their potential, however, is much wider; possible applications include copyright and intellectual property rights, ticketing, and the sale and trading of video games, music and movies. In September 2021, thriller film Zero Contact became the first feature-length movie to be released as an NFT; weeks later, pandemic-themed thriller Lockdown followed suit. In October, Tom Brady's NFT platform Autograph launched a music vertical, with The Weeknd as its first signing.

Video game companies have seized on the possibilities of NFTs, with Assassin's Creed publisher Ubisoft becoming the first major gaming company to launch in-game NFTs in late 2021. Other game companies including Konami have experimented with NFTs, but many gamers remain skeptical of the technology; in December 2021, developer GSC Game World abandoned plans to include in-game NFTs in its game S.T.A.L.K.E.R. 2: Heart of Chernobyl, following a widespread backlash among fans.

NFTs are also expected to become a key component of the metaverse, a persistent, shared virtual world where users can interact as 3D avatars. Companies such as Meta ( formerly Facebook ), Adidas , Nike and Samsung have all ventured into the metaverse, and more brands are expected to follow suit.

Metaverse platforms such as Decentraland and The Sandbox already make use of NFTs to represent plots of virtual land and in-game items such as clothing for avatars. The next step towards a single, persistent metaverse will likely make use of NFTs' interoperability, enabling users to move virtual items between different metaverse platforms.

Non-fungible tokens add potential to the creation of security tokens and the tokenization of both digital and real-world assets. Physical assets like property could be tokenized for fractional, or shared, ownership. If these security tokens are non-fungible, ownership over the asset is completely traceable and clear, even if only tokens representing part ownership are sold.

Further application of non-fungible tokens could include certification for qualifications, software licensing, warranties, and even birth and death certificates. The smart contract of a non-fungible token immutably proves the identity of the recipient or owner and could be stored in a digital wallet for ease of access and representation. One day, our digital wallets could contain proof of every certificate, license, and asset, we own.

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• Entertainment /
• NFTs, explained

I have questions about this emerging... um... art form? Platform?

By Mitchell Clark

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There’s nothing like an explosion of blockchain news to leave you thinking, “Um… what’s going on here?” That’s the feeling I’ve experienced while reading about Grimes getting millions of dollars for NFTs or about Nyan Cat being sold as one .

In the year since NFTs exploded in popularity, the situation has only gotten more complicated. Pictures of apes have sold for tens of millions of dollars , there’s been an endless supply of headlines about million-dollar hacks of NFT projects, and corporate cash grabs have only gotten worse.

All this news may have left you wondering: what is an NFT, anyhow?

After countless hours of research and discussions (most of which were against my will), I think I know. I also think I’m going to cry.

Okay, let’s start with the basics.

What is an NFT? What does NFT stand for?

Non-fungible token.

That doesn’t make it any clearer.

Right, sorry. “Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing.

A one-of-a-kind trading card, however, is non-fungible . If you traded it for a different card, you’d have something completely different. You gave up a Squirtle, and got a 1909 T206 Honus Wagner, which StadiumTalk calls “the Mona Lisa of baseball cards. ” (I’ll take their word for it.)

How do NFTs work?

At a very high level, most NFTs are part of the Ethereum blockchain, though other blockchains have implemented their own version of NFTs. Ethereum is a cryptocurrency, like bitcoin or dogecoin, but its blockchain also keeps track of who’s holding and trading NFTs.

How do you pronounce NFT?

Almost everyone spells it out, saying “en eff tee.” The brave call them “nefts.” The enlightened have never had the word cross their lips.

What’s worth picking up at the NFT supermarket?

NFTs can really be anything digital (such as drawings, music, your brain downloaded and turned into an AI), but a lot of the current excitement is around using the tech to sell digital art. 

You mean, like, people buying my good tweets?

I don’t think anyone can stop you, but that’s not really what I meant. A lot of the conversation is about NFTs as an evolution of fine art collecting , only with digital art.

But yes, someone could buy your good tweets. The founder of Twitter sold one for just under $3 million shortly after we originally posted this article.

Could you do a real quick rundown of what the blockchain is ?

Well, they’re pretty complex, but the basic idea is that blockchains are a way to store data without having to trust any one company or entity to keep things secure and accurate. There are definitely nuances and exceptions there, which you can read about in our blockchain explainer , but when most people say “blockchain,” that’s the kind of tech they’re talking about.

There’s also... a lot of nuance about whether NFT’s are on the blockchain or not, which we’ll dig into in a bit.

Oooh, foreshadowing.

I know, I feel like a real writer.

So do people really think this will be the future of collecting?

I’m sure some people really hope so — like whoever paid almost $390,000 for a 50-second video by Grimes or the person who paid $6.6 million for a video by Beeple . Actually, one of Beeple’s pieces was auctioned at Christie’s , the famou—

Sorry, I was busy right-clicking on that Beeple video and downloading the same file the person paid millions of dollars for.

Wow, rude. But yeah, that’s the awkward bit . You can copy a digital file as many times as you want, including the art that’s included with an NFT.

But NFTs are designed to give you something that can’t be copied: ownership of the work (though the artist can still retain the copyright and reproduction rights, just like with physical artwork). To put it in terms of physical art collecting: anyone can buy a Monet print. But only one person can own the original.

No shade to Beeple, but the video isn’t really a Monet.

What do you think of the $3,600 Gucci Ghost ? Also, you didn’t let me finish earlier. That image that Beeple was auctioning off at Christie’s ended up selling for $69 million , which, by the way, is $15 million more than Monet’s painting Nymphéas sold for in 2014.

Whoever got that Monet can actually appreciate it as a physical object. With digital art, a copy is literally as good as the original.

But the flex of owning an original Beeple...

I think I remember hearing that NFTs are already over . Didn’t the boom go bust ? Like for real this time ?

Sales have absolutely slumped since their peak, though like with seemingly everything in crypto there’s always somebody declaring it over and done with right before a big spike. Am I predicting that NFTs are about to make a comeback? Absolutely not, but I’m sure there are plenty of folks in NFT-based communities that are sure they’re still on the gravy train.

Oh no you’re about to talk about the apes aren’t you?

If you haven’t heard about the Bored Ape Yacht Club, it’s one of the most successful NFT projects, with apes (which are procedurally generated and have unique characteristics) selling for millions of dollars. The company behind the series of NFTs has created a spin-off cryptocurrency , broken the blockchain for a few hours with how popular one of their sales was, and even acquired other massive NFT brands . And a reminder: this all happened because people really like saying that they own a picture of a Bored Ape.

People like, for instance, Jimmy Fallon and Paris Hilton, who discussed their apes on TV in a clip that went viral for being soooo uncomfortable.

This kind of club isn’t really a new phenomenon — people have long built communities based on things they own , and now it’s happening with NFTs. It could be argued that one of the earliest NFT projects, CryptoPunks, got big thanks to its community .

• Bored Ape Yacht Club members want to build an empire, starting with weed

What’s the point of NFTs?

That really depends on whether you’re an artist or a buyer. 

I’m an artist.

First off: I’m proud of you. Way to go. You might be interested in NFTs because it gives you a way to sell work that there otherwise might not be much of a market for. If you come up with a really cool digital sticker idea, what are you going to do? Sell it on the iMessage App Store? No way.

Also, some NFT marketplaces have a feature where you can make sure you get paid a percentage every time your NFT is sold or changes hands . That makes sure that if your work gets super popular and balloons in value, you’ll see some of that benefit.

I’m a buyer.

One of the obvious benefits of buying art is it lets you financially support artists you like, and that’s true with NFTs (which are way trendier than, like, Telegram stickers). Buying an NFT also usually gets you some basic usage rights, like being able to post the image online or set it as your profile picture. Plus, of course, there are bragging rights that you own the art, with a blockchain entry to back it up.

No, I meant I’m a collector .

Ah, okay, yes. NFTs can work like any other speculative asset , where you buy it and hope that the value of it goes up one day, so you can sell it for a profit. I feel kind of dirty for talking about that, though.

So every NFT is unique?

In the boring, technical sense that every NFT is a unique token on the blockchain. But while it could be like a van Gogh, where there’s only one definitive actual version, it could also be like a trading card, where there’s 50 or hundreds of numbered copies of the same artwork.

Who would pay hundreds of thousands of dollars for what basically amounts to a trading card?

Well, that’s part of what makes NFTs so messy. Some people treat them like they’re the future of fine art collecting (read: as a playground for the mega-rich), and some people treat them like Pokémon cards (where they’re accessible to normal people but also a playground for the mega-rich). Speaking of Pokémon cards, Logan Paul sold some NFTs relating to a million-dollar box of the—

Please stop. I hate where this is going.

Yeah, he sold NFT video clips, which are just clips from a video you can watch on YouTube anytime you want, for up to $20,000 . He also sold NFTs of a Logan Paul Pokémon card.

Who paid $20,000 for a video clip of Logan Paul?!

A fool and their money are soon parted , I guess?

It would be hilarious if Logan Paul decided to sell 50 more NFTs of the exact same video.

Linkin Park’s Mike Shinoda (who also sold some NFTs that included a song) actually talked about that . It’s totally a thing someone could do if they were, in his words, “an opportunist crooked jerk.” I’m not saying that Logan Paul is that, just that you should be careful who you buy from.

Are NFTs mainstream now?

It depends on what you mean. If you’re asking if, say, my mom owns one, the answer is no.

But we have seen big brands and celebrities like Marvel and Wayne Gretzky launch their own NFTs, which seem to be aimed at more traditional collectors, rather than crypto-enthusiasts. While I don’t think I’d call NFTs “mainstream” in the way that smartphones are mainstream, or Star Wars is mainstream, they do seem to have, at least to some extent, shown some staying power even outside of the cryptosphere.

But what do The Youth think of them?

Ah yes, excellent question. We here at The Verge have an interest in what the next generation is doing , and it certainly does seem like some of them have been experimenting with NFTs. An 18 year-old who goes by the name FEWOCiOUS says that his NFT drops have netted over $17 million — though obviously most haven’t had the same success. The New York Times talked to a few teens in the NFC space, and some said they used NFTs as a way to get used to working on a project with a team, or to just earn some spending money.

Okay, but what does Keanu Reeves think of NFTs?

He doesn’t seem impressed .

That moment would make a great NFT.

Someone thought that too, and minted that clip as an NFT. It wasn’t us though! Rampant copyright infringement is an ongoing problem in the space. One of the post popular NFT trading sites estimated that over 80 percent of the artwork minted using its free tool were “plagiarized works, fake collections, and spam.” Which is, you know, not a great look? 

• The counterfeit NFT problem is only getting worse

Can I buy this article as an NFT?

No, but technically anything digital could be sold as an NFT (including articles from Quartz and The New York Times , provided you have anywhere from $1,800 to $560,000). deadmau5 has sold digital animated stickers. William Shatner has sold Shatner-themed trading cards (one of which was apparently an X-ray of his teeth).

Gross. Actually, could I buy someone’s teeth as an NFT?

There have been some attempts at connecting NFTs to real-world objects, often as a sort of verification method. Nike has patented a method to verify sneakers’ authenticity using an NFT system, which it calls CryptoKicks . But so far, I haven’t found any teeth, no. I’m scared to look.

Look? Where? 

There are several marketplaces that have popped up around NFTs, which allow people to buy and sell. These include OpenSea, Rarible, and Grimes’ choice, Nifty Gateway, but there are plenty of others.

I’ve heard there were kittens involved. Tell me about the kittens.

NFTs really became technically possible when the Ethereum blockchain added support for them as part of a new standard . Of course, one of the first uses was a game called CryptoKitties that allowed users to trade and sell virtual kittens. Thank you, internet.

I love kittens .

Not as much as the person who paid over $170,000 for one .

Arrrrrggggg!

Same. At one point I thought that the kittens would be used in games in a somewhat interesting ways. That glimmer of hope has been decimated by the fact that almost every salesperson in the NFT space promises that their tokens will be part of a game or metaverse.

When real game developers like Ubisoft and the studio behind STALKER have said they’d integrate NFTs into their games... people reacted VERY negatively. The companies have either had to scrap their plans entirely or severely tone down the amount of blockchain stuff in their games.

Of course, there have been a few fun experiments in the NFT space (though I’ll admit that at least one of them was poking fun at the concept of NFTs ), but... listen, one of the most successful NFT-based games is kind of a weird version of feudalism , and also got mega-hacked . So there’s that.

At least it’s not digital pet rocks... right?

In fact, there are people who spent tens or hundreds of thousands of dollars on NFT pet rocks (the website for which says that the rocks serve no purpose other than being tradable and limited).

Can I cry on your shoulder?

Only if I can cry on yours.

Could I pull off a museum heist to steal NFTs?

That depends. Part of the allure of blockchain is that it stores a record of each time a transaction takes place, making it harder to steal and flip than, say, a painting hanging in a museum.

Or at least that’s the theory. In reality, many, many people have gotten their NFTs stolen by attackers using a variety of tactics. To be clear, hackers aren’t always playing 5D chess here. For the ever complicated hack of the programs that control the flow of crypto , there’s a case where someone was tricked into signing a transaction they shouldn’t have through run-of-the-mill phishing.

• OpenSea’s official Discord compromised in a phishing attack that stole at least $18k worth of NFTs

Note: Please don’t steal.

Should I be worried about digital art being around in 500 years?

Probably. Bit rot is a real thing: image quality deteriorates, file formats can’t be opened anymore, websites go down, people forget the password to their wallets . But physical art in museums is also shockingly fragile . 

But wait, doesn’t the fact that they’re on the blockchain make them permanent?

Okay, so this is a whole thing. Technically, yes: when you say NFT you’re referring to an entry on the blockchain. However , the actual media, like the picture, GIF, or flagrant flaunting of copyright law is very rarely actually stored on the blockchain — it’d be too expensive to do that.

Sometimes the media the NFT points to is stored on a cloud service, which isn’t exactly decentralized. Since this has come up as an issue, with people worried that their NFT proving they watched the Lions lose could go poof if one company goes under or changes their URL scheme, many in the NFT space have been turning to decentralized storage solutions like the InterPlanetary File System that use torrent-like technology. It’s not bulletproof, but it’s better than having your million-dollar JPG stored on Google Photos.

Torrent-like? So people are pirating NFTs?

No... Well, kinda, but hold that thought. The idea behind IPFS is that files are stored on a peer-to-peer network, meaning they could be stored on several computers at once. Files are given an identifier, and when a computer goes to load the file it asks the IPFS network to give it the file with that ID. Any of the computers storing it can say, “Oh, here it is!”

When you make an NFT, the content link is baked into the token. If that link goes to IPFS, it’ll be pointing to something that’s more permanent than, say, an image on a regular server.

In theory, anyways. Of course, distributed does not equal perfect. Experts have warned that files could still end up on a single computer, and could be lost in the case of a hard drive crash.

• Your million-dollar NFT can break tomorrow if you’re not careful

Okay, so what’s that you said about pirating?

So someone created this site called The NFT Bay as a sort of art project, where they put up a torrent pointing to a 19TB ZIP file, which they said included every NFT on the Ethereum and Solana blockchains. There’s some doubt about whether was actually a treasure trove of NFTs (if such a thing could be referred to as “treasure”), but in theory it’s actually possible to scan the blockchain to find every record of an NFT being minted, and download the media it links to.

Real or not, it was an incredible piece of performance art, sparking a conversation (okay, closer to a flame war) about the right-clicker mindset.

Sorry, what on Earth is a right-clicker mindset?

Ah, sorry. “Right clicker” is sort of a joking derisive term used by NFT boosters to deride people who just don’t get it. The thought is that you’re completely missing the point if you think that just downloading (or pirating) a JPEG will actually get you the valuable part of an NFT. 

Has anyone ever had their feelings hurt when someone tells them they have a right click mindset? Probably not, but their eyes may get a little sore from rolling so hard. 

I want to maximize my blockchain use. Can I buy NFTs with cryptocurrencies?

Yes. Probably. A lot of the marketplaces accept Ethereum. But technically, anyone can sell an NFT, and they could ask for whatever currency they want.

Will trading my Logan Paul NFTs contribute to global warming and melt Greenland?

It’s definitely something to look out for. Since NFTs use the same blockchain technology as some energy-hungry cryptocurrencies, they also end up using a lot of electricity. There are people working on mitigating this issue , but so far, most NFTs are still tied to cryptocurrencies that generate a lot of greenhouse gas emissions. There have been a few cases where artists have decided to not sell NFTs or to cancel future drops after hearing about the effects they could have on climate change . Thankfully, one of my colleagues has really dug into it, so you can read this piece to get a fuller picture .

Can I build an underground art cave / bunker to store my NFTs?

Well, like cryptocurrencies, NFTs are stored in digital wallets (though it is worth noting that the wallet does specifically have to be NFT-compatible). You could always put the wallet on a computer in an underground bunker, though.

What if I wanted to watch a TV show that’s somehow related to NFTs?

Believe it or not, you have options! Steve Aoki is working on a show based on a character from a previous NFT drop , called Dominion X . The show’s site says that it’ll be an episodic series launched on the blockchain (the first short video is on OpenSea ), and there are hundreds of NFTs already associated with the show.

There’s also a show called Stoner Cats (yes, it’s about cats that get high, and yes it stars Mila Kunis, Chris Rock, and Jane Fonda), which uses NFTs as a sort of ticket system. Currently, there’s only one episode available, but a Stoner Cat NFT (which, of course, is called a TOKEn) is required to watch it.

Random question: what’s an NFT party like?

My colleague went to an event linked to NFT.NYC . It sounds like it was a... unique (or should I say non-fungible?) experience.

Are you tired of typing “NFT”?

This story was first published March 3rd, 2021. It has been updated to reflect new developments in NFTs.

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Google pulls gemini ai ad from olympics after backlash, surface pro 11 review: tantalizingly close to the dream, microsoft teams is finally cleaning up chats and channels, the pixel 8 pro has hit an all-time low ahead of google’s next hardware event.

More from The Year of the NFT

• How to create an NFT — and why you may not want to
• Some NFT influencers want you to ignore the hype
• Why a $30 million CryptoPunks auction fell apart at the last minute
• NBA Top Shot seemed like a slam dunk — so why are some collectors crying foul?
• Is NFT art any good?
• The tangled truth about NFTs and copyright
• How to frame your NFT
• The freelance artist behind a million-dollar NFT collection
• A trip to the GaryVee convention, where everyone is part of crypto’s 1 percent
• The graffiti economics behind Williamsburg’s wall of NFTs

• Cryptocurrency

What Is An NFT? Non-Fungible Tokens Explained

Updated: May 10, 2024, 3:41pm

Non-fungible tokens (NFTs) seem to be everywhere these days. From art and music to tacos and toilet paper, these digital assets are selling like 17th-century exotic Dutch tulips —some for millions of dollars.

But are NFTs worth the money—or the hype? Some experts say they’re a bubble poised to pop, like the dot-com craze or Beanie Babies. Others believe NFTs are here to stay, and that they will change investing forever.

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What Is an NFT?

An NFT is a digital asset that can come in the form of art, music, in-game items, videos, and more. They are bought and sold online, frequently with cryptocurrency , and they are generally encoded with the same underlying software as many cryptos.

Although they’ve been around since 2014, NFTs are gaining notoriety now because they are becoming an increasingly popular way to buy and sell digital artwork. The market for NFTs was worth a staggering $41 billion in 2021 alone, an amount that is approaching the total value of the entire global fine art market.

NFTs are also generally one of a kind, or at least one of a very limited run, and have unique identifying codes. “Essentially, NFTs create digital scarcity,” says Arry Yu, chair of the Washington Technology Industry Association Cascadia Blockchain Council and managing director of Yellow Umbrella Ventures.

This stands in stark contrast to most digital creations, which are almost always infinite in supply. Hypothetically, cutting off the supply should raise the value of a given asset, assuming it’s in demand.

But many NFTs, at least in these early days, have been digital creations that already exist in some form elsewhere, like iconic video clips from NBA games or securitized versions of digital art that’s already floating around on Instagram.

Famous digital artist Mike Winklemann, better known as “Beeple,” crafted a composite of 5,000 daily drawings to create perhaps the most famous NFT of 2021, “EVERYDAYS: The First 5000 Days,” which sold at Christie’s for a record-breaking $69.3 million .

Anyone can view the individual images—or even the entire collage of images online for free. So why are people willing to spend millions on something they could easily screenshot or download?

Because an NFT allows the buyer to own the original item. Not only that, it contains built-in authentication, which serves as proof of ownership. Collectors value those “digital bragging rights” almost more than the item itself.

How Is an NFT Different from Cryptocurrency?

NFT stands for non-fungible token. It’s generally built using the same kind of programming as cryptocurrency, like Bitcoin or Ethereum , but that’s where the similarity ends.

Physical money and cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They’re also equal in value—one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin. Crypto’s fungibility makes it a trusted means of conducting transactions on the blockchain.

NFTs are different. Each has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another (hence, non-fungible). One NBA Top Shot clip, for example, is not equal to EVERYDAYS simply because they’re both NFTs. (One NBA Top Shot clip isn’t even necessarily equal to another NBA Top Shot clip, for that matter.)

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How Does an NFT Work?

NFTs exist on a blockchain, which is a distributed public ledger that records transactions. You’re probably most familiar with blockchain as the underlying process that makes cryptocurrencies possible.

Specifically, NFTs are typically held on the Ethereum blockchain, although other blockchains support them as well.

An NFT is created, or “minted” from digital objects that represent both tangible and intangible items, including:

• Videos and sports highlights
• Collectibles
• Virtual avatars and video game skins
• Designer sneakers

Even tweets count. Twitter co-founder Jack Dorsey sold his first ever tweet as an NFT for more than $2.9 million .

Essentially, NFTs are like physical collector’s items, only digital. So instead of getting an actual oil painting to hang on the wall, the buyer gets a digital file instead.

They also get exclusive ownership rights. NFTs can have only one owner at a time, and their use of blockchain technology makes it easy to verify ownership and transfer tokens between owners. The creator can also store specific information in an NFT’s metadata. For instance, artists can sign their artwork by including their signature in the file.

What Are NFTs Used For?

Blockchain technology and NFTs afford artists and content creators a unique opportunity to monetize their wares. For example, artists no longer have to rely on galleries or auction houses to sell their art. Instead, the artist can sell it directly to the consumer as an NFT, which also lets them keep more of the profits. In addition, artists can program in royalties so they’ll receive a percentage of sales whenever their art is sold to a new owner. This is an attractive feature as artists generally do not receive future proceeds after their art is first sold.

Art isn’t the only way to make money with NFTs. Brands like Charmin and Taco Bell have auctioned off themed NFT art to raise funds for charity. Charmin dubbed its offering “NFTP” (non-fungible toilet paper), and Taco Bell’s NFT art sold out in minutes, with the highest bids coming in at 1.5 wrapped ether (WETH)—equal to $3,723.83 at time of writing.

Nyan Cat, a 2011-era GIF of a cat with a pop-tart body, sold for nearly $600,000 in February . And NBA Top Shot generated more than $500 million in sales as of late March. A single LeBron James highlight NFT fetched more than $200,000.

Even celebrities like Snoop Dogg and Lindsay Lohan are jumping on the NFT bandwagon, releasing unique memories, artwork and moments as securitized NFTs.

How to Buy NFTs

If you’re keen to start your own NFT collection, you’ll need to acquire some key items:

First, you’ll need to get a digital wallet that allows you to store NFTs and cryptocurrencies. You’ll likely need to purchase some cryptocurrency , like Ether, depending on what currencies your NFT provider accepts. You can buy crypto using a credit card on platforms like Coinbase, Kraken, eToro and even PayPal and Robinhood now. You’ll then be able to move it from the exchange to your wallet of choice.

You’ll want to keep fees in mind as you research options. Most exchanges charge at least a percentage of your transaction when you buy crypto.

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Popular NFT Marketplaces

Once you’ve got your wallet set up and funded, there’s no shortage of NFT sites to shop. Currently, the largest NFT marketplaces are:

•   OpenSea.io : This peer-to-peer platform bills itself a purveyor of “rare digital items and collectibles.” To get started, all you need to do is create an account to browse NFT collections. You can also sort pieces by sales volume to discover new artists.

•   Rarible : Similar to OpenSea, Rarible is a democratic, open marketplace that allows artists and creators to issue and sell NFTs. RARI tokens issued on the platform enable holders to weigh in on features like fees and community rules.

•   Foundation : Here, artists must receive “upvotes” or an invitation from fellow creators to post their art. The community’s exclusivity and cost of entry—artists must also purchase “gas” to mint NFTs—means it may boast higher-caliber artwork. For instance, Nyan Cat creator Chris Torres sold the NFT on the Foundation platform. It may also mean higher prices — not necessarily a bad thing for artists and collectors seeking to capitalize, assuming the demand for NFTs remains at current levels, or even increases over time.

Although these platforms and others are host to thousands of NFT creators and collectors, be sure you do your research carefully before buying. Some artists have fallen victim to impersonators who have listed and sold their work without their permission.

In addition, the verification processes for creators and NFT listings aren’t consistent across platforms — some are more stringent than others. OpenSea and Rarible, for example, do not require owner verification for NFT listings. Buyer protections appear to be sparse at best, so when shopping for NFTs, it may be best to keep the old adage “caveat emptor” (let the buyer beware) in mind.

Should You Buy NFTs?

Just because you can buy NFTs, does that mean you should? It depends, Yu says.

“NFTs are risky because their future is uncertain, and we don’t yet have a lot of history to judge their performance,” she notes. “Since NFTs are so new, it may be worth investing small amounts to try it out for now.”

In other words, investing in NFTs is a largely personal decision. If you have money to spare, it may be worth considering, especially if a piece holds meaning for you.

But keep in mind, an NFT’s value is based entirely on what someone else is willing to pay for it. Therefore, demand will drive the price rather than fundamental, technical or economic indicators, which typically influence stock prices and at least generally form the basis for investor demand.

All this means, an NFT may resale for less than you paid for it. Or you may not be able to resell it at all if no one wants it.

NFTs are also subject to capital gains taxes —just like when you sell stocks at a profit. Since they’re considered collectibles, however, they may not receive the preferential long-term capital gains rates stocks do and may even be taxed at a higher collectibles tax rate, though the IRS has not yet ruled what NFTs are considered for tax purposes. Bear in mind, the cryptocurrencies used to purchase the NFT may also be taxed if they’ve increased in value since you bought them, meaning you may want to check in with a tax professional when considering adding NFTs to your portfolio.

That said, approach NFTs just like you would any investment: Do your research, understand the risks—including that you might lose all of your investing dollars—and if you decide to take the plunge, proceed with a healthy dose of caution.

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Pop Culture

What's an nft and why are people paying millions to buy them.

Bobby Allyn

A work called Nyan Cat by Chris Torres sold for $590,000 recently. It's part of growing interest in digital assets, known as nonfungible tokens, or NFTs, that are generating millions of dollars in sales every day. Chris Torres hide caption

A work called Nyan Cat by Chris Torres sold for $590,000 recently. It's part of growing interest in digital assets, known as nonfungible tokens, or NFTs, that are generating millions of dollars in sales every day.

The artist Grimes recently sold a bunch of NFTs for nearly $6 million. An NFT of LeBron James making a historic dunk for the Lakers garnered more than $200,000. The band Kings of Leon is releasing its new album in the form of an NFT.

At the auction house Christie's, bids on an NFT by the artist Beeple are already reaching into the millions.

And on Friday, Twitter CEO Jack Dorsey listed his first-ever tweet as an NFT.

Digital artist Beeple posted a new work of art online every single day for 5000 days. Those pieces have been brought together in one digital collage EVERYDAYS: THE FIRST 5000 DAYS, minted as an NFT and is being auctioned off by Christie's. The current bid is $3M pic.twitter.com/rwwa64YXNV — Tanay Jaipuria (@tanayj) March 1, 2021

Safe to say, what started as an Internet hobby among a certain subset of tech and finance nerds has catapulted to the mainstream.

Which leads to some obvious questions. Chief among them: What on earth is an NFT?

NFT stands for what now?

It stands for "nonfungible token."

Nonfungible, meaning you can't exchange it for another thing of equal value. A $10 bill can be exchanged for two $5 bills. One bar of gold can be swapped for another bar of gold of the same size. Those things are fungible. An NFT, though, is one of a kind.

The token refers to a unit of currency on the blockchain. It's how cryptocurrency like Bitcoin is bought and sold .

"Remember those days where people would line up for the newest Nike Air Jordan sneakers at the physical store? This is the new digital equivalent," said Katie Haun, a general partner at the venture capital firm Andreessen Horowitz.

"It's everything that brings together culture, and it's also a bet on the future of e-commerce," Haun said.

Still. What exactly do you get when you buy an NFT?

This question unleashes a fury of debate among NFT enthusiasts. The answer is not simple.

Are you buying what amounts to an Internet trophy? Clout? A feeling? A digital collector's item?

Perhaps, but you are also purchasing a kind of bar code, almost a certificate of authenticity that serves as proof that a certain version of something is uniquely yours.

"The underlying thing that you're buying is code that manifests as images," said Donna Redel, who teaches courses on crypto-digital assets at Fordham Law School. "You're buying a different format of art."

👑HAIL TO THE KING👑 @andy8052 acquired this Serial No. 1 Legendary LeBron James Moment from our From The Top Series 1 set for $71,455 🚀 An iconic tribute dunk, indeed 💯 The TOP acquisition for any NBA Top Shot Moment ... so far 📈 Very nice pickup for the collection! 🎉 pic.twitter.com/LQuhgeYr45 — NBA Top Shot (@NBATopShot) January 22, 2021

But note that when you buy an NFT, you're usually not getting the copyright or trademark to the item. And just because you own an NFT doesn't mean there aren't endless other versions of that thing on the Internet. There will be. It's the Internet.

Still, NFT enthusiasts say owning a piece of code in a blockchain has shown itself to be an incredibly valuable thing.

"You're not buying the picture," said Jake Brukhman, founder of cryptocurrency investment company CoinFund. "You're buying the property rights to the picture."

She explained it better in 1m than I could in 2K words 😅 pic.twitter.com/sJ7Z7NjWH0 — robert (sped up) (@Brotractor) March 4, 2021

Why don't people just right-click on an image instead and save it to their desktop? That's free.

But like with other collectables, whether it's baseball cards, rare books or fine art, having an original is special.

Take CryptoPunks , pixelated avatars that have fetched millions of dollars. Sure, you could download one of the alien avatars, but collectors would not consider it authentic. A real alien CryptoPunk costs, on average, $900,000.

Someone just placed a 1,390 ETH ($2 million) bid on CryptoPunk #3100 👀 pic.twitter.com/cKwPoeFMGz — nft now (@nftnow) March 1, 2021

To be clear, there's no visual difference between an original and a copied version.

And to make it even more confusing, not all NFTs are originals. Many are the digital equivalent of a reprint. But in this case, the reprint has what is essentially a unique bar code, or "token," on the blockchain, which is a type of decentralized record-keeping system. In other words, instead of one institution, like a bank, having a ledger of transactions, a blockchain uses a vast network of computers that all hold each other accountable on a shared public record.

That makes it hard to remove an NFT from the Web entirely. It also means there's a way to trace an NFT's origin and transaction history.

How do you buy or sell an NFT?

It takes some steps .

First, you usually have to buy a cryptocurrency, like Ethereum. That's a process in and of itself. But once you do, you can go to an NFT marketplace. Some of the popular ones include KnownOrigin , Rarible and OpenSea .

There, you can bid on an NFT and wait for the auction to end. If no one outbids you, you get the bragging rights.

@OpenSea is undoubtedly where all the NFT hype go through though, it does not get more hockey stick than this! 🏒⛵️ Dashboard by the Dune wizard @richardchen39 🧙‍♂️ https://t.co/mpKOaBoPhh pic.twitter.com/TEMYbzjflW — Dune | We are hiring! (@DuneAnalytics) February 26, 2021

How do you make an NFT?

Log on to one of the NFT marketplaces and upload a file. This process is called "minting" an NFT.

You'll usually be asked if it's a one of a kind, if there are multiple copies or if it's part of a collection. (A quick glance at an NFT marketplace shows just how easy the process is — maybe too easy. Some people are trying to sell tweets and even colors as NFTs.)

Once you're done, collectors can start bidding.

Digital artists can build a royalty into their NFTs, even for future sales, which is why many artists see promise in NFTs: It can cut out the middleman and open up a new way to make money.

If you're not interested in buying or selling them, why should you care?

As tens of millions of dollars in transactions pour in for NFTs, enthusiasts say, NFTs will soon expand beyond trading art, music, video clips and memes. One startup lets people use their NFTs as collateral for loans.

Silicon Valley investors say the moneymaking possibilities in the NFT world are limitless.

"At the time the iPhone was created, nobody would've thought that one of the killer apps was going to be hailing a ride," said Haun of Andreessen Horowitz.

What are the risks?

There's always a chance that a tech frenzy is a passing fad or is stoking a speculative bubble. If you spend a pretty penny on an NFT and then enthusiasm and values suddenly plummet, you could be in for a big loss. But NFT backers say the system's built-in scarcity should keep values up, as long as the surge of interest persists.

Be cautious about works that appear to be created by famous artists. NFTs resembling pieces by the artist Banksy have netted $900,000, but they have turned out to be fakes.

Then there is the environmental impact of NFTs, which has attracted real scrutiny. The computing power required to operate the underlying blockchain system of NFTs is immense. By some estimates , one crypto transaction could gobble up more power than the average U.S. household uses in a single day. One artist estimated that generating six NFT pieces consumed more electricity than his entire physical studio did in two years.

"The energy production infrastructure is out of our sight," wrote Brussels-based artist Joanie Lemercier.

"And we often have the feeling that electricity is abundant, limitless and we disregard its impact."

Correction March 9, 2021

An earlier version of this story misspelled the name of venture capital firm Andreessen Horowitz.

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Non-Fungible Token (NFT): What It Means and How It Works

Understand how and why NFTs are being used today

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

What Is a Non-Fungible Token (NFT)?

Non-fungible tokens (NFTs) are assets like a piece of art, digital content, or video that have been tokenized via a blockchain. Tokens are unique identification codes created from metadata via an encryption function. These tokens are then stored on a blockchain, while the assets themselves are stored in other places. The connection between the token and the asset is what makes them unique.

NFTs can be traded and exchanged for money, cryptocurrencies, or other NFTs—it all depends on the value the market and owners have placed on them. For instance, you could draw a smiley face on a banana, take a picture of it (which has metadata attached to it), and tokenize it on a blockchain. Whoever has the private keys to that token owns whatever rights you have assigned to it.

Cryptocurrencies are tokens as well; however, the key difference is that two cryptocurrencies from the same blockchain are interchangeable—they are fungible. Two NFTs from the same blockchain can look identical, but they are not interchangeable.

Key Takeaways

• NFTs (non-fungible tokens) are unique cryptographic tokens that exist on a blockchain and cannot be replicated.
• NFTs can represent digital or real-world items like artwork and real estate.
• "Tokenizing" these real-world tangible assets makes buying, selling, and trading them more efficient while reducing the probability of fraud.
• NFTs can represent individuals' identities, property rights, and more.
• Collectors and investors initially sought NFTs after the public became more aware of them, but their popularity has since waned.

Investopedia / Julie Bang

History of Non-Fungible Tokens (NFTs)

NFTs were created long before they became popular in the mainstream. Reportedly, the first NFT sold was "Quantum," designed and tokenized by Kevin McKoy in 2014 on one blockchain (Namecoin), then minted on Ethereum and sold in 2021.

NFTs are built following the ERC-721 (Ethereum Request for Comment #721) standard, which dictates how ownership is transferred, methods for confirming transactions, and how applications handle safe transfers (among other requirements). The ERC-1155 standard, approved six months after ERC-721, improves upon ERC-721 by batching multiple non-fungible tokens into a single contract, reducing transaction costs.

In early March 2021, a group of NFTs by digital artist Beeple sold for over $69 million. The sale set a precedent and record for the most expensive digital art sold at the time. The artwork was a collage comprised of Beeple's first 5,000 days of work.

NFTs are created through a process called minting, in which the asset's information is encrypted and recorded on a blockchain. At a high level, the minting process entails a new block being created, NFT information being validated by a validator, and the block being closed. This minting process often entails incorporating smart contracts that assign ownership and manage NFT transfers.

As tokens are minted, they are assigned a unique identifier directly linked to one blockchain address. Each token has an owner, and the ownership information (i.e., the address in which the minted token resides) is publicly available. Even if 5,000 NFTs of the same exact item are minted (similar to general admission tickets to a movie), each token has a unique identifier and can be distinguished from the others.

Many blockchains can create NFTs, but they might be called something different. For instance, on the Bitcoin blockchain, they are called Ordinals. Like an Ethereum-based NFT, a Bitcoin Ordinal can be bought, sold, and traded. The difference is Ethereum creates tokens for the asset, while Ordinals have serial numbers (called identifiers) assigned to satoshis—the smallest bitcoin denomination.

Blockchain and Fungibility

Like physical money, cryptocurrencies are usually fungible from a financial perspective, meaning that they can be traded or exchanged, one for another. For example, one bitcoin is always equal in value to another bitcoin on a given exchange, similar to how every dollar bill of U.S. currency has an implicit exchange value of $1. This fungibility characteristic makes cryptocurrencies suitable as a secure medium of transaction in the digital economy.

For this reason, NFTs shift the crypto paradigm by making each token unique and irreplaceable, making it impossible for one non-fungible token to be "equal" to another. They are digital representations of assets and have been likened to digital passports because each token contains a unique, non-transferable identity to distinguish it from other tokens. They are also extensible, meaning you can combine one NFT with another to create a third, unique NFT—the cryptocurrency industry calls this "breeding."

Examples of NFTs

Perhaps the most famous use case for NFTs is that of cryptokitties. Launched in November 2017, cryptokitties are digital representations of cats with unique identifications on Ethereum’s blockchain. Each kitty is unique and has a different price. They "reproduce" among themselves and create new offspring with other attributes and valuations compared to their "parents."

Within a few short weeks of their launch, cryptokitties racked up a fan base that spent millions in ether to purchase, feed, and nurture them.

Much of the earlier market for NFTs was centered around digital art and collectibles , but it has evolved into much more. For instance, the popular NFT marketplace OpenSea has several NFT categories:

• Photography : Photographers can tokenize their work and offer total or partial ownership. For example, OpenSea user erubes1 has an "Ocean Intersection" collection of beautiful ocean and surfing photos with several sales and owners.
• Sports : Collections of digital art based on celebrities and sports personalities.
• Trading cards : Tokenized digital trading cards. Some are collectibles, while others can be traded in video games.
• Utility : NFTs that can represent membership or unlock benefits.
• Virtual worlds : Virtual world NFTs grant you ownership of anything from avatar wearables to digital property.
• Art : A generalized category of NFTs that includes everything from pixel to abstract art.
• Collectibles : Bored Ape Yacht Club, Crypto Punks, and Pudgy Panda are some examples of NFTs in this category.
• Domain names : NFTs that represent ownership of domain names for your website(s)
• Music : Artists can tokenize their music, granting buyers the rights the artist wants them to have.

Benefits of NFTs

Perhaps the most apparent benefit of NFTs is market efficiency . Tokenizing a physical asset can streamline sales processes and remove intermediaries. NFTs representing digital or physical artwork on a blockchain can eliminate the need for agents and allow sellers to connect directly with their target audiences (assuming the artists know how to host their NFTs securely).

NFTs can also be used to streamline investing. For example, consulting firm Ernst & Young developed an NFT solution for one of its fine wine investors—by storing wine in a secure environment and using NFTs to protect provenance.

Real estate can also be tokenized—a property could be parceled into multiple sections, each containing different characteristics. For example, one of the sections might be on a lakeside, while another is closer to the forest. Depending on its features, each piece of land could be unique, priced differently, and represented by an NFT. Real estate trading, a complex and bureaucratic affair, could then be simplified by incorporating relevant metadata into a unique NFT associated with only the corresponding portion of the property.

NFTs can represent ownership in a business, much like stocks—in fact, stock ownership is already tracked via ledgers that contain information such as the stockholder's name, date of issuance, certificate number, and the number of shares. A blockchain is a distributed and secured ledger, so issuing NFTs to represent shares serves the same purpose as issuing stocks. The main advantage to using NFTs and blockchain instead of a stock ledger is that smart contracts can automate ownership transferral—once an NFT share is sold, the blockchain can take care of everything else.

Non-fungible tokens are also very useful in identity security. For example, personal information stored on an immutable blockchain cannot be accessed, stolen, or used by anyone who doesn't have the keys.

NFTs can also democratize investing by fractionalizing physical assets. Fractionalized ownership through tokenization can extend to many assets. For instance, a painting need not always have a single owner—tokenization allows multiple people to purchase a share of it, transferring ownership of a fraction of the physical painting to them.

Concerns About Non-Fungible Tokens

While there are numerous benefits for creators, owners, investors, and other interested parties, there are several issues that should concern you if you're considering investing or minting NFTs.

The token represents ownership via hashed metadata and matching key pairs generated by your wallet. The image, video, music, or other digitized item can be copied and circulated without your permission using various techniques. It's very easy to copy an image by right-clicking on it and saving it. The person who does this to a tokenized digital asset is pirating the asset because there is established ownership. However, it is up to the owner to locate and file charges against the multitudes of people who might do this.

Non-fungible tokens are also very limited by their liquidity. They attract a specific audience of collectors or buyers because they are much more specific than cryptocurrencies. If you find yourself holding an NFT you no longer want, it might be difficult to find a buyer if that type is no longer popular.

How Does NFT Make Money?

It depends on what the NFT represents. If it is tokenized real estate, the NFT would be exchanged for the property's market value, which, if it has appreciated, would generate a return for the seller. If the NFT were an image of a monkey in a hat, it would depend on that specific token's market value. If its price had increased since it was last purchased, a seller would earn a profit.

What Is the Point of Having NFTs?

Non-fungible tokens can be valuable to the right person. To an investor, they might appreciate in value. To a collector, they might just be a collection they want to keep. Another person might only want to own it, yet another might consider it memorabilia of a specific moment they treasure.

What Is the Meaning of NFT?

Non-fungible token (NFT) is the opposite of a fungible token, which describes the interchangeability of a token. For example, say you had three notes with identical smiley faces drawn on them. When you tokenize one of them, that note becomes distinguishable from the others—it is non-fungible. The other two notes are indistinguishable, so they can each take the place of the other.

What Is the Concept Behind NFTs?

The idea behind NFTs is to create tokens that represent ownership. The token could represent anything from a digital image to partial ownership of an interstellar spaceship. In theory, because they are created using blockchain technology, they are immutable, secure, and don't require the intervention of third parties.

Non-fungible tokens are an evolution of the cryptocurrency concept. Modern finance systems consist of sophisticated trading and loan systems for different asset types, from real estate to lending contracts to artwork. By enabling digital representations of assets, NFTs are a step forward in the reinvention of this infrastructure.

To be sure, the idea of digital representations of physical assets is not novel, nor is the use of unique identification. However, when these concepts are combined with the benefits of a tamper-resistant blockchain with smart contracts and automation, they become a potent force for change.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer  for more info. As of the date this article was written, the author owns BTC and LTC.

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NFTs cheat sheet: Everything you need to know about non-fungible tokens

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You’ve probably heard about the latest new digital craze: non-fungible tokens or NFTs. These unique digital codes rely on the same blockchain technology as cryptocurrencies like Ethereum , but with a big difference: NFTs are completely unique and establish ownership of digital assets.

I wrote an article in 2018 about an online game called CryptoKitties , which involved collecting and breeding one-of-a-kind digital cats that lived on the Ethereum blockchain. These cats could be bought, bred and sold for Ethereum cryptocurrency, and ownership of the cats used NFT technology way before it was cool.

Fast forward three years and we’re living in an age where Twitter founder Jack Dorsey can auction off an NFT for his first-ever tweet for $2.9 million , and digital artwork sells for hundreds of thousands of dollars, which rightly leaves people in the art world and beyond scratching their heads and wondering just what a non-fungible token is, why it matters and if there’s anything behind the hype.

SEE: NFTs cheat sheet: Everything you need to know about non-fungible tokens (free PDF) (TechRepublic)

What are NFTs?

Non-fungible tokens are, in a way, a lot like cryptocurrency. The record of their existence lives on blockchains, they can be bought and sold using cryptocurrency, and there isn’t necessarily a physical asset that ties them to the real world.

NFTs differ from cryptocurrency in that they’re non-fungible, meaning they can’t be exchanged for an identical item. Cash, for example, is a fungible asset: Each dollar may be unique, but the particular dollar you have doesn’t matter. If you swap a $10 bill for two five-dollar ones, you still have $10. Trade your $10 for an autographed baseball card, however, and you then have a non-fungible item: it’s unique, and while it may have a monetary value, it isn’t itself a trade commodity.

SEE: There’s more to cryptocurrency than Bitcoin: 5 other digital coins to consider (free PDF) (TechRepublic)

Other examples of non-fungible goods include artwork, houses, website domain names, your pet cat and parcels of land.

Here’s where NFTs come in: they’re digital tokens on a blockchain that represent a unique item, like Jack Dorsey’s tweet, a crypto kitty, a piece of digital art or even a physical asset with ownership tied to an NFT.

What rights does ownership of an NFT confer?

If the idea of claiming ownership to a tweet, a GIF , a piece of property in an online game or a virtual cat seems odd, you’re not alone in thinking so. NFTs have been controversial, and it’s just as easy to find support for them online as it is to find people who think they don’t make any sense .

Daniel Van Boom, editor at TechRepublic sister site CNET, said people who don’t understand NFTs are in good company. He wrote: “It’s incomprehensible that clips, memes and gifs are selling for six, seven and even eight figures.”

Even more confusing is what owning an NFT means: If you purchase the NFT of a unique piece of art, you have sole ownership over it and can do with that art what you want, right? Not exactly.

Take, for example, Nyan Cat , an animated GIF of a cat with a body made out of a toaster pastry, flying through space with a rainbow in its wake. An NFT of Nyan Cat recently sold for $590,000 , but as CNET points out, the owner of the Nyan Cat NFT is only that: the owner of the Nyan Cat NFT. The intellectual and creative rights to the work are still owned by the artist who created it.

SEE: NFTs: A passing trend or here to stay? Americans and UK residents have very different opinions (TechRepublic)

From CNET reporter Oscar Gonzalez: “What the owner of the token has is a record and a hash code showing ownership of the unique token associated with the particular digital asset. People might download Nyan Cat and use it on social media if they want, but they won’t own the token. This also means they can’t sell the token as the owner can.”

Ownership of NFT assets can vary based on the transaction, but the Nyan Cat example is a typical case in which the creator still owns the work , but the NFT purchaser owns the original copy. Nothing about an NFT inherently confers copyright , which is why a $69 million NFT of a piece of digital art by Beeple (whose name is Michael Joseph Winkelmann) can be copied and re-copied without anyone breaking the law.

Think of owning an NFT like owning an original van Gogh: Sure, you have the artwork the man himself painted, but there are countless prints of it in other people’s homes. The big difference is that it’s basically impossible to claim ownership of a virtual item that can be copied without error unlimited times, while a physically original van Gogh painting is (with the exception of a skilled forgery) unmistakably the original painting.

When you think of it like that, it’s almost as if an NFT is only worth the bragging rights that come with it.

How are NFTs created, and how are NFTs sold?

In an article for OneZero, Allen Gannett walked through the process of creating his own NFTs and what was involved. Hint: You’d better have some spare cash if you want to try getting rich off your own art.

“There are three steps: the actual creation of the art, the “minting” of them (transforming the file to a one-of-one NFT) and selling them,” Gannett said. Buying NFTs, on the other hand, is just like bidding on any type of online auction.

SEE: Dole partnership creates an NFT series as a first step to fight global hunger (TechRepublic)

With a digital asset in hand, anyone wishing to mint an NFT needs to choose an NFT market, like Nifty Gateway , SuperRare or Rarible , where the digital asset can be uploaded and minted into an NFT on whichever blockchain the market operates on–most NFTs are part of the Ethereum blockchain.

Here’s where we arrive at sticking point number one: Some of the larger exchanges require NFT minters to apply to publish works. “I had imagined that I could walk in, throw down my best art and soon be showing my work to the masses. Instead, I was met by forms asking me to explain who I was and my background,” Gannett said.

Creators who make it past that point are now faced with the second obstacle to minting an NFT: money. Like everything to do with the blockchain, you need to put up some serious money to get your transaction added. In Gannett’s case, “doing this would cost .67 ETH (Ethereum) or, as we would say in normal-speak: $997. These fees vary based on how ‘congested’ the Ethereum network is,” he said. Naming one particular piece of NFT artwork in order to sell it cost Gannett an additional $86, and publishing four NFT images for sale ended up costing a total of $1,300.

“The next morning I received a bid of .05 ETH (about $76) for each of my four NFTs. The Ethereum gas fees for accepting the bids? $88…each,” Gannet said. “But I sold one, because even if I lost $12 on it, I’m now, technically… a professional NFT artist.” Gas fees are the price that must be paid into the Ethereum blockchain for verifying a transaction, such as the sale of an NFT, acceptance of a smart contract or the purchase/sale of Ethereum cryptocurrency.

SEE: Quick glossary: Blockchain (TechRepublic Premium)

How could NFTs impact businesses?

There are various ways in which NFTs could affect businesses: They have the potential to transform ownership rights , and they can be used as tools for selling digital and physical merchandise.

The NBA, for example, has created a new line of NFT collectibles called Top Shots , which are essentially short, collectible highlights from games that act as a sort of digital trading card. They’ve been successful enough that one LeBron James Top Shot sold for more than $200,000.

Celebrities, like rapper Post Malone, have also gotten into the NFT game. Malone recently partnered with crypto firm Fyooz to create NFTs that would allow owners to trade them for a game of beer pong. Other celebrities have sold art, songs and other digital products on NFT marketplaces.

“Blockchain-backed worlds are ripe for opportunity. Now is the time to build the structures to support NFTs and find your brand’s next audience on the decentralized web,” futurist Cathy Hackl said in Forbes .

SEE: How blockchain will disrupt business: A special report (free PDF) (TechRepublic)

When tied to digital or physical assets, NFTs provide a new means of establishing ownership as well. “The file itself—whether a photo, a video, an ebook or anything else—must ‘live’ somewhere else. You can create a permanent, secured record of the asset on a blockchain, and that record can be ‘tied’ cryptographically to the asset wherever it lives off-chain, but they do not reside together,” intellectual property lawyers Lance Koonce and Sean Sullivan said .

“[NFTs] can be used to represent other, unique assets that are either online or in the physical world,” Koonce and Sullivan said.

Here’s where businesses have the potential to do something with the technology behind NFTs. The tokenization of ownership, as CoinTelegraph points out , could help assert ownership of physical objects by “keeping them secure, ultimately revolutionizing the compensation, storage, legality and the security of property.”

NFTs, like the cryptocurrency and blockchain industries as a whole, are still a Wild West of risk and little regulation, but given time, NFTs could become a valuable investment for businesses looking to secure their property or products with a digital ownership chain. It’s a far cry from the NFT art markets of 2021, but like cryptocurrency, the underlying technology may be the thing that lasts rather than its initial speculative application.

Is the NFT market already in a bubble?

Popular cultural awareness of NFTs is still relatively new, but as CNN pointed out, the bubble may already be bursting . “The average price for an NFT on April 5 was about $1,256—down from more than $4,000 in late February,” wrote CNN Business digital correspondent Paul La Monica.

Even Beeple, possibly the biggest winner in the current NFT craze, said he thinks NFTs are in a bubble , much like the dot com bust of the early 2000s. “But it didn’t wipe out the internet. And so the technology itself is strong enough where I think it’s going to outlive that,” Beeple said.

Another problem with NFTs, like that of cryptocurrency, is that many people who think they understand what they’re investing in aren’t as aware as they should be, said Koonce and Sullivan. “There may be misconceptions among purchasers that by buying an NFT associated with underlying digital assets, they are purchasing the asset itself rather than just the token.”

SEE: Move over athletes and gamers—digital influencers want in on the NFT trend (TechRepublic)

As mentioned above, NFT ownership ultimately only amounts to bragging rights. Those bragging rights may be worth millions of dollars, but only if someone else thinks they’re that valuable and is willing to purchase them.

“What NFTs really do is create scarcity. It’s artificial scarcity , but that’s nothing unusual: Nike and Kanye West created artificial scarcity when they decided to only produce 200 Yeezy Red October sneakers, which is why that particular pair of sneakers runs over $10,000,” said CNET’s Boom .

The difference between sneakers and, say, a token representing a picture of sneakers, is that buying the sneakers means you own a pair. Buying the NFT only means you own a unique token that says you own the picture of the sneakers, which can still be copied, shared, printed and hung on the wall by anyone who wants to do so.

In addition, NFTs and their fungible-token cousins on the blockchain have an environmental problem: they consume tons of energy. Bitcoin mining alone consumes the same amount of energy per year as the entire country of Sweden , and that doesn’t take into account other currencies that eat up tons of energy as well; Ethereum, where most NFTs live, uses roughly the same amount of energy per year as an entire company .

French artist Joanie Lemercier recently sold a set of six NFTs on Nifty Gateway for several thousand dollars in a matter of seconds. The energy required to complete the sale was a massive 8.7 megawatt-hours . The average U.S. home consumes 10.7 MWh per year, for comparison, meaning that single sale ate almost a year’s worth of electricity for the average home. The art was later resold, requiring a similar amount of energy.

“Does acquiring bragging rights to a digital image that anyone with an internet connection can enjoy constitute an unavoidable part of one’s carbon footprint?” Peter Howson asked on The Conversation .

There’s an excellent technology underlying NFTs that, like blockchains in general, have the potential to transform supply chains, ownership and business, but the tech is still in its infancy. Whether NFTs will prove to be practical tools or just another short-lived digital bubble remains to be seen.

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NFTs, explained

Have you seen the word “NFT” spinning around the internet lately, and found yourself completely confused as to what everyone’s talking about?

We’re here to help.

What is an NFT?

An NFT is a non-fungible token. Non-fungible, in this context, means that it’s unique and (literally) irreplaceable.

In practice, NFTs can be any sort of digital item that someone might want to own, such as a piece of music or a painting. (Graphic designer Beeple just sold an NFT artwork at a Christie’s auction for an unheard-of $69 million .) 

It can even be a tweet, like Twitter founder Jack Dorsey’s first one, which just sold for nearly 3 million dollars .

How do NFTs work?

Most NFTs are part of the blockchain of the Ethereum cryptocurrency. When you buy one using cryptocurrency, you can verify on the blockchain that you are sole owner of that work: no one can undo your ownership of an NFT or re-create the exact same one that you have.

NFTs are like unique collectible cards that anyone can look at, but that only one person can own at any particular time. ( While the image or audio that an NFT represents is obviously infinitely reproducible, the proof of purchase seals the NFT itself as being under the sole ownership of the buyer.)

How long have NFTs been around?

The concept of NFTs can be traced back to 2012, when multiple cryptocurrency researchers started talking about the concept of unique “colored” bitcoins that would have their own unique value apart from the fixed price of each individual bitcoin. In their more current form, NFTs have existed since at least 2017, with the emergence of CryptoPunks and CryptoKitties . Many of the first generation of these NFTs have sold for at least six figures , including $760,000 for a rare CryptoPunk called “Alien” .

Why would I buy an NFT?

Like a stock or any other investment, NFT prices can fluctuate and make some people a lot of money. Because of the scarce nature of NFTs and the high demand from early-adopting investors, gamers and collectors, these days people are often willing to pay large sums of money for them. 

Should I buy an NFT?

It depends. It’s a risky investment that can fluctuate widely, just like baseball cards, paintings or, indeed, cryptocurrencies themselves. 

If you do plan to invest in NFTs, you should bone up on the particular NFT markets you’re exploring. Like any investment area, you'll need to think strategically and follow trends that often change rapidly. Yes, it's possible to earn money through NFT investment, but you have to do your homework. 

How do I buy an NFT?

If you’re interested in diving, you should first figure out a few things:

what marketplace to buy your NFT from

Options include OpenSea , Mintable , Nifty Gateway , Rarible , and topic-specific spaces like NBA Top Shot and Valuables (for Tweets ).

which “digital wallet” you need in order to store your NFT 

A wallet is where you keep your digital money, as well as your identifiers and credentials. It’s basically the portal that lets you access and interact with blockchain.

The most popular wallets for NFTs are MetaMask , TrustWallet , Dapper and MyEtherWallet , which is compatible with hardware wallets like Ledger and Trezor .

what kind of cryptocurrency you'll use to buy your NFT

The vast majority of NFTs right now are bought using Ethereum , but other cryptocurrencies are also starting to develop the capacity for them.

How do I make my own NFT?

To make an NFT you need a digital wallet, a small purchase of ethereum and a connection to an NFT marketplace. 

Things you buy through our links may earn Vox Media a commission

Everything You Need to Know to Make it Through a Conversation About NFTs

Let me guess: You’ve been trying your hardest to ignore the subject of NFTs, but it’s gotten to the point where conversations about them seem impossible to avoid, and you want to be able to keep up.

I can sympathize. A few weeks ago, I finally thought: Okay, I’ll bite . What are NFTs, and why the heck are people paying so much money for them?? But whenever someone tried to explain them to me, they’d usually start off with “Basically …” and then say something that might as well be in another language. Online explainers were just as bad, so I decided to take matters into my own hands and figure it out by piecing together conversations with a handful of experts.

To be clear: I still have no idea what I’m talking about. There are far more thorough, far more accurate explainers out there, if you’re really interested. But if you’re looking for one that uses Phantom Thread analogies and doesn’t take itself too seriously, then you’re in the right place. My hope is that after reading this, you can confidently meet someone halfway on the subject. But no more than that.

What does NFT stand for?

NFT stands for ‘non-fungible token.’

I know, ‘fungible’ is a ridiculous-sounding word. Basically, it means ‘interchangeable.’ Like if we swapped quarters, we’d both still have 25 cents. A non -fungible token is unique, and cannot be traded one-to-one. Think of it like the haute couture of currency; each NFT is exclusive to its owner.

Okay, so how do I get my hands on one?

Unlike couture gowns, NFTs don’t exist in the physical world. They’re strictly digital assets made up of unique lines of code that are stored on something called the “blockchain,” which is like an immutable digital ledger, or, a receipt written in stone. You need cryptocurrency to buy one, specifically Ethereum.

None of that made sense. This is where I stop paying attention.

Fair. Stay with me, though, because I’m not even going to try to explain to you what the blockchain is, or how it works. And I promise not to use the word “Ethereum” again.

Fine. Please continue.

Okay, since we’ve already used haute couture as a metaphor, allow me to try to use the plot of Phantom Thread as a reference point, just for kicks. (If you haven’t watched it, please exit this window and do so before reading any further.) Remember when Reynolds Woodcock designs a custom wedding dress for the Princess of Whatever? That gown is one-of-a-kind. It is non-fungible . Even if someone were to make an exact copy of it, only the princess would have the original, which has “never cursed” sewn into its seam — effectively Woodcock’s signature.

Now. Imagine that Phantom Thread takes place in the year 2021. To get with the times, the House of Woodcock is selling digital renderings of a gowns. Cool. The only problem is that they can’t call this type of work haute couture. Why? Because digital assets are fungible . If Woodcock saved the finished project to his desktop — let’s call the file WeddingDress.jpg — it could be copied a million times and sent to a million different people, and everyone would have the same thing.

This is where NFTs come in. As luck would have it, there’s a princess out there who loves Woodcock’s work, thinks it’s fucking chic , and wants to own an image of it. She is rich in cryptocurrency, but she’s only going to pay for a JPEG file if she’s able to say with absolute certainty that she alone owns the original, nobody else. So instead of buying WeddingDress.jpg, she buys an NFT of the file, which Cyril has put up for auction on a digital NFT marketplace like this one , under the username is Oldsoandso.

Without getting too much into the tech, what the princess has purchased isn’t the file itself. What’s she’s purchased instead is basically a digital certificate of authenticity that says, in code: “Oldsoandso transferred the ownership of this file to me on this date for this much money.” That receipt, which was “minted” on the blockchain, where it cannot be deleted, duplicated, or messed with, is the non-fungible-haute-couture token and thing of value. It’s as if Woodcock wrote “never cursed” in computer language, and sewed it into the image of the dress.

I see, so this is really about manufacturing exclusivity.

Exactly! It’s about having proof that you own the “original” or “real” version of a digital asset. And that digital asset could be anything: A tweet , a GIF of a flying cat , an NBA highlight-reel video , even a photo of this very article. A Times writer recently auctioned off a photo of his article about NFTs for $560,000 .

To use another movie reference, it’s sort of like in A Walk to Remember , when that guy buys a star for Mandy Moore. What he really bought was a piece of paper giving him the right to name the star, not the star itself. No one can really “own” a star, in the same way that no one can really “own” a tweet. We can all go online, or look up in the night sky, and see them for ourselves. That piece of paper, though, serves as something like an NFT.

It makes sense now why I keep hearing about NFTs in relation to artwork.

Yes. Verifying an artwork as an original has always been important to the art market. There’s never really been a way to do that with digital art before, though, so here we are.

Things have escalated quickly, in part because the market for original artwork is so well-established. In March, an NFT of a collage by the digital artist known as Beeple sold for $69 million  at Christie’s , positioning him “among the top three most valuable living artists,” according to the auction house. So the list goes: David Hockney, Jeff Koons, and then … Beeple.

Why are people paying $69 million for an NFT, though?

For the same reasons people pay lots of money for rare baseball cards, uncut gems, and, of course, haute couture dresses. Maybe they genuinely love the thing, and want to support the person who created it. ( Bret Easton Ellis? ) Maybe they think it’s a good investment. Maybe they have too much money and think it’s funny . Or maybe they just want bragging rights. Either way, humans just like to own stuff, even if it’s not material.

There’s also a certain aura to an original — something works of art have arguably lost in the Age of Mechanical Reproduction . “Now that there is a way to tether originality to digital objects, the question becomes: Does the minted original have any more aura than a copy of the digital file, or a screenshot of it?” asked Lauren Studebaker, an internet art researcher and writer. “In terms of ownership, it’s an ideological thing,” she said.

Personally, I would like to own an NFT of this extremely awkward Vine that Times chief fashion critic Vanessa Friedman took of the Olsen twins in 2014.

Besides money, do the sellers get anything out of it?

If you’re an artist or creator, there are some benefits to NFTs. “The concept of ownership (and therefore materiality) that an NFT provides an object could further legitimize art made using digital means to the general public as being equal to, let’s say, paintings,” said Studebaker.

Creators also have the ability to write clauses into their NFTs. Beeple, for example, stipulated that he earn a 10 percent royalty off of each consequent resale of his $69 million piece. “It’s an issue in the art world, where a young artist will sell their work at an undervalued rate because they have to get by, and then in a year or two, the buyer resells it for a huge profit,” Studebaker explained.

She also added that when it comes to music, artists could start minting songs as NFTs, allowing them to set the price for subsequent streams, which don’t currently yield as much profit as buying a CD, or a song on iTunes did. They could also sell original recordings, mint concert tickets as NFTs to avoid scalping, etc. There are a million different ways artists can benefit from NFTs, from musicians to meme makers.

Hmm. I think I ‘ve got the gist of it. Now I want to argue.

Great! Arguing about NFTs is the easiest part. In my experience, simply saying those three letters in a row can be enough to upset someone, specifically a self-serious person who knows what Ethereum means. (God help me after these Phantom Thread analogies.) But for all the jargon and bullshit surrounding NFTs, the subject can actually bring up some interesting questions.

For example, my friend Alexander Iadarola recently sold an NFT of a digital smiley face he made, but got shadow-banned from an invite-only platform when he tried to sell a photo of his foot. This is a great fodder for intellectual debate: Does one qualify as “art” more than the other? Who’s to say? What if it was a really good foot??

Another thing people love to argue about is where this is going. Is it just a bubble? A fad? Or are we going to be talking about NFTs for the REST OF OUR LIVES??? (Or are they going to kill the planet first?) The current hype will likely die down, but there’s a world in which NFTs could be a common, boring thing. No one knows the answer.

Okay, so how much for an NFT of this article?

Wow, thank you so much for asking! Let’s talk offline.

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NFTs Are Shaking Up the Art World—But They Could Change So Much More

J ust a few months ago, Jazmine Boykins was posting her artwork online for free. The 20-year-old digital artist’s dreamy animations of Black life were drawing plenty of likes, comments and shares, but not much income, aside from money she made selling swag with her designs between classes at North Carolina A&T State University.

But Boykins has recently been selling the same pieces for thousands of dollars each, thanks to an emerging technology upending the rules of digital ownership: NFTs, or non-fungible tokens. NFTs—digital tokens tied to assets that can be bought, sold and traded—are enabling artists like Boykins to profit from their work more easily than ever. “At first, I didn’t know if it was trustworthy or legit,” says Boykins, who goes by the online handle “BLACKSNEAKERS” and who has sold more than $60,000 in NFT art over the past six months. “But to see digital art being bought at these prices, it’s pretty astounding. It’s given me the courage to keep going.”

NFTs are having their big-bang moment: collectors and speculators have spent more than $200 million on an array of NFT-based artwork, memes and GIFs in the past month alone, according to market tracker NonFungible.com, compared with $250 million throughout all of 2020. And that was before the digital artist Mike Winkelmann, known as Beeple, sold a piece for a record-setting $69 million at famed auction house Christie’s on March 11—the third highest price ever fetched by any currently living artist, after Jeff Koons and David Hockney.

TIME is now accepting cryptocurrency for subscriptions to time.com . Learn more .

NFTs are best understood as computer files combined with proof of ownership and authenticity, like a deed. Like cryptocurrencies such as Bitcoin, they exist on a blockchain—a tamper-resistant digital public ledger. But like dollars, cryptocurrencies are “fungible,” meaning one bitcoin is always worth the same as any other bitcoin. By contrast, NFTs have unique valuations set by the highest bidder, just like a Rembrandt or a Picasso. Artists who want to sell their work as NFTs have to sign up with a marketplace, then “mint” digital tokens by uploading and validating their information on a blockchain (typically the Ethereum blockchain, a rival platform to Bitcoin). Doing so usually costs anywhere from $40 to $200. They can then list their piece for auction on an NFT marketplace, similar to eBay.

At face value, the whole enterprise seems absurd: big-money collectors paying six to eight figures for works that can often be seen and shared online for free. Critics have dismissed the NFT art craze as just the latest bubble , akin to this year’s boom-and-bust mania around “meme stocks” like GameStop . The phenomenon is attracting a strange brew of not just artists and collectors, but also speculators looking to get rich off the latest fad.

A bubble it may be. But many digital artists, fed up after years of creating content that generates visits and engagement on Big Tech platforms like Facebook and Instagram while getting almost nothing in return, have lunged headlong into the craze. These artists of all kinds—authors, musicians, filmmakers—envision a future in which NFTs transform both their creative process and how the world values art, now that it’s possible to truly “own” and sell digital art for the first time. “You will have so many people from different backgrounds and genres coming in to share their art, connect with people and potentially build a career,” Boykins says. “Artists put so much of their time—and themselves—into their work. To see them compensated on an appropriate scale, it’s really comforting.” Technologists, meanwhile, say NFTs are the latest step toward a long-promised blockchain revolution that could radically transform consumer capitalism, with major implications for everything from home loans to health care.

Read more: TIME releases 3 special edition NFT magazine covers for auction

Digital art has long been undervalued, in large part because it’s so freely available. To help artists create financial value for their work, NFTs add the crucial ingredient of scarcity. For some collectors, if they know the original version of something exists, they’re more likely to crave the “authentic” piece. Scarcity explains why baseball-card collectors, for example, are willing to pay $3.12 million for a piece of cardboard with a picture of Honus Wagner, a legendary Pittsburgh Pirate. It’s also why sneakerheads obsess over the latest limited-edition drops from Nike and Adidas, and why “pharma bro” Martin Shkreli bought the sole copy of Wu-Tang Clan’s Once Upon a Time in Shaolin for $2 million in 2015.

But baseball cards, sneakers and that Wu-Tang CD all exist in the physical space, so it’s easier to understand why they’re worth something. It can be harder to understand why digital art, or any other digital file, has value.

Some digital-art collectors say they’re paying not just for pixels but also for digital artists’ labor–in part, the movement is an effort to economically legitimize an emerging art form. “I want you to go on my collection and be like, ‘Oh, these are all unique things that stand out,'” says Shaylin Wallace, a 22-year-old NFT artist and collector. “The artist put so much work into it–and it was sold for the price that it deserved.” The movement is also taking shape after many of us have spent most of the past year online. If nearly your whole world is virtual, it makes sense to spend money on virtual stuff.

The groundwork for the digital-art boom was laid in 2017 with the launch of CryptoKitties—think digital Beanie Babies. Fans have spent more than $32 million collecting, trading and breeding these images of wide-eyed one-of-a-kind cartoon cats. Video gamers, meanwhile, have been pouring cash into cosmetic upgrades for their avatars—Fortnite players spent an average of $82 on in-game content in 2019—further mainstreaming the idea of spending real-world money on digital goods. At the same time, cryptocurrencies have been booming in value, fueled in part by celebrity enthusiasts like Elon Musk and Mark Cuban. Bitcoin, for instance, is up more than 1,000% over the past year, and anything remotely crypto-adjacent—including NFTs—is getting swept up in that mania.

Sensing an opportunity, tech entrepreneurs and brothers Duncan and Griffin Cock Foster last March launched an NFT art marketplace called Nifty Gateway. At the time, NFT art was just heating up in some circles, but it was difficult for newbies to buy, sell and trade pieces. Nifty Gateway prioritized accessibility and usability, helping fuel wider adoption. “It was such an early stage, we didn’t have many expectations about how it would turn out,” Duncan Cock Foster says. But Nifty Gateway users ended up buying and selling more than $100 million worth of art during its first year. Similar platforms, like SuperRare, OpenSea and MakersPlace, have seen similar surges; they typically pocket 10% to 15% of initial sales.

Big businesses and celebrities are getting in on the action: NBA Top Shot, the National Basketball Association’s official platform to buy and sell NFT-based highlights (packaged like digital trading cards), has racked up over $390 million in sales since its October launch, according to parent company Dapper Labs. Football star Rob Gronkowski has sold NFT trading cards of Super Bowl highlights for over $1.6 million; rock band Kings of Leon made over $2 million by selling NFT music. Twitter founder Jack Dorsey put his first-ever tweet up for auction as an NFT, and it’s expected to sell for at least $2.5 million. The past few months have been a feeding frenzy, with new highs almost daily. Perhaps Beeple put it best after his record-setting auction: “I’m pretty f-cking overwhelmed right now,” he told fans and collaborators gathered on chat app Clubhouse.

So-called whales are making the biggest deals in the NFT art world. These deep-pocketed investors and cryptocurrency evangelists stand to benefit financially from hyping anything remotely related to crypto. “A Winklevoss spending 700 grand on a Beeple or whatever is very much marketing spend for an idea that they are heavily invested in,” the technologist and artist Mat Dryhurst says, referring to Tyler and Cameron Winklevoss, two well-known cryptocurrency bulls who bought Nifty Gateway in late 2019 for an undisclosed amount.

One of those whales is Daniel Maegaard, an Australian crypto trader who made much of what he claims is a $15 million-plus fortune when Bitcoin exploded in value in 2017. Maegaard has bought and sold millions of dollars worth of digital art and other NFT-based goods, like a $1.5 million parcel of land in Axie Infinity, a virtual universe. While Maegaard initially saw NFTs as a means of adding to his wealth, he’s become a true fan of the work, proudly displaying his collection online and excitedly sharing news of new purchases and sales with his followers. He’s particularly attached to a piece called CryptoPunk 8348, an image of a pixelated man who looks vaguely like Breaking Bad’s Walter White. Maegaard, who uses the work as his social media avatar, recently declined a $1 million offer for the piece. “People almost now tie that character to me,” he says. “It’s almost like I’d be selling a part of myself if I ever sold him.”

But even investors who see NFT art solely as an asset to be bought low and sold high are putting money into artists’ pockets. Andrew Benson, a Los Angeles-based artist, has been experimenting with psychedelic, glitchy digital video work for years. He’s landed his work in museums and galleries, but he’s long held a day job at a software company and taken on commission work for musicians like M.I.A. and Aphex Twin to support himself. “For a long time, my perspective has been that the best way to survive as an artist is to not have to survive as an artist,” Benson says.

A year and a half ago, when his plans to exhibit a new series of videos fell through, Benson was plagued with doubt about his future in the art world. “I was thinking, Do I even want to go through the trouble of trying to do this kind of work and finding places to show it?” he recalls. Then, in January, a friend who works at an NFT platform called Foundation asked Benson to submit a piece. Benson didn’t think much of it, but sent over a video that otherwise “would have gone on a website or something,” he says. The piece—which looks something like a kinetic, colorful Rorschach—sold within 10 days for $1,250. Since then, Benson has sold 10 more works in the same price range. He’s now pondering a future in which he could sustain himself entirely through his art. “It really kind of shook my worldview, actually,” he says. “Seeing this work find a context and a place where it matters makes me want to think like an artist more.”

Many other artists working in groundbreaking and sometimes controversial styles are also receiving unprecedented interest from NFT collectors. Art with whirling 3-D renderings, street-style oversaturated color schemes, and hyper-referential (and often crass) cartoons are thriving. These Internet-fueled aesthetics are grabbing the attention of both a younger generation raised on Instagram and a rabble-rousing crypto clientele. “The street art and countercultural styles are being used to reinforce the impression most finance-crypto people have that they are the ‘punks’ in the broader tech and finance world,” Dryhurst says.

These developments have left many in the conventional art world agape. “You have a lot of traditional collectors who look at the NFT space and they can’t plug it into any acceptable system of belief,” says Wendy Cromwell, a New York-based art adviser. “We’re at a real inflection point: a lot of the deeply experienced people in the art world are older and don’t have the interest or mental bandwidth to parse the language of the Internet.” Following Christie’s Beeple sale, however, rival auction house Sotheby’s quickly announced its own partnership with NFT artist Pak, showing that even if art powerhouses might not understand the genre, they understand its financial potential.

With or without the establishment’s support, a new wave of digital artists is banding together in tight-knit NFT communities, echoing past generations of artists across disciplines and genres hanging out and influencing one another’s thinking, approach and output. “There is a huge ethic of generosity happening in the space,” Benson says. “Typically in the worlds of independent music or fine art, there is a sense that one person is going to make it out of a scene. With this, there’s a feeling of abundance where it really does seem like everyone could benefit.”

In some cases, the whales and minnows are swimming in tandem. The buyer of the $69 million Beeple piece turned out to be a collector group called Metapurse, two anonymous Singapore-based investors who have been experimenting with tech-driven collective-ownership models. In January, the duo bought 20 Beeple artworks, placed them in a virtual museum that can be visited for free, and then fractionalized their new enterprise into tokens which are now co-owned by 5,400 people. Their value has since increased sixfold as of March 16. The duo is considering a similar move with their latest headline-grabbing purchase, which they hope to display in a cutting-edge virtual museum. The idea, says Metapurse co-partner Twobadour, is to “open up both the experience of art and its ownership to everybody.”

Even as artists, collectors and speculators benefit from the NFT craze, the phenomenon is not without its dark side. The barriers to entry—it costs money and requires tech savvy to sell an NFT—could prevent some creators from joining in on the action. Many are concerned that young artists of color in particular will be left out, as they have long been marginalized in the “traditional” art world. Legal experts are scrambling to determine how existing copyright laws will interact with this new technology, as some artists have had their work copied and sold as an NFT without their permission. “It’s providing another platform for people to take advantage of other people’s work,” says artist Connor Bell, whose work was plagiarized and posted on an NFT marketplace.

Then there are the environmental concerns . Creating NFTs requires an enormous amount of raw computing power, and many of the server farms where that work happens are powered by fossil fuels. “The environmental impact of blockchain is a huge problem,” says Amy Whitaker, an assistant professor of visual arts administration at New York University, though some cryptocurrency advocates argue these fears are overblown.

Read more: Digital NFT Art Is Booming—But at What Cost?

Theoretically, climate-minded artists could move to some alternative blockchain platform with less environmental impact. They’re already finding ways to bend NFT technology in other beneficial ways. Some, for instance, are setting up their tokens so they’re compensated every time their work is resold, like an actor getting a royalty check when their show airs as a rerun. Taiwanese tech startup Bitmark has started an NFT-like program to give rights and royalties to music producers around the world. And artists who join NFT-based social media sites, like Friends With Benefits, receive fractional ownership in the platform and can receive direct compensation for the work they create through the network, in sharp contrast to existing tech giants like Facebook and Instagram.

For technology evangelists, meanwhile, the NFT frenzy is just more evidence of their long-held beliefs that cryptocurrency, and blockchain platforms more broadly, has the power to change the world in profound ways. Blockchain technology has already been implemented in attempts to make voting more secure in Utah, combat insurance fraud at Nationwide Insurance, and secure the medical data of several U.S. health care companies. Advocates say it could also help companies ensure transparency in their supply chains, streamline mutual aid efforts and reduce biases in historically racist loan-application processes.

“The potential societal impact … is so important that we should do everything in our power to make it manageable, environmentally and otherwise,” Whitaker says. “New idealistic technologies are always really imperfect in their rollout: they can have a speculative boom, and people can misuse them in unsavory ways,” she adds. “I try to stay centered on what’s possible.”

—With reporting by Julia Zorthian

More Must-Reads from TIME

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• Mark Kelly and the History of Astronauts Making the Jump to Politics
• The Young Women Challenging Iran’s Regime
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NFTs Explained: What Are Non-fungible Tokens and How Do They Work?

• Non-fungible tokens are all the rage now.
• The popular ones are selling for hundreds of thousands and even millions.
• You can start trading NFTs even as a newbie.

Many people are still dazed with the NFT phenomenon. If you find yourself in their company, show them this article.

This Guide Contains:

Proper way to understand nfts, traditional artworks, nfts explained on 3 levels, where are nfts stored, how to start trading in nfts, tips on making sure your nfts sell, frequently asked questions.

In hundreds of headlines about NFTs , the first thing one notices is that they are presented as your regular files — animations, images, texts, tweets, audio.

Therefore, you could simply download them and effectively have the same file as all those NFTs that have been sold for millions of dollars .

The logical question then is, why would anyone buy them for such exorbitant prices. Prices like Beeple’s EVERYDAYS: THE FIRST 5000 DAYS NFT that sold for $69 million?

After all, they don’t even confer automatic copyright protection.

To answer that question is to understand what NFTs are and why they are valuable . And the only way to understand it is if we place NFTs in contrast to traditional artworks.

For instance, the most expensive and iconic artworks such as Mona Lisa or Interchange by Willem de Kooning can be reproduced just as equally as NFTs.

More specifically, here is a $300 million worth Interchange painting. Juxtaposed to it is Nyan Cat NFT by Chris Torres, sold for about $600,000 at the time (300 ETH).

Both are visible right on your screen, meaning that you can see them for what they are just as their buyers can see them.

If that is the case, and it obviously is, what do buyers of art actually buy?

Simply put, they buy original traceability, which leads to social prestige.

After all, it is one thing to hold one of the millions of reproductions. However, another altogether when you hold a piece of cultural history that can be directly traced to its creators.

In ten years, Nyan Cat may be sold for tens of millions of dollars, just as Interchange began its cultural journey humbly, selling for merely $4,000 in 1955.

With physical assets — paintings, sculptures, photographs, books — specialists determine whether something is original, appraising them as worthy to be bought as unique assets.

With NFTs, all of that is handled automatically by smart contracts contained within a blockchain.

Smart contracts mint a piece of media known as Non-Fungible Token — NFT.

So what are NFTs? There are many ways to explain them.

Simply put, non-fungible tokens (NFTs) are unique digital assets that are not interchangeable. You most often will recognize them as digital art . However, NFTs are also music, videos, or even books.

They are unique because each NFT is one-of-a-kind and cannot be exchanged for another NFT or for any other asset in a one-to-one manner. This is in contrast to fungible assets, which can be exchanged for other assets of the same type, on a one-to-one basis, such as currencies which are a unit of account or medium of exchange.

In essence, non-fungible tokens can represent unique real-world objects (like fine art or music) or a set of permissions in the: physical, digital, or legal world (like royalties). People unknowingly use tokens on a day to day basis, although we do not call them tokens.

For example, a deed to a house, a title to a car, or tickets to a concert can all be understood as “tokens”. Therefore, digital art only scratches the surface of NFT’s potential. In the future, NFTs could represent legal contracts, membership badges, shares to a company and virtually anything that you own.

From a technical standpoint, NFTs can be likened to a webpage.

Metadata is the information that describes the characteristics and functionality of an NFT. It includes details such as the appearance of the NFT, its unique features, and how it differs from other NFTs in the same collection or game. For example, if an NFT is a book, the metadata would include details about the content of the book, the words on the pages, and the covers designs.

In this way, NFTs are similar to webpage files in the Web 2. Just as a webpage can be simple or complex, with various styles and layouts, an NFT can also contain a wide range of data and links to other datasets. In addition, NFTs have a token uniform resource identifier (URI) field. The token URI field serves a similar function to a web URL.

Furthermore, a webpage is just a collection of files stored on a server. Similarly, an NFT and its metadata are hosted on servers like IPFS , Amazon, or Google. In this way, NFTs are similar to modern webpages, which are likewise dynamic and responsive.

This means that digital media is reborn and begins its journey on a blockchain — a decentralized digital ledger that is incorruptible, unfalsifiable, and indestructible.

Bitcoin represents a fungible token, just like USD bills, while items that cannot be precisely divided and interchanged for the same value, such as diamonds or Pokémon cards, are non-fungible.

Once an NFT is minted, it becomes a part of blockchain, a digital asset with its ownership uniquely identifiable and traceable.

Although NFTs are stored on a blockchain, not all blockchains are created equal.

Bitcoin’s blockchain was built for the specific purpose of creating a deflationary cryptocurrency, which is what made it grow to its current market cap of one trillion dollars.

Bitcoin’s blockchain is conservative and inflexible, but highly secure based on a proof-of-work (PoW) consensus algorithm.

On the other hand, six years after the launch of Bitcoin, in 2015, the Ethereum blockchain had been unleashed, eventually becoming the second largest cryptocurrency with its ETH token.

However, Ethereum (ETH) is much more than a cryptocurrency. Thanks to its flexibility and programmability, Ethereum made it possible to build smart contracts, also called decentralized applications — dApps.

The key feature of this blockchain innovation is that they eliminate mediators and all the costs accompanying them.

Smart contracts, as their name implies, are auto-executable programs that complete tasks within preset terms of the contract.

Consequently, Ethereum created an entire ecosystem of dApps locked in a DeFi (decentralized finance) ecosystem worth over $51 billion.

The world’s largest banks have come to recognize Ethereum’s DeFi as a much bigger threat than Bitcoin .

NFT marketplaces are just some of Ethereum’s dApps. They allow you to create, sell, and buy NFTs.

Although there are other programmable blockchains that offer smart contracts, such as Wexchain, most NFT marketplaces are still hosted on Ethereum’s blockchain. As of date, across NFT marketplaces, the trading volume of NFTs surpassed $561 million.

Therefore, for both buying and selling NFTs, you must have a crypto wallet with some ETH in it, which is Ethereum’s native token.

Even if you are just selling an NFT, you still need to pay a 2.5% transaction fee in ETH gas, which is a denomination of the token called Gwei (one billionth of ETH).

And if you later decide to use NFT marketplaces outside of Ethereum, you will still be able to swap ETH tokens for alternative blockchain tokens.

Here is the simplest and fastest way to get your ETH funds. After which, everything else is easy.

1.) Get a Crypto Wallet

Download and install MetaMask crypto wallet . It supports all major web browsers.

Once the installation is complete, your browser will now have a new extension, a crypto wallet that will easily connect you to dApps, including NFT marketplaces. After clicking on “Get Started”, click on the “Create a Wallet” button.

First, you will be asked to create a password for the wallet itself. However, your seed phrase will be of critical importance, the only way you can restore your crypto wallet and all the funds in it if something happens to your device. Store it safely on a piece of paper or use a hardware wallet for cryptocurrencies .

With the 12-word recovery phrase completed and stored, your wallet is set up.

Before you add funds to it, you should also export your private key. Simply put, if you have your private key, you own your funds.

In other words, even if you lose access to the current wallet, you can access your funds within a new wallet when you import the private key.

Click on the icon in the upper right corner represented as three vertical dots, then click on “Account details”.

This will open a new window with which you can export your private key, after you have entered your MetaMask password. Quick recap, make sure you have safely stored your:

• MetaMask password
• 12-word seed phrase (also called recovery phrase)
• Private key

If you don’t want to buy a hardware wallet , you can use one of the free password managers, such as Bitwarden, with 256-bit AES encryption. Likewise, don’t forget to read up on these security tips .

a.) Adding Funds to Your MetaMask Wallet

The most expedient way to do this is to open an account on a cryptocurrency exchange such as StormGain .

You will be required to go through KYC protocol — know your customer — in which you will have to either upload your national photo ID document or take a selfie with a code written on a piece of paper, or both.

Once complete, it’s only a matter of connecting your banking account/card to your crypto exchange account.

Moreover, your crypto exchange account will also serve as your secondary crypto wallet, but one without a private key.

Once you’ve connected your bank account/card to your crypto exchange of choice, buy a certain amount of ETH, let’s say $50 worth. Then, transfer it to your MetaMask wallet.

Clicking on the “View Account” button will open up your MetaMask’s address and QR code. Use this info to transfer the funds you bought on the crypto exchange. And that’s it! Now you have $50 worth of ETH in your MetaMask wallet which can connect to hundreds of dApps every time you visit them.

2.) Start Selling and Buying NFTs

There are dozens of NFT marketplaces. One of the biggest ones are OpenSea , Rarible , CryptoSlam , AtomicAssets , SuperRare . You can check the other ones here .

Whichever one you visit, you will now be able to easily connect your MetaMask wallet to each site without having to create new accounts. For example, if you were to visit Rarible that rewards you with RARI tokens when you sell and buy NFTs, in the upper right corner, you will see “Connect wallet”.

A window will open with a list of wallets, from which you can pick one to use. Since you have already installed the MetaMask wallet, select it. Now, when you click on the upper right icon, you will see your ETH and RARI token balance.

For more detailed info on the Rarible NFT marketplace and its RARI tokenomics , visit this guide . While you explore the site, you will notice that all the NFTs are listed in ETH, which you have in your wallet, which means you can instantly bid for them.

Otherwise, if you want to create and sell an NFT, almost all NFT marketplaces follow the same procedure:

• Selecting the “Create” option
• Choosing between single or multiple NFTs
• Uploading the file that will be minted as NFT, ranging from text to image, video, and audio
• Entering the info for the file to be minted — name, description, price, royalties
• Paying for the ETH gas fee — usually 2.5% — so that your NFT can be listed on the marketplace

Once you finalize the last step and click “Start”, a MetaMask pop-up will ask you to sign the funds allocated for the fee. Click on “Sign” and your newly-minted NFT is listed for everyone to bid on!

There are many reasons people would buy NFTs .

Limited digital collectibles such as CryptoPunks have achieved stellar success in selling their pixelated portraits for millions of dollars .

Some NFTs sell because they are an integral part — in-game assets — of blockchain games such as Cometh or Axie Infinity.

Other NFTs serve as crowdfunding mechanisms for ambitious projects, as it happened with Bear Games .

For individuals who try to break through the scene, it’s all about leveraging cultural trends, which Beeple perfectly exemplified with his Crossroads NFT . The most important tip to remember is to leverage your social media presence.

Greater notoriety = greater cultural significance = greater value of NFTs associated with their creator.

Lastly, try to be imaginative. We live in turbulent times, at best, a dystopian novel at worst.

There is plenty of room for making predictions that turn out to be true. One only has to watch the UK show “Utopia” or “The Hamburg Syndrome” to notice the stark parallels with the real world. Transforming such patterns into comic book form may spike your NFT’s value.

NFTs can be hard to keep up with, so why not join BeInCrypto’s Discord server to ensure you’re on top of everything?

< Previous In Series | NFTs | Next In Series >

What are NFTs?

NFTs are tokens that can represent unique real-world objects (like fine art or music) or a set of permissions in the: physical, digital, or legal world (like royalties).

What are NFT marketplaces?

NFT marketplaces are decentralized applications that allow you to create, sell, and buy NFTs. Some of the most popular NFT marketplaces are Rarible, OpenSea , and SuperRare.

How do NFTs work?

FTs work by using blockchain technology to create a secure and transparent record of ownership for digital assets. When an NFT is created, it is given a unique identifier that is stored on a blockchain. This identifier, along with other information about the NFT, is used to verify the authenticity and ownership of the asset.

What makes an NFT valuable?

The value of an NFT is determined by a variety of factors, including the perceived value and rarity of the asset, the reputation of the creator or artist, and the demand for similar NFTs in the market. As with any asset, the value of an NFT can fluctuate over time and may be affected by a variety of external factors.

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• Emerging Technology

‘The apotheosis of ownership’: What is the future of NFTs?

NFTs promise artists a new way to connect with their audience and a valuable income stream. But are they here to stay?

By Greg Noone

In the beginning was the presentation. Seven years ago, digital artist Kevin McCoy and tech entrepreneur Anil Dash mounted the stage at the Seven on Seven conference to explain their new invention, the ‘ monetised graphic ’. They proposed a new program containing metadata on any given object’s creation and ownership that would sit on the blockchain. The program – now more popularly known as a non-fungible token, or NFT – was effectively a concert ticket to the object, an additional layer to the object that didn’t lay claim to its ownership or copyright, but promised a new form of participation with it. The future of NFTs was born.

Dash and McCoy finished that presentation to polite applause and little uptake. It took another six years and the invention of a standard protocol on the Ethereum blockchain before NFTs began to spread in a serious way. By the end of 2020, tokens for digital art were being valued by cryptocurrency enthusiasts at hundreds of thousands of dollars. In March, that craze broke into the mainstream with the auctioning of Everydays: The First 5000 Days by Mike Winkelmann, otherwise known as Beeple. That work would sell for $69.3m.

By that point, a crowd of celebrities and sporting institutions had entered the NFT market. Some traded heavily on fan participation, including the NBA, which began selling NFTs of basketball video highlights . Some seemed to be just in it for the money – see Jack Dorsey’s sale of an NFT of his first tweet for $2.9m , or Kate Moss flogging NFTs of videos where she’s sleeping – while others, like model Emily Ratajkowski , harnessed the craze to provoke a discussion about image rights.

Underneath the froth, though, were artists and musicians who see the medium as an important new revenue stream that, with the right smart contract, could guarantee secondary resale royalties long after the NFT has been minted. Both groups had been sidelined in their own industries, which are dominated by closed networks of art dealers and streaming services, respectively. NFTs promise a way to connect with their audiences directly. Suddenly, digital artists from Brazil to Australia and the Philippines were reaping the whirlwind of interest, while musicians began selling tokens worth far more than their fees for gig appearances or streaming royalties.

For Tom Flynn, the emergence of NFTs is an inflection point in how we participate in creativity. “We’re seeing the apotheosis of ownership in the NFT,” says the art historian and founder of Flynn & Giovani Art Provenance Research. “All you own is the fact that you own it. You don’t own the thing. You just have the concept that you own it. That seems, to me, to be very radical.”

We’re seeing the apotheosis of ownership in the NFT. All you own is the fact that you own it. That seems, to me, to be very radical. Thomas Flynn Flynn & Giovani Art Provenance Research

It is also, as Flynn acknowledges, a medium that could be built on a house of sand. The notion that anything can be minted as an NFT – from the Brooklynite who successfully sold a token of his own flatulence , to numerous examples of third parties tokenising works without the consent of the original artist – is testing the inherent value of the instrument, and, for some, points towards a bubble market from which the medium might never recover. Others, meanwhile, have argued that the hyperlinks NFTs use to point to their associated pieces may be susceptible to ‘ link rot ’, and, therefore, will be unavailable in several years’ time.

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Will NFTs remain useful for artists in the future? Flynn remains undecided. “There’s a gold rush,” he says. “It’s like El Dorado all over again. Everyone’s thinking this is the keys to the kingdom, and it’s not. It’s very, very early days.”

New York’s Superchief Gallery NFT is dedicated exclusively to NFT artwork. (Photo by TIMOTHY A. CLARY/AFP via Getty Images)

House of sand

David Gerard is less equivocal. NFTs, says the author and crypto-sceptic, are little more than the plaything of Bitcoin and Ethereum promoters. “These are literally the same people who were previously selling ICOs and altcoins ,” says Gerard. “I don’t think this is the way forward for artists.”

This is partly down to a question of definition. An NFT, says Gerard is only “a ticket saying you participated in an interesting event,” a notion that is only commanding value because the demand for NFTs per se is currently so strong. Why that’s the case isn’t down to any philosophical shift about how we define ownership, he argues, but the fact that crypto-promoters are slapping millions of dollars on to individual pieces to artificially boost the market.

This happened in plain sight with the sale of Everydays , says Gerard. “It was an attempt by MetaKovan to promote the concept of NFTs,” he argues, referring to an investigation by Amy Castor into the crypto-entrepreneur’s history with a defunct Canadian coin exchange, and attempt to break up Beeple’s work into its own cryptocurrency. “That’s why he dropped a massive pile of Ether on this particular JPEG.”

Other flaws with NFTs, says Gerard, include the massive environmental cost associated with minting them, a potential PR disaster for young artists and bands. They also constitute a major opportunity for money launderers, he says. “I’m pretty sure some of those guys are looking closely at the NFT market and seeing if they can do the same tricks,” says Gerard. “If you look at transactions on the NFT sites, you’ll see some deals that make you go, ‘That can’t possibly be a real deal.’”

Meanwhile, there are structural deficiencies that could prove troublesome for artists if NFTs persist in their current form. One is that buyers often assume that they’re acquiring not just the token, but also ownership rights and copyright over the associated asset. “The challenge, I think, that will happen as the froth begins to subside is people starting to ask questions like, ‘What did I spend all that money on? What do I actually get?’” says Scott Thiel, a legal expert on NFTs at DLA Piper.

This could conceivably lead to civil cases being mounted against individuals selling NFTs where the conditions of sale are, at best, unclear, while those tempted to fractionalise newly-bought NFTs into more tokens, says Thiel, usually don’t realise that the act is subject to securities regulations . Sellers may also be inclined to pursue legal action against individuals who tokenise their assets without permission, explains Andres Guadamuz. He should know. A senior lecturer in intellectual property law at the University of Sussex, Guadamuz has minted ten different NFTs in this way.

As the researcher explains in a series of articles, the ability to mint someone else’s artwork constitutes a serious threat to an NFT’s claim to scarcity. Legal protections for artists against this remain theoretical. What is clear is that NFTs minted in this way do not infringe copyright in a broad sense, since the token doesn’t make any ownership claim over the object.

One exception to this, though, lies in something known as ‘communication to the public’, a type of violation in US, UK and EU copyright law wherein a link to a piece is published for commercial gain without the permission of the artist. If that’s the case, explains Guadamuz, “you may be sued successfully for copyright infringement”.

This has yet to be tested in court. Even so, “from a legal perspective, there’s almost nothing that people can do” to prevent third-party tokenisation, says Guadamuz. “You have to spend a lot of money pursuing someone for a result that may not be successful.”

Quantum by Kevin McCoy, minted in 2014 and considered to be the first known NFT of a digital artwork. What the future of NFTs holds will be better understood when it is put up for auction at Sotheby's on 10 June. (Image courtesy of Kevin McCoy)

The new middlemen

Kevin McCoy isn’t so worried. Sporting a tousled grey mane underneath a green baseball cap labelled ‘MATH’, the digital artist remains irrepressibly hopeful about the continued potential of NFTs. This is just as well. Two weeks after his interview with Tech Monitor , on 10 June, McCoy will auction Quantum , a fluorescently hypnotic GIF that lays claim to being the first such tokenised artwork in existence.

“There’s all kinds of issues and problems around platforms, and the emergence of a middle layer,” says McCoy. “Those things are real. But the day-to-day experience of people is that they have greater access to production and communication and distribution.”

In turn, argues McCoy, a new creative awakening has taken place, one that “blows through traditional aesthetic categories”. Flynn agrees, seeing precedents in the resulting explosion in the popularity of digital art in the Art Brut movement of the 1940s, and the provocations of conceptual artists from Marcel Duchamp onwards.

Even so, a hierarchy is taking shape that puts the lie to any argument that NFTs will vanquish middlemen from the creative industries. Most artists, after all, lack the technical knowledge to create unique tokens themselves, instead relying on third-party platforms to mint and sell their NFTs. Established artists and celebrities turn to Christie’s and Sotheby’s to publicise and auction their tokens. Those with less money to spend, meanwhile, turn to sites like OpenSea and Nifty Gateway to flog their wares.

Lawyers are also beginning to close ranks around NFTs. Worried that buyers may be confused at what they’re actually acquiring, sellers have commissioned disclaimers explaining precisely what and what is not included with an NFT. Guadamuz cites the recent sale of the NFT for ‘Charlie Bit My Finger’, an early YouTube hit. “It’s clear, to me, that they asked a lawyer for advice,” he says. “If you look at the terms and conditions of the sale, they’re not saying that you own the video. They’re saying you only own the NFT. You do not own any of the assets.”

That isn’t always the case, says Thiel. Transferring copyright through NFTs is possible, but it requires separate waivers and complex legal agreements to ensure that sellers are properly protected from civil actions. These kinds of services, however, constitute yet another barrier to entry for amateurs seeking to trade in NFTs. “It costs money to enter the space,” says Guadamuz. “And the market is already overheated. There are people that are making lots of money, but most of the people are not.”

NFTs are also unlikely to overcome the deep institutional antipathy towards publicity among mainstream art collectors, says Flynn. “There is a rump of the art market that is very discrete, very private, very confidential, that has nothing to do with this kind of thing, and isn’t interested in it,” says Flynn. These ultra-high net worth individuals “don’t want people knowing what they own. So, the notion of putting it on the blockchain would be completely anathema to them.”

The future of NFTs

McCoy is more optimistic. We are, he says, still in the earliest stages of the technical evolution of NFTs. While the system he pioneered may be vulnerable to link rot, he believes that sociocultural norms around the preservation of internet culture will continue to change for the better. “There will be things lost along the way, for sure,” says McCoy. “But I do think it’s a mistake to think that that’s going to derail the whole train.”

Guadamuz believes that the future of NFTs may lie partly in guaranteeing the existence of the works behind them on the blockchain. Right now, it is prohibitively expensive to upload anything more than a tweet on to Ethereum, but this may become cheaper to do once it converts to a new ' proof-of-stake ' model, which promises to lower on-chain transaction fees significantly.

Another legacy that NFTs will leave behind, argues Thiel, will be in popularising the fractionalisation of not only digital art, but real-world objects. Doing so with real-world stakes of ownership will be the next great transformation. “They don’t even have to be NFTs,” he says. Instead, a client might choose to tokenise a painting or a wine collection into 10,000 pieces, like so many shares in a company. “All of a sudden, you’ve got a marketplace,” says Thiel, with the added advantage that it exists within an established regulatory framework for securities.

How long the market will value association with an artwork or a song through NFTs, rather than an explicit claim to it, is anyone’s guess. The next great test will take place on 10 June with the sale of Quantum . Axios estimates the work will sell for $7m.

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Table of Contents

Non-Fungible Tokens (NFTs) have emerged as a revolutionary force in the digital landscape, captivating the imagination of creators, collectors, and investors alike. These unique digital assets, powered by blockchain technology , represent a new paradigm of ownership and authenticity in the digital age. This comprehensive guide will explore NFTs' functionalities and potential impact on various industries.

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What Are NFTs?

Non-Fungible Tokens (NFTs) are unique digital assets stored and managed on a blockchain, a decentralized digital ledger technology. Each NFT is distinct and cannot be replicated, making it one-of-a-kind. Unlike cryptocurrencies such as Bitcoin or Ethereum, which are fungible and can be exchanged one-to-one, NFTs represent ownership of specific digital content or assets, such as artwork, collectibles, virtual real estate, music, videos, or any other form of digital media. Each NFT contains metadata that verifies its authenticity, ownership history, and other relevant information, providing a transparent and immutable record of ownership.

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How NFTs Differ From Cryptocurrencies Like Bitcoin

NFTs differ from cryptocurrencies like Bitcoin in several key ways. While both are digital assets that utilize blockchain technology, they serve different purposes and have different properties:

Fungibility

• Cryptocurrencies like Bitcoin are fungible, meaning that each unit is identical and interchangeable with any other unit of the same denomination. For example, one Bitcoin is equivalent in value to any other Bitcoin.
• In contrast, NFTs are non-fungible, meaning each token is unique and cannot be exchanged like-for-like. Each NFT represents ownership of a specific asset, and no two NFTs are identical.
• Cryptocurrencies like Bitcoin are primarily used as a medium of exchange or store of value, functioning as digital currencies that can be traded or spent. 
• NFTs, on the other hand, represent ownership of digital content or assets. They can be bought, sold, and traded like any other asset, but their value is derived from their uniqueness and scarcity rather than their utility as a medium of exchange.

Interoperability

While cryptocurrencies like Bitcoin are generally interchangeable across different platforms and wallets, NFTs are often specific to particular blockchain networks or marketplaces. However, efforts are underway to improve interoperability and enable cross-chain compatibility for NFTs, allowing them to be transferred and traded more freely between different platforms and ecosystems.

Understanding Fungibility vs. Non-fungibility

• Fungibility refers to the property of an asset whereby each unit is interchangeable and indistinguishable from any other unit of the same type. For example, a dollar bill is fungible because one dollar bill is equivalent to any other dollar bill.
• Non-fungibility refers to the property of an asset whereby each unit is unique and cannot be exchanged on a like-for-like basis. Non-fungible assets have distinct characteristics or properties that differentiate them from one another. For example, a piece of artwork is non-fungible because each artwork is unique and cannot be replaced by any other artwork of the same type.

How NFTs Work

Blockchain technology is the underlying infrastructure that enables the creation, management, and transfer of NFTs. It is a decentralized digital ledger that records transactions across a network of computers in a secure, transparent, and immutable manner. Each block in the blockchain contains a cryptographic hash of the previous block, creating a chain of blocks that cannot be altered retroactively.

The decentralized nature of blockchain technology ensures that NFT transactions are transparent and resistant to censorship or tampering. When an NFT is created, its ownership information, metadata, and transaction history are recorded on the blockchain, providing a permanent and verifiable record of ownership.

Smart Contracts and Their Role in NFT Transactions

Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically enforce the terms of the contract when predefined conditions are met, without the need for intermediaries or third parties. Smart contracts play a crucial role in NFT transactions by facilitating the creation, transfer, and ownership of NFTs in a trustless and decentralized manner.

When an NFT is created, a smart contract is deployed on the blockchain to define its rules and conditions, such as its ownership rights, royalties, and transferability. The smart contract automatically executes these rules when the NFT is bought, sold, or transferred, ensuring that ownership rights are properly transferred and enforced.

Examples of Popular Blockchain Platforms for NFTs

Several blockchain platforms support the creation and trading of NFTs, each with unique features and ecosystem. Some of the most popular blockchain platforms for NFTs include:

• Ethereum: Ethereum is one of the leading blockchain platforms for NFTs, known for its robust smart contract functionality and vibrant ecosystem of decentralized applications (DApps). The Ethereum blockchain is widely used for creating and trading NFTs thanks to its flexibility, scalability, and interoperability with other blockchain networks.
• Binance Smart Chain (BSC): Binance Smart Chain is a blockchain platform developed by Binance, one of the largest cryptocurrency exchanges in the world. BSC offers fast and low-cost transactions, making it an attractive option for NFT creators and traders looking to minimize transaction fees and maximize efficiency.
• Flow: Flow is a blockchain platform designed for building decentralized applications and digital assets, created by Dapper Labs, the team behind popular NFT projects like CryptoKitties and NBA Top Shot. Flow is optimized for scalability and performance, making it well-suited for handling large-scale NFT collections and high-volume transactions.

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Types of NFTs

Digital art and collectibles.

• Digital art NFTs encompass many artistic creations that are tokenized and sold as NFTs, including illustrations, paintings, animations, and 3D models.
• Artists can upload their digital artwork to NFT marketplaces, where collectors can purchase them using cryptocurrency.
• Digital art NFTs often come with metadata that includes information about the artwork, such as the artist's name, creation date, edition number (if applicable), and any additional details or descriptions.
• Collectibles are digital items that hold value due to their rarity, uniqueness, or sentimental value. Examples include virtual trading cards, virtual pets, and virtual fashion items.

Virtual Real Estate and Gaming Assets

• NFTs are increasingly being used to represent ownership of virtual real estate within virtual worlds, metaverses, and decentralized gaming environments.
• Virtual real estate NFTs allow users to buy, sell, and trade virtual land parcels, buildings, and other assets within virtual environments.
• Gaming assets NFTs include in-game items, characters, skins, weapons, and other virtual goods that players can own, customize, and trade within video games and online gaming platforms.
• NFTs enable players to own their in-game assets and transfer them between games, platforms, and marketplaces.

Music and Other Digital Media

• NFTs are revolutionizing the music industry by providing artists and musicians new ways to monetize their music, engage with fans, and retain ownership and control over their creative works.
• Music NFTs can represent ownership of digital albums, songs, concert tickets, exclusive access to live performances, and other music-related assets.
• Other digital media NFTs include videos, podcasts, e-books, articles, and other forms of digital content that can be tokenized and sold as NFTs.
• NFTs allow creators and content creators to monetize their content directly without relying on traditional intermediaries like record labels, publishers, or streaming platforms.

Intellectual Property Rights and Ownership

• In a decentralized and transparent manner, NFTs can be used to tokenize and manage intellectual property rights, such as patents, trademarks, copyrights, and licenses.
• Creators and rights holders can use NFTs to prove ownership, establish authenticity, and manage the licensing and distribution of their intellectual property.
• NFTs provide a secure and immutable record of ownership and transaction history, reducing the risk of copyright infringement, piracy, and unauthorized use of intellectual property.

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Benefits of NFTs

1. empowering creators and artists.

• NFTs provide creators and artists new opportunities to monetize their work directly without relying on traditional intermediaries like galleries, agents, or publishers.
• Artists can tokenize their digital creations as NFTs and sell them on blockchain-based marketplaces, earning royalties from secondary sales and retaining ownership and control over their intellectual property.
• NFTs enable artists to reach a global audience of collectors and fans, democratizing access to art and allowing for greater creativity, diversity, and innovation in the art world.

2. Immutable Ownership and Provenance

• NFTs offer a transparent and immutable ownership and transaction history record stored on a decentralized blockchain ledger.
• Each NFT contains metadata that verifies its authenticity, ownership rights, and provenance, reducing the risk of fraud, forgery, and counterfeiting.
• NFTs provide collectors and investors with confidence in the authenticity and scarcity of digital assets, enhancing trust and transparency in the marketplace.

3. Potential for Royalties and Resale Value

• NFTs enable creators and rights holders to earn royalties from secondary sales of their digital assets on the secondary market.
• Smart contracts embedded in NFTs automatically distribute royalties to creators every time their NFT is resold, ensuring ongoing compensation for their work.
• NFTs can appreciate over time, especially if the creator gains popularity or digital assets become culturally or historically significant. This potential for value appreciation can provide long-term financial benefits for creators and investors.

4. Democratizing Access to Ownership

• NFTs democratize access to ownership by allowing anyone to buy, sell, and trade digital assets, regardless of their geographical location, socioeconomic status, or traditional connections to the art world.
• NFTs lower barriers to entry for creators and collectors, providing a more inclusive and accessible platform for participation in the digital economy.
• NFTs enable fractionalized ownership, allowing multiple investors to collectively own shares of a digital asset collectively, further democratizing access to ownership and investment opportunities.

5. Unlocking New Use Cases and Applications

• NFTs unlock new use cases and applications across various industries, including art, gaming, music, entertainment, fashion, real estate, and finance.
• NFTs can represent ownership of virtual real estate, in-game assets, music rights, digital collectibles, and other digital assets with unique value propositions.
• NFTs drive innovation and experimentation in the digital space, fostering collaboration, creativity, and exploration of novel ideas and concepts.

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How to Get Started With NFTs

• Set up a cryptocurrency wallet to store and manage digital assets.
• Research and choose a reputable NFT marketplace or platform to buy, sell, and trade NFTs.
• Familiarize yourself with buying, selling, and transferring NFTs, including gas fees and transaction times.
• Explore different categories of NFTs, such as digital art, collectibles, gaming assets, and virtual real estate.
• Follow artists, creators, and projects in the NFT space to stay informed about new releases, drops, and collaborations.
• Conduct due diligence on NFT projects and creators before purchasing, including verifying authenticity and reputation.
• Participate in NFT communities, forums, and social media groups to connect with other enthusiasts and learn from their experiences.
• Consider diversifying your NFT portfolio by investing in various assets across different categories and platforms.
• Stay updated on trends, developments, and regulations in the NFT space to make informed decisions and mitigate risks.
• Enjoy the journey of exploring, collecting, and participating in the exciting world of NFTs responsibly and ethically.

The Future of NFTs

The future of NFTs holds immense potential for transformative innovation and widespread adoption across various industries. As blockchain technology evolves and matures, NFTs are poised to revolutionize how we create, own, and exchange digital assets. We can anticipate a future where NFTs become increasingly integrated into our everyday lives, enabling new forms of digital ownership, creativity, and value exchange.

In the art world, NFTs democratize access to art and empower artists to monetize their work directly while providing collectors with verifiable provenance and ownership rights. In the gaming industry, NFTs are reshaping the concept of digital ownership, allowing players to truly own their in-game assets and transfer them between games and platforms.

Beyond art and gaming, NFTs are finding applications in music, entertainment, fashion, real estate, finance , and beyond, unlocking new opportunities for creators, investors, and consumers. With ongoing advancements in blockchain technology, interoperability, and user experience, the future of NFTs promises to be one of continued growth, innovation, and disruption, reshaping the digital economy and redefining how we engage with digital content and assets.

NFTs represent a dynamic frontier of digital ownership, creativity, and innovation. Through this ultimate guide, we've explored the fundamental concepts of NFTs, their underlying technology, diverse use cases, and potential impact on various industries. From empowering artists and creators to revolutionizing gaming, music, and beyond, NFTs offer a glimpse into a future where ownership is decentralized, creativity is boundless, and value exchange is transparent.

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1. What are some examples of non-fungible tokens?

NFTs can represent any asset digitally. It can be online-only assets such as digital artwork or real assets like real estate. Some examples are in-game avatars, digital/ non-digital collectibles, tickets, domain names, and more. 

2. How can I buy NFTs?

Most non-fungible tokens can be purchased with Ether only. So, owning and storing them in a digital wallet is the primary step. You can buy NFTs via an online NFT marketplace such as OpenSea, SuperRare, and Rarible. 

3. Are NFTs safe?

NFTs that use blockchain technology like cryptocurrency are generally secure. Their distributed nature makes NFTs nearly impossible to hack. The only security risk is that you could lose access to your NFTs if the hosting platform goes out of business.

4. What does non-fungible mean?

Fungibility is a term from economics describing the interchangeability of products/ goods. For instance, an item such as a dollar bill is fungible when it is interchangeable with any other dollar bill. Contrastingly, non-fungible means the item is unique or distinguishable. For example, if you take a dollar bill and have it signed by a famous artist, it will become unique.  

5. What are NFTs, exactly? 

NFTs or non-fungible tokens are digital assets based on blockchain technology. Anything can become an NFT—a piece of art, sports memorabilia, or even a tweet. 

6. What are NFTs used for?

NFTs are digital files. They can be a jpeg of a piece of art, real estate, or a video. Turning files into NFTs helps secure them via blockchain to make buying, selling and trading efficient, reducing fraud considerably. 

7. How do NFTs and crypto connect?

Like cryptocurrencies, non-fungible tokens also exist on a blockchain. It confirms the ownership and unique identity of the digital asset. A technology similar to Bitcoin and Ethereum is used to build NFTs. In fact, Ethereum is the widely accepted crypto in the NFT market. 

8. Why do people buy NFTs?

NFTs are considered a safe investment option. These tokenized assets are accessible to everyone. They empower you with basic usage rights. Moreover, most buyers invest in them because they believe the assets will hold value in the future. 

9. What are the best ways to make money from NFTs?

Some of the best ways to maximize the return from NFTs include Renting, Earning royalties, Trading NFTs, NFT gaming and Adopting NFT-powered yield farming. 

10. Should I invest in an NFT?

Experts suggest that NFTs can be a good investment because you can resell them for profit. Several NFT marketplaces allow sellers to get royalties for their sold assets. However, proper research is necessary before investing so that you can gauge whether it suits your demands.  

11. What's the difference between NFTs and cryptocurrency?

Both cryptocurrencies and NFTs use the blockchain network for ownership verification. However, unlike a cryptocurrency, an NFT can't be directly exchanged with another NFT. NFTs are sold but not traded like securities on digital exchanges. In contrast, cryptocurrencies can be traded like securities.

12. What is NFT digital art and how does NFT art work?

NFT art is digital art tokenized in the blockchain, much like any other NFT object. Since the artwork is totally digital, buyers, sellers, and traders eventually transact in the metaverse. NFT art also has a single original, just like there is with physical art.

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The Rise and Fall of NFTs: What Happened and What’s Next?

Non-fungible tokens (NFTs) were one of the hottest trends in the crypto world in 2022. They allowed artists, creators, and collectors to tokenize and trade unique digital assets on the blockchain, such as art, music, videos, games, and even tweets. NFTs promised to revolutionize ...

Table of Contents

Why did nfts get so much hype at first, why did nfts lose so much value and popularity lately, who are the celebrities who lost the most from nfts, will nfts be able to regain their former popularity.

Non-fungible tokens (NFTs) were one of the hottest trends in the crypto world in 2022. They allowed artists, creators, and collectors to tokenize and trade unique digital assets on the blockchain, such as art, music, videos, games, and even tweets. NFTs promised to revolutionize the creative economy by giving creators more control, ownership, and monetization of their work, as well as providing new opportunities for fans to support and interact with their favorite artists.

However, the NFT craze was short-lived. After reaching a peak of $17 billion in trading volume in January 2022, the NFT market collapsed by 97% in September 2022, according to data from Dune Analytics. The hype faded, the prices dropped, and the interest dwindled. What caused this dramatic decline, and what does it mean for the future of NFTs?

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NFTs emerged as a novel and exciting use case of blockchain technology, which is the underlying infrastructure of cryptocurrencies like Bitcoin and Ethereum. Blockchain is a distributed ledger that records transactions in a secure, transparent, and immutable way. By using blockchain, NFTs can provide verifiable proof of authenticity, scarcity, and ownership of digital assets, which are otherwise easy to copy and distribute online.

NFTs also appealed to the human desire for collecting, owning, and displaying rare and valuable items. Some of the most popular NFT platforms were marketplaces for digital art and collectibles, such as OpenSea, SuperRare, Rarible, and Foundation. These platforms enabled artists to create and sell their work as NFTs, often using a smart contract that automatically pays them a royalty fee every time their NFT is resold on the secondary market. This created a new revenue stream for artists who otherwise struggle to make a living from their digital creations.

Moreover, NFTs attracted a lot of attention from celebrities, influencers, and mainstream media outlets. Some of the notable examples of NFT sales in 2022 include:

• The first tweet by Twitter founder Jack Dorsey sold for $2.9 million.
• A collage of 5,000 digital images by artist Beeple sold for $69 million at Christie’s auction house.
• A video clip of NBA star LeBron James dunking sold for $208,000 on NBA Top Shot.
• A rock-shaped JPEG image sold for $1.3 million on EtherRock.
• A pixelated image of a punk character sold for $7.6 million on CryptoPunks.

These examples show how NFTs created a new form of digital expression and social status. By owning an NFT, one could show off their taste, wealth, and support for a certain artist or community. NFTs also enabled new forms of fan engagement and interaction, such as voting rights, exclusive access, or personalized experiences.

However, the NFT boom also had its drawbacks. One of the main challenges was the environmental impact of NFTs. Most NFTs are built on the Ethereum blockchain, which uses a consensus mechanism called proof-of-work (PoW) that requires a lot of computing power and energy consumption to validate transactions. According to Digiconomist, Ethereum’s annual carbon footprint is equivalent to that of Ecuador.

This raised ethical concerns among some artists and collectors who were worried about contributing to climate change by creating or buying NFTs. Some platforms tried to address this issue by switching to more eco-friendly blockchains or offsetting their carbon emissions.

Another challenge was the quality and originality of NFTs. As the market became saturated with thousands of new NFT projects every day, it became harder to distinguish between genuine artistic expression and opportunistic cash grabs. Many NFTs were simply copied or stolen from other sources without permission or attribution. Some were even generated by algorithms or bots with minimal human input.

This led to a loss of trust and confidence among buyers who felt they were being scammed or overpaying for low-quality or fake NFTs. Some buyers also realized that owning an NFT did not necessarily mean owning the underlying asset or having exclusive rights to it. For example, an NFT of a tweet or a video does not prevent anyone else from viewing or sharing it online. In fact, the NFT itself is just a token that points to a URL where the actual asset is stored, which could be changed or deleted at any time.

Furthermore, the NFT market was affected by the broader crypto market conditions. The crypto sector experienced a significant downturn in 2022, as the global economy recovered from the Covid-19 pandemic and central banks tightened their monetary policies. This reduced the risk appetite and liquidity for speculative assets, such as cryptocurrencies and NFTs. As a result, many investors and traders exited the market, leading to lower demand and prices for NFTs.

Some of the celebrities who jumped on the NFT bandwagon in 2022 may have regretted their decision later, as their NFT sales did not live up to their expectations or received backlash from their fans or critics. Some of the examples are:

• Lindsay Lohan sold an NFT of her face for $50,000 in February 2022, but it was resold for $15,000 in March 2022, losing 70% of its value.
• Paris Hilton sold an NFT of her cat for $17,000 in March 2022, but it was resold for $1,300 in September 2022, losing 92% of its value.
• Grimes sold a collection of NFTs for $6 million in March 2022, but some of them were resold for less than $1,000 in September 2022, losing over 99% of their value.
• Eminem sold an NFT of his beat for $100,000 in April 2022, but it was resold for $6,500 in September 2022, losing 93% of its value.
• Snoop Dogg sold an NFT of his dog for $25,000 in April 2022, but it was resold for $3,600 in September 2022, losing 86% of its value.

These examples show how volatile and unpredictable the NFT market can be, and how celebrity endorsement does not guarantee long-term success or value retention.

Despite the recent slump, some experts and enthusiasts believe that NFTs are not dead and that they have a bright future ahead. They argue that NFTs are still a nascent and evolving technology that has a lot of potential to transform various industries and sectors beyond art and entertainment. Some of the possible use cases and benefits of NFTs include:

• Gaming: NFTs can enable gamers to own and trade their in-game items, characters, and achievements across different platforms and games. They can also create new gaming experiences and economies based on user-generated content and rewards.
• Music: NFTs can empower musicians to monetize their work directly from their fans without intermediaries or fees. They can also offer new ways for fans to access exclusive content, merchandise, tickets, or experiences.
• Fashion: NFTs can create new opportunities for fashion designers and brands to showcase and sell their digital collections and accessories. They can also enable users to customize and wear their digital outfits across different virtual platforms and environments.
• Sports: NFTs can create new forms of fan engagement and interaction with their favorite athletes, teams, and leagues. They can also provide new sources of revenue and sponsorship for sports organizations and players.
• Education: NFTs can provide verifiable proof of credentials, achievements, and skills for learners and educators. They can also create new incentives and rewards for learning and teaching.

In conclusion, NFTs are a fascinating and innovative technology that has the potential to revolutionize various industries and sectors. However, they also face many challenges and uncertainties that have caused their market to collapse in 2022. To survive and thrive in the long term, NFT platforms and projects need to improve their technical and operational aspects, as well as their quality and originality. They also need to adopt effective SEO strategies to reach and engage their target audience and customers. NFTs are not dead, but they need to evolve and adapt to the changing market conditions and consumer preferences.

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Observer’s Guide to This Year’s Must-Visit August Art Fairs

In the height of summer, there are loads of smaller, lesser-known and niche art fairs happening around the world..

Are you ready to be both shocked and dismayed? I’m here to tell you that summer is already half over. August in the art world can feel like a long, hot, somewhat unpleasant slog toward Frieze Seoul and the Armory Show , not to mention all the other early-autumn art fairs in New York. But wait! Don’t write off summer’s dreariest month just yet. The list of August art fairs is surprisingly long—particularly for those art enthusiasts willing to country hop. If you thought this month would give you a moment to catch your breath after the July art fairs and festivals, think again. The serious art fair enthusiasts of the world have already planned out their 2024 August art fair calendars and are hitting the road to go to some, or even most, of these fairs and fair-ish art events.

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Aspen Art Fair

July 29 – August 2

Aspen Art Fair, a brand-new contemporary fair debuting this year at the historic Hotel Jerome, hasn’t attracted much attention yet but as the latest newcomer to the expanding Aspen art scene, it’s sure to make headlines with its lineup of thirty domestic and international exhibitors from more than twelve countries. The full lineup includes Colorado art galleries like Denver’s K Contemporary and Aspen’s Casterline | Goodman Gallery; galleries from New York, L.A. and elsewhere in the States; and more far-flung art spaces like London’s Ronchini, Italian gallery Secci and Galerie Gmurzynska of Zürich. Aspen Art Fair’s program includes an Aspen Art Museum tour with curator Simone Krug , a film screening, panel discussions, dance performances and even—this is very Aspen—a hike. On July 28, there will be a kickoff event at the Arhaus Studio featuring work by multimedia artist Rachel Garrard .

Intersect Aspen Art and Design Fair 2024

July 30 – August 3

Intersect Aspen , an art fair founded in 2010, is a cornerstone of Aspen’s peak art season and summer cultural calendar. Once again at the Aspen Ice Garden, this year’s edition of the fair will feature artworks by over 100 artists displayed by more than thirty galleries—including several contemporary design galleries like Todd Merrill Studio, Mastrangelo and BDDW and some first-timers. This is the first year design will be incorporated into the fair’s curatorial vision and the updated name (Intersect Aspen is now Intersect Aspen Art and Design Fair) reflects a new, broader focus. Art is still number one at Intersect, however, and some of this year’s featured artists include Meghann Riepenhoff , Zaria Forman and Yigal Ozeri . “We strive to create a space for collectors and art enthusiasts to immerse themselves in viewing, acquiring, learning about and discussing the art and continue to be a must-attend event during Aspen’s world-renowned ArtWeek,” said Tim von Gal, CEO of the fair, in a statement.

Uptown Art Fair 2024

Less fair than art festival, Minneapolis’ Uptown Art Fair has a new format this year thanks to major infrastructure work making the usual venue inaccessible. Now billed as DETOUR @ Bachman’s, the event’s 60th-anniversary edition features a lineup of 150 artists working in paint, fiber, sculpture and mixed media, along with jewelry artists, ceramicists and other creators. As a concession for those disappointed by the change, Uptown Art Fair’s organizers and the city have put together a lineup of artsy events spanning all of August that include immersive art installations, pop-ups and a public art competition.

Biennale Chianciano 2024

August 3-18

The eighth edition of the Biennale Chianciano in Tuscany presents the work of 150+ selected artists from forty nations in the Museo d’Arte Chianciano Terme and thirteen art galleries located around Medieval Chianciano. This Biennale, which is free and open to the public, showcases the work of contemporary artists chosen via a worldwide open call. Seeing these works displayed in contrast with the local historic architecture and the breathtaking surrounding countryside is an experience. After browsing the Museo d’Arte Chianciano Terme’s Biennale selections and a permanent collection that includes works by Durer and Rembrandt; Munch, Magritte and Guttuso; and the likes of Salvador Dalì, Mario Schifano and Frances Turner. Before you head to the galleries, take a pause with a glass of champagne in the Museo d’Arte Chianciano Terme’s art-filled Picasso Bar.

SEE ALSO: Rashid Johnson Is Curating a Show Around Leon Golub’s Work at Hauser & Wirth

Whitehawk Antique Indian & Ethnographic Art Show 2024

August 9-12

The Whitehawk Antique Indian & Ethnographic Art Show was once several fairs, as Objects of Art Santa Fe and The Antique American Indian Art Show merged to become Objects of Art & American Indian/Tribal Santa Fe in 2022. IAF Indigenous Art Fair Contemporary fits in somehow, but the event has been postponed until further notice according to the Whitehawk website. Nevermind that, as the Whitehawk Antique Indian & Ethnographic Art Show—a staple of the Santa Fe art scene for more than forty-six years, whatever name you give it—brings together over 127 of the world’s premier experts in this space showing “the best of the best” of modern and historical textile art, folk art, pottery, jewelry, beadwork, woodcarving and more from Native American and other indigenous cultures. Whitehawk bills the fair as an educational experience where one can learn more not only about the art but also the people who created it and the context in which it was created. This year’s special exhibit is “Art of Timeless Beauty, the Navajo Child’s Blanket,” curated by Robert Parsons .

SWISSARTEXPO 2024

August 21-25

In Zurich, SWISSARTEXPO is yet another fair that aims to pair artists and art enthusiasts through lively conversation. (Honestly, we love that so many fairs are trying to strip the lingering veneer of exclusivity from these art world events.) In past years, SWISSARTEXPO has attracted 80,000 visitors per day, there to see more than 100 exhibitors from all over the world displaying art under the sculpture L’ange protecteur by Niki de St.Phalle . This is the fair’s sixth year, and chances are it will have a long life, given its reputation for innovation. Most importantly, this fair is free. But it has also incorporated QR codes into displays, making it easier to find out more information about specific art and artists—and in some cases, to access related audio and video guides. Artists who don’t make it into the fair can still virtually show their work in the main exhibition space via Art Box digital displays.

KUNST/MITTE 2024

August 22-25

The 10th edition of KUNST/MITTE in Magdeburg, Germany, brings together more than sixty exhibitors—a roster that includes not only galleries but also artists and artist collectives. Additionally, ten young artists will present their work in the YoungArtistSpace (YAS). There’s admittedly not a ton of exhibition space at this fair, but the organizers manage to pack in an engaging variety of paintings, mixed-media works, sculptures, collages, fine art photographs and installations by artists of all stripes, who are there for the exposure and several prizes. There’s also an extensive supporting program, with free guided tours of the fair, performances and COLLECTOR’S NIGHT, during which exhibitors show one previously unpublished work per booth for the first time ever. A chance to own something entirely new?

art3f Monaco 2024

August 23 -25

Monaco’s international contemporary art fair at Chapiteau de Fontvieille, art3f Monaco , aims to give art and art collecting a “human and warm side” with affordable art presented “without code, without prejudice and uninhibited.” Galleries are certainly present at this August art fair, but many of the 200 artists whose works are on show were handpicked by the fair’s selection committee, and moreover, the artists are actually on site. Enthusiasts and collectors can meet the painters, sculptors, photographers, etc., and hear their stories, fostering a connection between buyer and artist that leads to a “direct exchange and sharing of emotions.” In theory, anyway. It’s a good concept and one that’s attractive to many younger collectors and would-be collectors, but whether it makes art more accessible is up for debate.

SP–Arte Rotas Brazileiras 2024

August 28 – September 1

In São Paulo, Brazil at ARCA, SP–Arte’s Rotas Brazileiras is an art fair laser-focused on the art of Brazil and its contexts, historical and otherwise. This year marks the fair’s third edition, which will feature artistic direction by Brazilian curator, editor and art critic Rodrigo Moura , who is also acting chief curator at the Museo del Barrio in New York. Rotas Brazileiras bills itself as a fair of discoveries, whether that means of emerging art world trends or of the influential Brazilian artists you’ve probably never heard of. What you’ll see: curated presentations of hundreds of works mounted by art galleries from across Brazil; institutional presentations that shed light on their collections; special projects designed to promote Brazilian art and support the work of the country’s artists; and a new sector that brings together large-scale paintings, sculpture and installations.

ART021 Hong Kong 2024

August 28 – September 8

Shanghai-based art fair operator ART021 —which was founded in 2013 by art collectors Kylie Ying , Bao Yifeng and David Chau — is launching a distributed Hong Kong fair this month, with the inaugural edition taking place across multiple venues (including an outdoor sculpture garden) and not at the Hong Kong Convention and Exhibition Centre as originally announced. Early reports suggested that there would be just dozens of galleries participating but more recent intel suggests there will be more than seventy exhibitors from thirteen countries helping to kick off not only the fair but also a “Greater Bay Area Art Week.” The main Galleries section will be mounted in the Asia-Pacific headquarters of auction house Phillips, which will devote two floors of its space to the fair. The Expansion section, hosted by the Fringe Club, will have special exhibitions, live performances, forums and other events.

CHART Art Fair 2024

August 29 – September 1

CHART , which takes place in Copenhagen, Denmark’s Kunsthal Charlottenborg, was founded more than a decade ago by five Copenhagen art galleries and has given the region’s contemporary art scene an annual boost ever since. Now in its twelfth edition, this August art fair brings together a roster of established, celebrated Nordic artists exhibited by leading regional galleries and new talent from around the globe. For 2024, CHART has brought back the curated selling exhibition “Start Collecting with CHART,” which is limited to works priced below €2,700 ($3,000) selected by participating galleries. There will also be a public program of artist talks, panel discussions, performances and film screenings focused on New Voices in The Nordics. The associated month-long off-site sculptural exhibition in Tivoli Garden, CHART in Tivoli, is always a highlight, as are the art book and print components of the fair.

Enter Art Fair 2024

August 29 – September 1 Established by Julie Leopold in 2019, Enter Art Fair at Lokomotivværkstedet in Copenhagen is the region’s largest international art fair. This year, it will bring ninety-six galleries from forty-six cities and twenty countries together in what it dubs a “nexus of creative and commercial exchanges.” More than 20,000 art collectors, enthusiasts and professionals are expected to come for the paintings, drawings, sculptures, ceramics, glass, video, photography and digital works by more than 350 artists, as well as the annual Art and Talks Program, which is this year curated by Diana Velasco , and a performance program. A new section, ENTER Digital, will highlight cutting-edge digital art—A.I. art and NFTs are just the beginning.

Affordable Art Fair Melbourne 2024

Since its inception in 1999, Will Ramsay ’s Affordable Art Fair has emerged as a beacon for art enthusiasts and collectors alike, democratizing the acquisition of art with its welcoming, inclusive ethos. Affordable Art Fair Melbourne brings Ramsay’s ethos to Australia with a show of original, contemporary artworks by emerging and established artists, all priced up to AUD$10,000 and no higher. On the exhibitor list are galleries from Australia, Asia and even Peru, but you’ll find no U.S. or North American galleries at this edition of this fair that aims to democratize art collecting. New for this year are presentations of work by talented young artists with connections to Melbourne: Olivia Walmsley , Lily-Rose Burgess , Sam Harrison , Kenzopaints , Sibylla ‘Billie’ Robertson and Charli English .

arteba 2024

August 30 – September 1

The Center Costa Salguero in Buenos Aires is hosting this year’s arteba art fair, which will showcase the work of more than 400 artists represented by sixty-five galleries from fifteen different locales. Often incorrectly labeled ArteBA— Usos incorrectos: Arte BA, arte BA, arteBa, arteBA , the fair’s press room proclaims—this August art fair was founded in 1991 by Jacobo Fiterman and nonprofit Fundación arteba as part of efforts to strengthen Buenos Aires’ art market and promote Argentine art. It has since become Argentina’s longest-running and most important modern and contemporary art fair, as well as one of the standout Latin American art fairs, attracting about 100,000 people annually. This year, the exhibitor list was curated by Mora Bacal , director of Ruth Benzacar Art Gallery; independent curators Carla Barbero and Florencia Malbrán; Ricardo Ocampo , director of W-Galería; and Amparo Díscoli, director of COSMOCOSA.

ART-O-RAMA 2024

The first international art fair in the South of France, Marseille’s ART-O-RAMA is produced by Fræme in co-production with La Friche la Belle de Mai. This year, exhibiting galleries were chosen by a selection committee made up of art collector Émilien Chayia and gallerists Marie Madec , Haynes Riley , Joana Roda and Sophie Tappeiner . They built a roster of forty-one galleries from around the world—primarily European galleries, which is unsurprising, but Chicago’s Good Weather gallery is also on the roster.

Even more August art fairs in 2024

As always, what’s above doesn’t represent the totality of the August art fair calendar in 2024—there are always plenty of smaller, lesser-known and niche art fairs happening around the world. Here’s a quick roundup of several more art fairs and festivals you might want to check out this month.

ART ANTIQUE Residenz Salzburg 2024

August 10-18

Knokke Art Fair 2024 (Knokke-Heist, Belgium)

Bada argentina 2024 (buenos aires), paréidolie 2024 (marseille), pink art fair 2024 (seoul), art formosa 2024 (taipei).

• SEE ALSO : Why Defining Exactly Who Is and Isn’t an Artist Matters

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