2021 was the year of digital investments. We have seen it with Bitcoin, which reached its all-time high and then plummeted. However, another digital asset promises to revolutionize the way we consume content, to the point of redefining what we consider works of art: NFTs.
What is an NFT?
The first thing to say is that this concept should not be confused with the NFT Hydrophonic, which comes from agriculture. An NFT is a Non-Fungible-Token, which means a digital asset with an utterly subjective value.
It is the equivalent of works of art and other products, such as gold or silver in real life. The difference is that they are tangible goods, while NFTs are 100% digital, as we cannot touch them. Although cryptocurrencies are a similar concept, the truth is that NFT and crypto are not the same.
Precisely, the first ones emphasize the possibility that the objects are intended for collecting. In other words, the “authenticity” of a digital piece is what makes it possible to enhance the value of one of these assets, something that also occurs in “real life,” but, until now, has never been implemented on the Internet.
What is an example of an NFT?
Let’s take an example to understand it better. In the world of painting, perhaps the best-known painting on the planet is “La Joconde.” The value of the original piece is practically priceless, not only because of the magnificence of the work, the technical prowess, and the time it took Leonardo da Vinci to create it but also because there is only one on the entire planet.
Although there are many copies of “La Joconde,” none can approach the value of the original work. No matter how well the painting is imitated, the authenticity certificate makes the original always the most valuable, no matter how many duplications there are.
Features that make NFTs a digital revolution
The following are the main characteristics that define NFTs:
- Unique. No two NFTs can be the same. While there will be similar assets, as is the case with works of art, each NFT itself is unique. It is worth mentioning that there will be “copies” in the network. For example, a tweet, an NFT, may be retweeted countless times or have thousands of screenshots taken. In the same way, a GIF or an image can also be “captured” by another user. However, you and only you will have the original copy.
- Authenticity. Thanks to the blockchain system, the authenticity of the purchase can be verified. There will be a history of who bought and sold an NFT to confirm acquiring the right asset.
- Owned. Here enters one of the most important factors in this whole affair. Unlike with music or movies, an NFT will be yours. That is, you are not buying a license to play a song or a movie, but the asset will be your property, something that can be corroborated with a certificate of authenticity.
- Indivisible and without interoperations. Unlike crypto, you cannot acquire portions of a unit. It is impossible to own 1/5 of an NFT, as you need to obtain it in one piece. At the same time, depending on your usage, there may be no interoperability. For example, an avatar from one video game cannot be used in another, as they are different systems.
How much is an NFT?
It is difficult to provide a specific cost for an NFT in general, mainly because the cost of one of those pieces depends on many factors such as their rarity and uniqueness. Also, the cost of an NFT depends on the market demand; this means that if an NFT is really popular, it would cost more.
Other factors to keep in mind are related to the author’s reputation and the platform where it is published on the market. If you want to know the specific value of an NFT piece, we recommend searching for it on different platforms and checking its price.
What is a Floor Price for an NFT?
The floor price is the minimum price that a seller is willing to accept for a piece. This price is set by the seller and is used as a reserve price (that usually maintains occult) during an auction.
The floor price is not a standard practice for all NFT marketplaces; some of them use other mechanisms like “soft cap” or “hidden reserve” to protect the seller.
The “floor price” is mainly used by the sellers to protect their capital. This ensures that he or she will receive at least a certain amount of money for the NFT. If the NFT is sold during an auction and the final bid is less than the floor price, the seller has the right to reject the sale.
How much does it cost to make an NFT?
The cost of making NFT can vary depending on different factors like the kind of NFT you are trying to make, the platform you want to use, and how complex you want it to be, but these are the cost that you may consider if you want to create your own NFT:
- First of all, you need to think about the time that it would take to create the digital artwork or asset you’re basing your NFT on.
- The fees you will have to pay to the platform you use to create and sell your NFT.
- The fees required to process a transaction on the blockchain network. This may change due to the current network congestion.
How to create my NFT for free and sell them for a lot of money?
In this last application, you will only need to touch the circular button to create or load a specific file. That is to say, the artwork that you will transform into an NFT may have been created through some specialized design software, such as Adobe Photoshop.
Once you have uploaded it, the service will generate the NFT executed under the Ethereum blockchain. You will be the holder of the NFT, with its corresponding certificate of authenticity. In the future, if your artwork has a higher value, you will be able to sell it and get a significant profit margin.
What makes an NFT valuable?
The value of an NFT is mostly determined by the market, and it fluctuates based on supply and demand, or the actual condition of the market itself at a particular time. Speculation prices can also influence the value of an NFT, so it’s important to perform research before investing in one.
Additionally to what we mentioned before, there are some other factors that can determine the value of an NFT:
- How unique or original the piece is. An example of this is collectibles because they are not easy to replicate.
- If an NFT were created by a recognized or prestigious artist, the price would tend to be higher than other pieces.
- NFTs that have a functional use, like skins in games, or provide additional content, are most likely to be expensive.
- If an NFT piece is one of a kind and can rarely be found in the market, it would be more valuable.
How to check the rarity of an NFT?
To check the rarity of an NFT try some of the following methods:
- Read the smart contract: Many NFTs have a smart contract associated with them that specifies the total supply of the piece. You can find this information on the blockchain by looking up the smart contract address.
- Check the NFT’s metadata: Some NFTs contain metadata that includes information about the total supply and rarity of the NFT. Use an explorer such as Etherscan.
- Look at the marketplace: Marketplaces like OpenSea, Rarible, and SuperRare, display the total supply of an NFT on the listing page.
- Investigate the past sales history: Some marketplaces show the past sales history of the NFT, and if the NFT has been sold several times at high prices and it’s not available for purchase anymore, it could indicate that it’s a rare NFT.
- Check the creator’s website: Some creators may list the total supply of their NFTs on their website or social media accounts.
NFT and crypto: What can you do with an NFT?
NFT and crypto can be tremendous investment opportunities.
We must keep in mind that the future seems to be more and more oriented toward virtuality. Therefore, we observe that Non-Fungible-Tokens mean a real revolution for the traditional concept of art and collecting.
For many years, people had been betting on collecting in different ways: special cards, antique objects, or limited edition items have been just some of the things that people bought with the aim that, at some point, the value would increase.
Now the same thing is happening but in a 100% virtual way. Best of all, not only can you create your own NFTs quickly, but you can also purchase them, expecting the value to rise in the future. More and more companies are releasing completely digitally exclusive collectible items, which could be revalued soon.
It’s the same thing that happens with Bitcoin, for example, as people buy a piece of a particular asset in the hope that it will increase and they can make a profit. The difference with NFTs is that, in addition, you become the owner of a work of art that also has an aesthetic experience value.
Anyone interested in NFT investment needs to know what an NFT is, its characteristics, and how it can be created. If you want to know more about them, we invite you to read some of the articles you will find on our blog and contact us for Blockchain Development Services.