What Is NFT And How Does It Work?

Have you heard of NFTs? Is it true that NFTs can make you a massive amount of money? Recently, there has been a lot of talk about this topic and one thing we know for sure, NFT is here to stay. NFTs are a series of digital assets or cryptographic tokens that are changing the way of selling and buying art on the internet.

However, if there is one thing that has kept the NFT issue going, it is the confusion generated by this token system. How is it possible for people to become millionaires overnight by selling simple images that anyone can download for free from the internet in a couple of clicks?

The success and profitability of NFT is thanks to their high exclusivity value, where digital pieces available to everyone are transformed into non-expendable pieces, unique and impossible to exchange or replicate.

Let’s break it down… What is NFT? How do they work? How to make money with NFTs? Here are the answers to all these questions.

Table of Contents

What Is NFT?

Non-Fungible Tokens, known by their acronym NFT, are digital assets that do not exist in a tangible way, but acquire unique and irreplaceable properties for a similar one. In this case, the digital context is very similar to how art is displayed today in museums.

NFTs can be images, animations, videos, GIFs, movies, text files, music albums, and any other digital file format.

NFT, like cryptocurrencies, are stored in the blockchain, a shared and transparent accounting book that allows you to keep track of who owns a certain number of pieces and also makes it possible to verify the authenticity of these files.

What Does Non-Fungible Token Mean?

The title of Non Fungible Tokens that gives name to NFT refers to the impossibility of replicating the works and assets that contain the files sold as NFTs, be it an image, song, video, etc…

In fact, the term non-fungible means that no substitution or exact copy is allowed. Even if there is a similar piece, it will never reach a value above the original, in this case, the one that has been transformed into NFT.

For example, works of art from the physical world such as the Mona Lisa or The Starry Night have been replicated, photographed and reframed millions of times, but no piece could have a value equal to or greater than the original paintings painted by the hand of Leonardo Da Vinci or Vincent van Gogh, respectively. The same goes for NFTs.

Quite the opposite of what would happen with a physical bill of any amount, for example, 100 dollars, since this bill could always be replaced by another bill in similar conditions and it would not lose its value: it would still represent 100 dollars.

How Does The NFT Work?

When a person sells an NFT, they would not really only sell the file or piece of art it contains, but also sell the property title that certifies it as a “unique and original version” and therefore, the version with the highest economic value.

This solves the most common question of why if a file can be downloaded for free on the internet, it is so expensive to sell it as an NFT. Literally the only reason it is so highly valued is to be able to have title to it.

All artists can “Tokenize” their works and artistic works and launch them on the NTFs market at auctions and sales, even keeping the copyright, but selling the ownership certificates on them, as if it were a signed piece.

The majority of million-dollar and viral NFT sales are made by major media figures, such as Chris Torres, Grimes and even Twitter co-founder Jack Dorsey, who sold the first NFT tweet in the history for $2.6 million.

If you are not known in the public sphere as an artist or artist in general, your chances of gaining mainstream attention are much slimmer. Although this does not mean that you cannot make money after transferring the digital ownership of their creations to “Digital art collectors”, the possibility of receiving millionaire figures in return is less.

Does It Make Sense to Buy and Sell NFTs?

Until now, nobody knows and it all depends on how the rise of “Crypto-art” and “Crypto-collectors” evolves. Some consider NFTs just another bubble that is about to burst, leading to huge losses, while others consider them the next step in the evolution of art.

Although there is nothing to prove that all these files will be worth what they cost today in a few years, the argument of those who buy NFTs is that there is a high likelihood that most of the great artists of the future will have had their careers built on digital creations that were first published on the internet.

Nevertheless, if these digital certificates are acquired in an original way, they are not required to have a physical version. As the owner of the token, he would have a great asset in his possession and made a good investment, however, it’s just a bet.

In fact, the NFT fever has caused great controversy such as the destruction of physical works of art, which always exceed the value of their digital version and have now been destroyed to immortalise themselves only as a digital token and finally exceed their value.

How To Make Money With NFT?

There are different ways that people can invest in NFT and make a profit from it.

The more profitable way is the more difficult way. As you may have seen, if a famous person creates an NFT, automatically this NFT increases in value continuously, and it is the best way to make profits. The problem is that few people will be able to do this, since they have to be already famous.

Another way is to bet on an NFT. This means that you will have to choose an NFT that you think may rise in value, and buy it when it is low in market value. For this, you will have to have many reasons why the NFT could rise in value in the market.

In addition, you can create the next most famous NFTs in the world! Whether you create an image that catches everyone’s eye, or a collection that’s on par with Bored Apes or CryptoPunks. If you can create something that people love, you could create a gigantic source of income.

Either way, you have to know that this is still a speculative investment method. This means that you could lose your money if you don’t invest it wisely.

Where To Buy And Sell NFT?

One of the most frequently asked questions (FAQs) is where you can buy and sell NFTs, but in reality there is no single place. Everything will depend on the NFT itself. There are websites such as Crypto.com, Open Sea, where you can see Trending NFTs for sale and then purchase them. MakersPlace or Rarible, these are online stores that allow you to buy and sell unique digital creations encrypted as NFTs. Stores or official sites of artists that, in addition to selling other types of items, take advantage of their name to join the rise of NFTs and include them in their product catalog.

Step 1 – Set up an exchange account and crypto wallet.
Step 2 – Buy Ethereum because majority of NFT are built on the Ethereum blockchain.
Step 3 – Transfer Ethereum into your crypto wallet. …
Step 4 – Connect your crypto wallet to the NFT marketplace.
Step 5 – Final step, Buy NFT and add them in your collection.

These types of cryptocurrency wallets can then be connected to NFT trading websites and apps to complete transactions.

There are several other ways to make money with NFTs, including:

Selling digital art or other creative works as NFTs: You can create digital art, videos, music, or other creative works and sell them as NFTs on marketplaces like OpenSea, Rarible, SuperRare, or Nifty Gateway.
Collecting and reselling NFTs: You can buy and collect NFTs, then resell them later at a higher price if their value increases.
Creating and selling NFTs for others: You can create and sell NFTs on behalf of other artists, musicians, or creators, and take a commission for each sale.
Using NFTs for gaming and virtual worlds: You can create NFTs that can be used in gaming and virtual worlds, such as virtual real estate, game items, or virtual collectibles.
Sponsorships and brand partnerships: You can collaborate with brands to create sponsored NFTs, such as limited edition items or virtual experiences.

It’s important to note that, as with any new market, there is a high level of volatility in the NFT market, and it’s important to understand the risks and the basics of smart contract and blockchain technology before investing.

Conclusion

Market analysts believe NFTs will continue to gain popularity in the years to come. A total of $45 billion was traded in NFT in 2021 alone – many of which were sold for more than a million dollars. You can find some of the best NFT available today on Crypto.com if you’re interested in getting exposed to this space. Furthermore, buyers do not have to pay fees for buying NFT, as they can pay with debit/credit cards.

If there’s anything you think I’ve missed – talk to me in the comments below!

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