The rise of web 3 technology has been a revolution and has transformed the way we interact with the internet. Web 3 enabled new branches of technology to emerge, which include blockchain, crypto, and of course the NFTs. Our focus in this article is on NFT and we will try to find out what is the hype all about and why people are willing to spend over 70 million dollars to get their hands on them. So, without further ado, let’s get started with everything you need to know about NFTs.
What are NFTs and how does it work?
NFT stands for non-fungible token. But keeping the definition aside, you can think of NFT as a digital certificate of authentication that a virtual asset (it can be art, video, meme, or anything) is stored by your name on a public blockchain. So that anyone can check that the real owner of that NFT is you because of the way blockchain technology works, this is immutable and can not be changed or compromised in any way.
But what is this blockchain all about? A blockchain is like a digital ledger that records every transaction. This digital ledger is completely decentralized, meaning it works without the supervision of any third-party entity such as banks. Some miners are constantly working on making complex calculations and verifying that each transaction is legit and is not exploited in any way. And because it requires all miners to agree that a transaction is valid, it is almost impossible for hackers to exploit, making blockchain safe to store any digital assets.
But that does not answer why NFTs are so expensive. On the surface, this digital asset which is already available on the internet has little monetary value. You can not actually make money out of the NFT itself. However, what drives the price of NFT has to do with human psychology. We value appreciation. Our mind is set up in such a way that we want to be recognized in society. An NFT enables you to get that recognition as it allows you to prove ownership of something that is truly unique. Unlike cryptocurrency, NFTs are not interchangeable or divisible and therefore each one is a one-of-a-kind item that has its own distinct value. This helps NFT to grow its value exponentially and makes it desirable to a much wider audience.
How to earn with NFT?
NFTs have a collectible value, therefore the more scarce and limited an NFT project is, the more you can earn from it. Some NFT projects have already become part of history, take the following tweet as an example. The founder Jack Dorsey, the founder of the tweet, sold the ownership of his very first tweet, earning him a whopping 48 million USD.
Obviously, for common folks like us, earning with NFT is a bit more complex. But depending on your skills and interest, here are several possible ways you can earn with NFT.
Participate in NFT drops
Many NFT marketplaces like opensea will release limited-edition NFTs in a process known as a “drop.” These drops can be highly sought-after and can often sell for significant sums of money. However, to be eligible to participate, you must be an active member of the NFT community, so you may require to join the discord and participate in hyping up the NFT project.
Participate in NFT-based play-to-earn (P2E) games
There are a growing number of games that use NFTs as a core component of their gameplay. If you are someone who loves playing games, P2E games can be a great way to earn in-game rewards in the form of NFTs, which can then be traded for real money.
Create and sell your own NFTs
If you’re an artist, musician, or creator of any sort, you can create your own NFT project, create hype on why people will be interested to buy into your project, and sell them on a marketplace. This can be a great way to monetize your work and reach a new audience. For example, this rock NFT was sold for over 1 million USD.
Trade NFTs
Like other types of assets, NFTs are tradeable meaning you can buy and sell them on a marketplace. If you have a good eye for undervalued assets, you can buy NFTs and then sell them for a profit later. But like most trades, it is associated with risk as the value of the NFT depends on the willingness of other buyers to invest in the project.
Is it possible to create your own NFT?
NFT was first introduced to help creators monetize their digital assets so yes it is perfectly possible to create your very own NFT project and earn money from it. To create an NFT project, you will first need to decide on which type of asset you want to create. This could be anything from a digital artwork, video, or even a meme. Here is a detailed guide on how to create your own NFT project:
Choose a blockchain
NFTs are typically created on a blockchain, so the first step in creating a successful NFT is choosing the appropriate blockchain. Ethereum is currently the most popular blockchain for creating NFTs, but there are other options that you can explore.
Create a cryptocurrency wallet
To interact with the blockchain, you’ll need a cryptocurrency wallet. This is where you’ll store any cryptocurrency you use to pay for transaction fees or to buy other NFTs. There are several wallets you can choose from but MetaMask and Coinbase are the most popular options.
Mint your NFT
To create your NFT, you’ll need to use a smart contract on the blockchain. Several platforms can help you create and mint your NFT, such as OpenSea, Rarible, and SuperRare.
List your NFT for sale
Once your NFT is created, you can list it for sale on a marketplace or sell it directly to a buyer. You have to market the NFT and find potential buyers who are willing to invest in the NFT project.
The future of NFT: Is NFT a scam?
NFT is not a scam, it is a byproduct of web 3 that enables creative artists to license their creative work. However, in an ever-changing world, it is hard to predict the future of NFTs but many experts believe that NFTs have the potential to transform the way we think about digital assets and ownership. While NFTs are still a relatively new technology, they have already proven to be a powerful tool and a great medium to connect with the audience.
But that said, NFT is not without scams. There are many entities that try to leverage the power of NFT to scam people and exploit them for money. A popular example is the “rug pulls,” a scam where creators or marketplaces suddenly disappear with investors’ money, making the entire NFT project completely worthless.
Below are some of the scams to avoid in the NFT project
Fake NFTs
Some scammers will create fake NFTs that look like legitimate ones, but are actually just digital copies. It was probably downloaded off the internet and marketed to unsuspecting buyers as real NFTs. This scam is mainly targeted at first-time buyers or people who lack a basic idea of how NFTs work.
Impersonation scams
In this type of scam, a scammer will pose as a well-known artist or celebrity and create NFTs that they claim are from the celebrity. These fake NFTs can be sold to fans who believe they are getting a one-of-a-kind collectible. But because it was not endorsed by the celebrity, you will end up losing all your investment.
Marketplace scams
Some scammers will create fake NFT marketplaces that look legitimate, but are actually designed to steal users’ cryptocurrency or personal information. This is why we always recommend using a popular marketplace that has a proven track record to protect user information.
Pump-and-dump schemes
Similar to the “rug pull” scam described above, the pump-and-dump scheme also involves artificially inflating the price of a certain NFT, then selling it at a high price, leaving buyers with worthless assets.
To avoid NFT scams, it is important to do your research and only invest in reputable marketplaces and creators. Look for creators with a track record of successful NFT projects. It is also a good idea to be involved with the community to see what others are saying about the project.
Conclusion
It is fascinating to think how much NFTs have grown in a very short amount of time. With the introduction of the metaverse, it is safe to bet that digital assets are the next big thing and are here to stay. However, the success of NFTs is not guaranteed and only time will tell if NFTs will shape our future or if it is a bubble waiting to burst.
This concludes our guide on NFT for beginners. But do note this guide is for educational purposes only and we do not bear any responsibility for the investment decisions made by you. So do proper research if you intend to invest in any NFT project.
