Why Have An NFT? Why Care About Non-Fungible Tokens
- cmadolla
- Jun 11, 2022
- 2 min read
By Clemiran Madolla Saturday, 11 June 2022
What Is an NFT?
A non-fungible token (NFT) is a digital currency a bit similar to Bitcoin in logic but differs in exchange. In contrast to cryptocurrencies, NFTs cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies or dollars where $1 is equal to $1 for example, hence ‘non-fungible’. Examples of NFTs include:
Graphic art
GIFs
Collectables
Music
Virtual avatars and video game skins
A still from Quantum (2014) by Kevin McCoy
The artwork, Quantum, was first minted in May 2014 and is regarded by many, including the auction house, as the first-ever NFT. It sold for $1.47m during Sotheby’s “Natively Digital” auction.
How Do NFTs Work?
NFTs are created by issuing a unique cryptographic key to represent the asset. This key is used to control the ownership of the NFT and can be transferred between users. The NFTs are stored on a blockchain platform where they are tracked and verified by the network and used to transfer ownership between users. Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.
How to buy NFTs
NFTs are bought and sold via a purpose-built NFT marketplace, kind of like Amazon only for digital assets. These marketplaces can be used to buy an NFT at a fixed price or function as a virtual auction, much like the exchange system for buying and selling cryptocurrencies and stocks. Prices on NFTs listed for sale via auction are therefore volatile, changing in value depending on demand. So this brings me to the point I am trying to make.
Why Should You Care
The average price of an NFT can vary anywhere from $100 to $1,400, depending on its scarcity, utility, and popularity. Asking a Graphic Designer (like me for instance =) or any other illustration artist to design a Graphic NFT would cost you roughly R200-R500 depending on who you ask and their skill level. 500 ZAR is about 31 USD meaning you would be spending only 31% of your initial selling price if you decide to sell your NFTs from $100, having a return of 69%. I was bad at maths but even a little kid can see this is worth investing in. Like Nyla Hayes, a 13-year-old artist that became a millionaire through her art by selling them as NFTs.
***WARNING*** there is always a risk that an investor could lose their entire investment if the holder of an NFT decides to sell it. So be sure to let them know beforehand if possible.
Reference List
1. Conti, R. & Schmidt, J. 2022. What Is An NFT? Non-Fungible Tokens Explained. https://www.forbes.com/advisor/investing/cryptocurrency/nft-non-fungible-token/
2. Jeffrey, J. & Savannah, S. 2022. 13-year-old girl became a multimillionaire in 1 year by selling NFT art
4. Ludel, W. 2022. Sotheby’s and artist Kevin McCoy sued over sale of early NFT. https://www.theartnewspaper.com/2022/02/04/sothebys-kevin-mccoy-lawsuit-quantum-nft
5. Market Trends. 2022. NFTS BASICS: EXAMPLES, USES, AND BENEFITS. https://www.analyticsinsight.net/nfts-basics-examples-uses-and-benefits/#:~:text=The%20benefits%20of%20NFTs%20include,by%20anyone%20on%20the%20blockchain
6. Qayum, A. 2022. HOW TO SELL AN NFT: GUIDE FOR 2022. https://www.oberlo.co.za/blog/how-to-sell-nft#:~:text=an%20NFT%20FAQ-,How%20much%20do%20NFTs%20sell%20for%3F,a%20non%2Dfungible%20token's%20price
7. Sharma, H. 2022. Non-Fungible Token (NFT) Definition. https://www.investopedia.com/non-fungible-tokens-nft-5115211#:~:text=NFTs%20are%20unique%20cryptographic%20tokens,reducing%20the%20probability%20of%20fraud.
8. Wikipedia, the free encyclopedia. 2022. Non-fungible token. https://en.wikipedia.org/wiki/Non-fungible_token
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