NFT, or Non-Fungible Token(s) became popular last year after lockdown. Initially used to enable artists, creators, filmmakers, musicians, writers… to create and purchase artwork online. In December 2021, the biggest auctions of NFTs’ history yet took place: artist Beeple sold his artwork “Everydays – The First 5000 Days” for £69 million (cover image of the blog).

How can a transaction take place? How come a digital image is worth this much? What is NFT? Who can create an NFT? Is it a good idea to invest in NFT? ….

NFT is a popular topic in magazines, news articles, general public, social media… However, not many people really understand how it operates. Today, we will briefly guide you through Non-Fungible Tokens functioning from important things to know before investing, and the future of NFT…

Non-Fungible Token, is the elongated version for the acronym NFT. What it means is that an NFT is a cryptographic asset (artwork, real estate…) on a blockchain with unique identification codes (meta-data) that distinguished them from each other. Representing a “real-world” item or an individual, identity, property, right and more.

NFT cannot be replicated nor traded with monetary values, for the reason that it is not a commercial transaction, and theses cryptographic assets have different identification codes, making each of them unique. Therefore, the price applicable cannot be the same for each and every NFT.

You can still exchange one for another but, never with another currency then Etherum.

To access the marketplace you will have to choose a platform, many are open to public use. Once there, to create or purchase an NFT you have to possess Etherum coins: in (usually) an active digital wallet. Eth. being the only currency to purchase, buyers have the possibility to remain anonymous, and no direct fluctuation of price can happen while the purchase is made. NFT prices depend on the artist, but also the buyers (can be sold at fixed prices or via auctions), as a creator you would think that the best plan would be to create as many NFT as possible and release all of them. It would not be profitable for the platforms holding the marketplaces, numerous fees come into action when it comes to selling NFT and can sometimes equal or surpass the final price of the digital asset.

Transaction fees reportedly could reach $200/per transaction, adding to that the computing fees, etc.

Find below, listed, some of the main NFTs’ attributes:

  • Cannot be traded with classic currency
  • Do not equal commercial transaction
  • Cannot be replicated
  • Can represent objects, individuals, properties, identities, rights, and more…
  • Could potentially remove intermediaries. (Buyers (creators, suppliers) create for buyers, overall direct aimed public, simplicity of transactions, creating new marketplace…)
  • Extensible, possibility to combine 2 different NFTs leading into the creation of a 3rd hybrid NFT.
  • Can contain ownership details for easy identification and transfer between token holders.
  • Secure, NFT are not impossible, but surely difficult to hack making them more secured.

NFT functioning, NFT specificities, NFT marketplace…. You have now a good amount of knowledge in regards of Non-Fungible Tokens. Let’s explore the pros and cons of NFT investments:

Pros:

  • Physical art and collectibles appreciate in value over time, digital art could exhibit the same appreciation.
  • Buying (selling digital assets as) NFT access to potentially more buyers and sellers than in the past.
  • “Smart contracts”, (built in the blockchain) ensures artists and creators get paid via use and resale of their work in the future.

 

Cons:

  • NFT doesn’t generate any income on their own. They stay valued by subjective metrics, such as buyers demand.
  • The fees can add up to the NFT value by other users on marketplace.
  • The blockchain technology NFT is built on cause environmental impact. (The use of significant amount of energy to create and verify transaction).
  • Considered as a bubble waiting to be popped, digital assets could cool off at some point in the future.

After studying the world of NFT really globally, we will try to explain why NFT is so popular nowadays.

First, let’s address that NFT are what they are perceived as due to many different factors, for instance, “new crypto investors” (the Bitcoin and Etherum bull run), celebrities promoting it to the public, Quarantine (improved digital art/NFT market).

When asked about NFT some will say “it is the future of monetization (creators), it is a long-term investment to be willing to make.” Others will respond with “it’s only a bubble waiting to be popped, only beneficial in a short term perspective, is used/created for entertainment purposes only.”

Regardless of opinions and based on facts, NFT’s future is uncertain as it brings great opportunities at the moment but, as we saw that fees can bring a lot of charges and expenses. Use this tool for money leverage really carefully and at your own risks as a creator (expenses, hacking…), and a buyer (scams, appreciation/depreciation…) ….