The acronym NFT, pronounced “nifty,” stands for “non-fungible token.” Fungible means interchangeable, so if an item is fungible, it is replaceable, such as money, for instance. The replacement doesn’t have to be the same, but is of equal value, so 20 quarters is the same as a $5 bill, which makes money fungible. Know more on how to buy NFTs and other details.
Original art, on the other hand, has never been fungible. You simply can’t swap Michelangelo’s David with 20 smaller statues. It’s unique and irreplaceable.
Fungible items don’t necessarily stay that way. For instance, something fungible, like gold, can be changed and molded into something non-fungible, such as a beautiful piece of jewelry from a top designer. While time, which makes a once fungible piece a rare antique, is a large part of it, errors in production that got to market can also add to the perceived value of the item. For instance, baseball’s rarest error card appears to be the “Slow” Joe Doyle card, which had the wrong team name printed on his shirt. Only ten are known to exist, and the value exceeds $350,000.
How much possible errors and passing time will impact the digital market is up in the air, but for now, NFTs, are “unique, collectible crypto assets” and can be almost anything, ranging from gaming items to digital images to art to music and beyond. They’re built on the same technology as cryptocurrency, and in the end, act much like a signature on an oil painting, to identify the original creator or owner. Unlike an oil painting, however, the technology guarantees the signature can’t be changed, smudged, fudged, or forged – no matter where the digital item lands in the virtual sense, the signature of the original maker goes with it. The same protection that underlies the technology creates the assurance that anyone who buys it has the original NFT.
Be aware, though, that buying an NFT doesn’t necessarily involve pocket change, either – an artist called Beeple produced a digital collage piece called “Everydays: The First 5,000 Days,” which sold at Christies for $69.3 million in early 2021. The payout was the largest ever to a living artist, whether in paint or the virtual world, and the largest known for any NFT to date.
How to Buy NFTs: Why You Want Them
NFTs, much like any art, antique, or other unique items, draw those who want to own what’s rare or beautiful or both. Those who are entering this market now know that by purchasing the first of anything, they will be owners of something no one else has ever purchased, and that means that the NFT rush is on. Much like the old maxim that says, “If you have to ask the price, you can’t afford it,” in NFTs, if you have to ask why you would want it, then you probably don’t want it.
If you do, however, the range of possibilities for NFTs covers everything from personal services to web domains to specific digital items. Arguably, NFTs went truly mainstream in 2020 as the NBA started selling NFT clips and photos of NBA stars. In February 2021, a crypto image of the Nyan Cat sold for $600,000. The Kings of Leon also sold their most recent album as an NFT, netting a cool $2 million so far.
How to Find and How to Buy NFTs
The NFT marketplaces are popping up everywhere, but the common thread is that to buy on any marketplace, you must have the currency which that specific marketplace demands. While there are hundreds out there now, the two most common cryptocurrencies are Bitcoin and Ether. Most of the large marketplaces take one or the other or both. Obtaining either of them is another blog post in and of itself, but the simplest version is that you need to set up a cryptocurrency wallet and either sell something to receive cryptocurrency for the sale, buy cryptocurrency from someone who is selling it, or mine them yourself.
Using that cryptocurrency to buy NFTs is facilitated by several different NFT marketplaces. According to Cryptoticker, three of the top marketplaces for NFTs all use ether:
- OpenSea – OpenSea was the first kid on the block, NFT-wise, and still the biggest one. Its listings cover the gamut of NFTs, with more than 200 categories and more than 400 million items listed as this is written. Like the other marketplaces, users can “mint” their items and create them for sale on the site, for a fee of course. Whether creating or buying, the user must have their digital currency in hand to use the site. OpenSea’s currency of choice is ether, and you must have a balance in your MetaMask wallet to purchase anything on OpenSea.
- Decentraland – This site uses a simulated world, where you buy land, etc. In the dirt world, Decentraland would be called a commune, or possibly a co-op, but it touts itself as the “first-ever virtual world owned by its users.” To use the site, you will need to become part of it in different ways than most marketplaces. Their marketplace includes the ability to buy parts of that simulated world, as well as goods that can be purchased with ether.
- SuperRare – SuperRare specializes in Digital Art NFTs, noting “Each artwork is authentically created by an artist in the network, and tokenized as a crypto-collectible digital item that you can own and trade.” They see the digital art world as a social endeavor, and according to their published information, build on the assumption that your NFT purchase will be something that you will eventually sell or trade. They, too, use ether as the currency of choice.
If you’re already knowledgeable about or using ether as a unit of currency, that’s great, but if you’re unsure about it, CoinDesk has great information on how it works and how the fee structure works, as well.
Last but not least, NFTs are an investment, and like any investment, need to be entered into carefully and with a lot of research. Everyone’s risk tolerance is unique to their experience and circumstances.
Please reach out and contact us if there is any advice or assistance we can provide.