What Are NFTs?
Non-fungible tokens, simply known as NFTs – have taken the world by storm in 2021. Since their inception, NFTs have grown from just digital formats of JPEG to animations, music, pop culture, sports, gaming and social commentary. NFTs are no longer considered art, per se, but rather a socio-economical expressionist movement – an organic response to the world of digitization. Much like Peter Carl’s 1982 Fabergé egg collection or in recent history, Beanie Babies – NFTs rely on a limited production run, hence making the end product scarce.
What Are Features of an NFT?
FIAT money and cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They also resemble their given value, so one Bitcoin is always equal to another Bitcoin. Crypto’s ‘fungibility’ makes it a trusted mean on conducting transactions on the blockchain. NFTs are different in that each NFT has its own digital signature, and built-in authentication, that acts as proof of ownership. Therefore, it’s impossible for NFTs to be exchanged with one another, hence being non-fungible.
By creating an element of digital scarcity, NFTs are gaining notoriety now, as they are becoming a way of buying, selling and trading cryptocurrency, and they are also being leveraged as a store of value, or a diversification strategy in one’s personal or corporate portfolio. Hypothetically, limiting supply would raise the value of the given NFT asset, assuming it’s in demand, and relevant, thus being a reliable option for investment.
NFTs are typically held on the Ethereum blockchain, although other blockchains, like Solana, support NFT art. All data related to the NFT file is stored on the blockchain and is secured through smart contracts. Therefore, the token will never be destroyed, removed or replicated and NFTs can only exist on the platform they were issued on.
The early days of NFTs have seen digital creations of art or subjects that already exist in some form in real life, like iconic video clips from NBA games, a rendition of art that already exists online, or even a tweet from Twitter! Let’s take a look at some early examples of NFTs from various artists.
Jack Dorsey’s First Tweet
Jack Dorsey, the billionaire co-founder and CEO of Twitter, sold his first tweet as an NFT. Published on Mar 21, 2006, the tweet reads “just setting up my twttr” and received an approximate highest bid of USD $2.9 Million
Image Source Credit: LiveAuctioneers
Beeple’s Digital Art
Mike Winkelmann, knows as Beeple is an artist, and a dad from Wisconsin. He makes digital art in the form of pixels on screens depicting bizarre, hilarious, disturbing, and sometimes ambiguous images. Smashing together pop culture, technology, and post-apocalyptic terror as commentary on the way we live. Some of his NFT work sold for USD $69 million at Christie’s Auction House. The NFT sale of “Everydays – The First 5000 Days” positions Beeple among the top three most valuable living artists, according to the auction house.
Image Source Credit: Bitcoin.com
NBA Top Shot
NBA Top Shot is a trading card market through online-only collections of basketball highlights. Virtual trading card packs in video form can be purchased to be displayed or sold, all in one marketplace. The National Basketball Association (NBA) select the highlights (e.g, Kawhi Leonard three-pointer) and produce only a set number, making these highly-sought after.
In partnership with Dapper Labs, NBA Top Shot can receive a bid anywhere from USD $100K up to USD $350K.
Image Source Credit: NBA.com
CryptoPunks were released in 2017, being one of the first NFTs on the Ethereum blockchain. CryptoPunks are essentially little pixelated portraits of different characters, resembling everyday humans. The characters are unique, with different colours and different feature attributes. Some CryptoPunks wear pirate hats, smoke pipes, or rock aviator glasses. The NFTs are argued to be the digital equivalent of social signifiers like status, wealth and fashion. The value of CryptoPunks skyrocketed now the least expensive collectible punks run hundreds of thousands, with the most expensive running well into the millions. The project was originally developed by Larva Labs Studio, a small team consisting of Canadian software developers Matt Hall and John Watkinson.
Image Source Credit: NiftyZone
What Are NFTs Used For?
Because NFTs can be anything digital like art, music, or trading cards, what they’re used for depends on your intention of buying them in the first place. That being said, the original purpose for NFTs being integrated as part of the blockchain technology is to give artists and content curators the space to showcase their talent and monetize their efforts. Artists no longer need to rely on galleries or auction houses to sell their art, which often come with logistical and financial barriers.
Instead, the artist can sell directly to the consumer and reap all the profits. So you can be a buyer, or a collector, and you either enjoy the mere pleasure of collecting NFTs, or you may also enjoy its appreciating value. In addition, you get to keep the ‘bragging rights’ by having proof of ownership. Buying and selling isn’t the only use for NFTs. Business use NFTs as a mean of diversifying their portfolios – instead of only owning traditional assets, organizations can add Bitcoin to their corporate treasure, or buy Ethereum to purchase and own NFTs. Charity is also one way to leverage NFTs; known-brands like Charmin and Taco Bell have auctioned off their own themed NFTs for charitable causes. The NFTs happened to sell out in just minutes, and with bids as high as USD $3.7 million.
Can Anyone Create an NFT?
The short answer is – yes. Anyone can sell their artwork. This process is called minting, and it involves turning your artwork into an NFT on the blockchain and then posting it for sale on any of the marketplaces. The hidden fees, commonly knows as ‘gas fees’ can vary, depending on which marketplace you use, so do your own research in advance.
How To Buy NFTs Using Bitbuy’s Platform
Investors can buy and trade NFTs like any other Ethereum based cryptocurrency – but other cryptocurrencies like Solana are also integrating NFTs. So while the only catch used to be that NFTs were only built off of a specialized platform using the Ethereum ERC721 token standard, this is no longer the case. But for the sake of this article, we will use the Ethereum example.
To interact with the Ethereum platform, users must first purchase some Ethereum, and this can be done easily on a platform like Bitbuy. Once users are prompted to create an account and complete verification, they can start funding their accounts through e-transfer or bank wire.
With the funds added, users can purchase Ethereum and load up their balance. Users will then need to transfer their Ethereum to an Ethereum wallet that allows integration to a NFT marketplace; example, MetaMask. Once your Ethereum reaches the MetaMask wallet, you can connect your wallet to an NFT marketplace to start browsing and purchasing.
You can learn more about how to buy NFTs in Canada by checking out this article.
Popular NFT Marketplaces
Once your MetaMask wallet is funded, there is no shortage of NFT marketplaces
- OpenSea.io: One of the first, and biggest NFT marketplaces to exist. This platform oversees a rare collection of art, and all you need to do to get started is to create an account.
- Rarible: Similar to OpenSea, Rarible is an open NFT marketplace for artist and curators to publish and sell their work. Rarible features its RARI tokens issued on the platform and allows its holders rewards and voting rights on marketplace decisions.
- Foundation: While still an NFT marketplace, this platform is invitation-based only, and you must be invited from the fellow members and creators. To keep the community ‘exclusive’ – artists must purchase ‘gas’ to mint their NFTs.
Should you buy NFTs?
Purchasing NFTs, or investing in them, is largely a personal decision. You would have to do your own extensive research and ask yourself what your intent is behind buying or selling NFTs. Remember, we do not have a lot of history to map out the performance of NFTs and their value is based entirely on what someone else is willing to pay for it. Much like the stock market, demand and supply will drive the price, factoring in technical and economic indicators.
Don’t forget about your tax obligations with the CRA, as NFTs are also subject to capital gains taxes—just like when you sell stocks at a profit. If you bought cryptocurrency to mint the NFTs, they may also be taxed if they’ve increased in value, so make sure to consult with a tax professional. If you feel after reading this article that you’re ready to take the plunge – proceed with a healthy dose of caution.