NFT Tokens and their authenticity for investments and trading.

Just when we thought that investing in dogecoins online is the most bizarre thing that the 21st century could endure, we are faced with yet another revelation. Could you imagine a meme, an art piece, or a GIF being bought online for millions? NFT or Non-Fungible Token has made it happen.

Lingering around since 2014, NFT has finally made it big in the layman’s ‘eccentric’ world by creating a platform where everyday things like Tacos and Toilet Paper to virtual dogecoin GIFs and tweets are being bought and sold online. After thorough research, we have finally got an idea of NFT, and we would love to share it with you.

Caution: You may encounter certain surprising elements as you read further!

What is the Meaning of NFT?

The abbreviation NFT stands for Non-Fungible Token. Let’s go back to our economics class to understand the meaning of ‘fungible’. A fungible asset has units that can be interchanged easily, like money, cryptocurrency, or shares. A 100 rupee note will have the same value if swapped with another 100 rupee note.

But, a non-fungible asset is unique and cannot be interchanged with anything else. Hence, an NFT has special identifying codes like ‘The Starry Night’ by Vincent van Gogh. There can be a million copies or pictures of it on the Internet, but there will always be one original version of the painting.

How do NFTs Work?

An NFT is a digital asset representing real-life objects like art, music, videos, etc. Digital, because it is bought and sold on the Internet, majority of them being transacted using cryptocurrency.

NFTs are traded or part of the Ethereum blockchain (at a very high level). Now, what’s Ethereum, you might ask? Ethereum is a famous cryptocurrency like bitcoin or dogecoin (you must have heard of them through tweets and memes). The Ethereum blockchain stores extra information about NFT, which helps them work differently than cryptos. Other blockchains support the NFTs too.

What’s on Sale at the NFT Supermarket?

The NFTs are minted or created from digital objects representing intangible and tangible items. We mean anything digital can be bought and sold in NFT. These include:

Art
Music
GIFs
Sports highlights and videos
Designer Sneakers
Collectables
Avatars (Virtual) and Video game skins

And, even a tweet! Yup, Jack Dorsey, the CEO of Twitter, sold the first-ever tweet in NFT for a whopping $2.9 million. Although, the significant excitement at present is about selling digital art.

How Will I Own an NFT?

We know you’ll now be thinking about how you would own it. These digital tokens can be considered certificates of ownership of the virtual or physical assets you are buying. We can label them as physical collector items but which are only digital. This means that a person purchasing a painting will not get the physical painting to hang but will receive a digital file or certificate instead of it.

Exclusivity is another feature of an NFT because it can have only one owner at a time. This feature is aided by the unique characteristics of NFT, which helps in identifying and verifying the owners and making the transfer of tokens between them a piece of cake. The creator or owner can even store the information inside the NFT. For instance, the tweet sold by Jack Dorsey was signed by him.

Is it like Collecting Art?

Well, yes! Individuals invest a significant amount of money in buying videos on the Internet. Someone legitly bought a 50-second video by Grimes for $390,000 and a video by Beeple for $69.3 million. Did you read about a Gucci Ghost GIF being bought for $3600? The owner is currently asking $16,300 for the same.

However, the ownership rights and copyright remain with the artist to produce and sell more copies. So, the buyer of the NFT gets a token saying that he owns the ‘original’ work.

What is the Use of NFT?

The use of NFT is not the same for everyone. The artist, the buyer, or even the collector will benefit from the NFT in their unique way.

For the artists: It creates a digital platform for them to monetise their pieces of hard work. Sure, there are galleries and auction houses where they can sell their art. But, through NFT, the artist gets an even broader platform to make their art directly accessible to the people. Additionally, through royalties, the artists can receive a part of sales as profit every time their art is sold further. These additional profits are not provided to them in the ‘real’ world.

Apart from artists, the brands have also benefited from the platform. Taco Bell and Charmin are two brands that auctioned their themed NFT arts for charity. Charmin labelled its offering with clever wordplay as Non-Fungible Toilet Paper or NFTP. Taco Bell’s themed art sold out like hot cakes within minutes with the highest bids at 1.5 WITH (wrapper ether), the value equivalent to $3,723.83 at that time.

For the buyers: Buying art online helps promote the artists, especially the underdogs. It also provides you with some fundamental rights like displaying it as your profile picture or posting it online. Don’t forget about all the flaunting you can do with it.

For the collectors: NFTs are like any other speculative assets, which you buy and then hope for the price to go up so that you can sell it for a profit. So, if you invest, cross your heart for the NFT to only be popular from the day you buy it.

How Can I Buy an NFT?

Are you tempted enough to want a piece of it? You can buy an NFT too. To begin your precious NFT collection, you would need certain essential elements:

First off, you would require a digital wallet that will help you store your NFTs and cryptocurrencies.
You will have to purchase cryptocurrency like Ether, based on your NFT provider’s official currency. Crypto can be easily bought in India using various platforms. Move the currency to your wallet as and when you require it.
You need to keep in mind the fees charged by the exchanges. At least a percentage of your crypto is charged during the transaction.

After setting up your wallet, you just need to visit the NFT sites to begin your shopping. The most famous NFT marketplaces today are OpenSea.io, Raible, and Foundation.

Fun fact: The Nyan Cat GIF, a 2011 meme of a flying cat with a pop tart, was sold on the ‘Foundation’ platform by creator Chris Torres for more than $500,000.

Are NFTs the Talk of the Town?

NFTs are not the go-to option for investing your money yet. The experts are wary of NFT as a secure platform to trade, and people are still getting to know about its ABCD. But, big brands like those mentioned above, Wayne Gretzky and Marvel, have launched their own NFTs.

India, too, has hopped on the bandwagon with celebrities like Amitabh Bachchan, Rohit Sharma, Salman Khan, Yuvraj Singh, and Manish Malhotra, among others who have launched their digital tokens in 2021. Morris Garages has become India’s first auto brand to have launched their NFT collection (you can go through it on their official website).

But, it is still too soon to call it a ‘mainstream’ investment or trading platform.

Are NFTs Permanent?

The existence of NFTs is in play solely based on the survival of the blockchain. This is because there is no way to remove/eradicate an NFT once it is on the blockchain. However, you can still dispose of the NFT by burning it. The process is to send the NFT into a wallet called the burn address, or null, from where it can never be retrieved. Buyer’s remorse is one of the most prominent reasons for the burning of an NFT.

Negative Impact on the Environment

The hazardous effects of the Ethereum blockchain on the environment are a secret to none. Every year, the people managing this blockchain make promises to reduce the energy consumed by the system. But, will these efforts be enough to calm down the raging storm?

Positive Impact on the World

Who knew that NFTs and cryptos could be used to do good in the world? Yes, the environmental damage caused is irreparable, but what if we tell you that it literally does save lives. NFT was adopted as a tool for activism by the Russian feminist Nadya Tolokonnikova and raised more than half a million U.S. dollars today. This money was used to finance the survivors of domestic violence in Russia. She also raised money through crypto for the Ukrainians in the ongoing war. The aim? To make the industry more equitable and the world a better place.

Are you Late to the Party? No

If you feel like you’re way behind in catching up with the trend, then the stress is in vain because the world has just joined the party like you. The best thing for an NFT trader is to get their hands on reliable information they can take action upon. This information is called ‘alpha’. You can join the Telegram groups where the ‘sharks’ – those in power to single-handedly sway the market’ discuss their tactics. Then there are paid groups on Discord and unpaid arenas – like WhatsMinting, where you can get your goss on the trending NFTs.

Is it Worth Buying an NFT?

Like everything else in the market, it is not necessary that if you can buy an NFT, you must. Since the concept of NFT is comparatively new, it is dicey to go all-in for it. According to experts on the subject matter, there is not enough history to determine whether the NFT will be able to reap monetary benefits or returns to the buyers or not.

Another vital thing to note is that the NFT’s value is based on the other person’s willingness to pay for it. Hence, demand is the factor that determines the price of the NFT rather than the fundamental or technical indicators of economics, which also influence the costs of the stocks and are a solid basis for the investors to plan their investments.

This also means that you might have to sell your NFT at a lower price, or you might not be able to sell it at all if nobody wants your priced NFT possession.

NFTs are also eligible for capital gains taxes, similar to selling your stocks at a profit. Bear in mind that the cryptocurrency with which you bought the NFT might also be taxed if they are at a price higher than when you bought them.

Our recommendation for investment in NFTs is simple – view the NFTs as all other investment options, scrutinise the pros and cons of it, research it out thoroughly and keep your spare finances in mind (because you might even lose it all). Caution is the word of wisdom here.