What you need to know about non fungible tokens (NFT)

Non-fungible tokens or NFTs, products that function as digital assets, have grown steadily to encompass a €210 million market by 2020 and have become one of the most important crypto trends of this year 2021, with a 55% growth in total sales, from $250 million to $389 million.

One of the main reasons that can explain the momentum of the market, lies in the interest that NFTs have generated among global companies, from fashion brands to sports brands that have found a very profitable business alternative through the creation and active monetization of consumer goods and services based on NFTs. It is worth noting that it is not only companies that have currently decided to venture into this industry, NFTs have also caught the attention of large investors and digital art collectors and one of the main reasons is that, unlike cryptocurrencies, NFTs represent unique, irreplaceable and non-exchangeable digital assets that make them relatively valuable, all thanks to blockchain technology that guarantees the immutability of these digital assets making them impossible to copy or counterfeit, or even to appropriate.


What is an NFT?

Basically, it is a record of ownership of an asset, almost always digital, that exists in a blockchain network, and which certifies it as unique and cannot be exchanged with each other for the same value or divided into smaller values (hence the term non-fungible, or non-exchangeable). This registration is done on a blockchain, so in theory it is quite secure. 

NFTs rely on blockchain contract technology to create a representation of the original content that cannot be plagiarized without losing its certificate of originality.

NFT products cover a wide range of items, from digital art (the most common to date) to digital fashion items, collectible sports cards, virtual real estate, and video game characters.

No two NFTs are alike; they are characterized by their unique qualities, rarity, uniqueness, exclusivity, and authenticity. Digital tokens usually function as a kind of collector’s item and there is no possibility of duplication. These tokens are based on the standards of the Ethereum network and its blockchain, which has facilitated their use in buying and selling, and services such as MetaMask or MyEtherWallet (wallets that allow interacting with Ethereum) are references in this type of transactions. In addition to this, NFTs have several characteristics that distinguish them; they are rarely unique, although it is commonly possible to make copies of digital works, in which case the owner can certify that he is the sole owner of the original work, even though the digital work can be shared on the Internet. Digital works are indivisible, cannot be separated into smaller parts and have a total value as an entity. They cannot be destroyed, the data of an NFT is stored in the blockchain through a smart contract, so it is impossible to destroy, delete or replicate it. Full ownership is acquired when it is purchased, and through the blockchain it is possible to go through the process of verifying the asset to see who has owned it, including its original creator and its current owner, through the history kept by the blockchain.

NFTs are part of the Ethereum blockchain, a protocol that has been developed not only to issue cryptocurrencies, but also to store additional information, allowing the creation of smart contracts and asset repositories. In fact, blockchain is used for any product that requires unambiguous proof of ownership.

NFTs can be used to represent virtually any type of tangible or intangible item, including artwork, virtual items within video games such as skins, virtual currencies, weapons and avatars, music, collectibles, tokenized real assets: from real estate to vehicles, virtual land, videos of iconic sports moments among other goods or services.

Ways to make money with NFTs

There are currently three basic ways to make money with NFTs. These are three business models that, according to the “NFT 2020 Annual Report,” can provide a stable source of income sufficient to make it a full-time business.

– Artist (i.e., digital content creator).

– NFT project development

– Trading NFT (investing in NFT)

The NFT Market

The NFT Marketplace is one of the cheapest NFT trading and exchange platforms in the cryptocurrency industry. The OKEx platform does not charge commissions for sales on the secondary market: users only pay the network commission when they buy or sell NFT on it. Assets created with OEC also benefit from the network’s low gas fees and fast transaction settlement times.

The purchase of the NFTs themselves will depend on the website where you buy them, as the method of payment or purchase may vary. There is no single website or global marketplace where you can find this type of content, but there are many options for buying NFTs. Through websites such as Coin Ranking, you can view some of them and from the website you can go directly to buy them. There are also specialized sites like Makersplace, a marketplace to find “unique digital creations” and where you can buy or sell your creations in the corresponding section.

Currently there are derivative financial instruments that offer greater liquidity and ease of trading, allowing you to take advantage of up and down price movements, thanks to the ease of taking short positions that these products offer. Moreover, they are leveraged instruments (if risk is well managed, leverage can be useful).

In the meantime, the only market that exists is the cash market: the physical buying and selling of NFTs. Without the intermediation of a broker.

It is convenient to follow the prices dictated by this market, as it best determines the prices of the assets, based on the sales made. Thus, by buying an NFT and observing its sale price, we will be able to know if it is in line with the market price, if it has increased or decreased.

In addition to the platforms for buying and selling NFTs, there may be groups, communities, or forums where they are sold for less money, in larger lots, etc. It is all about networking and negotiating. This form of buying and selling is possible with some of the larger NFT projects.

In short, the market can be complex. In any case, it is not entirely impossible to invest in NFT if you know the keys to trading these new digital assets.

Written by:

Mauricio Petit


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