In the midst of the current cryptocurrency craze, a new type of digital asset has been making headlines: the non-fungible token, or NFT. Although NFTs have been around since 2014, they became national news in March 2021 when Christie’s auction house sold a piece of digital artwork by Mike Winkelmann, known as Beeple, for a whopping $69 million. With that type of money involved, NFTs became a global sensation. Yet, many people still have no idea what exactly an NFT is, or how to buy and sell one. Here’s a quick look at what you need to know about NFTs.
What Exactly Is an NFT?
An NFT is a digital asset that represents some tangible, real-world item, oftentimes artwork. These creations are tied to the blockchain and are unique representations, which in some cases can give them significant value. For example, if a well-known artist creates a digital representation of an exclusive work, the buyer of the NFT essentially owns the actual artwork, although in digital form. Like with an original Monet painting, for example, other buyers may own prints or copies of that artwork but there is only one original.
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The “non-fungible” part refers to the fact that the NFT cannot be replaced with something similar, as it’s a one-of-a-kind object. Any bitcoin, for example, can be exchanged for another bitcoin, but an exchange of two NFTs involves two different items.
How Do I Create an NFT?
Creating an NFT is similar to putting up an item for sale or auction on a website like eBay. In the NFT world, there are numerous NFT marketplaces, with exotic names ranging from OpenSea and Rarible to SuperRare, AtomicMarket and BakerySwap. Once you’ve established an account at one of these sites, you can create your NFT by simply uploading a digital file of your asset, such as a photograph or original drawing.
How Do I Sell an NFT?
Selling an NFT is quite similar to listing an item on eBay. After you’ve created your NFT, you’ll need to come up with a name for it, along with a description and price. Since NFTs are unique items and buys and sells are recorded on the blockchain, you’re also able to establish a royalty amount or the amount you’ll receive if a buyer later sells your NFT to a third party. To get paid, you’ll need to open a cryptocurrency wallet, if you don’t yet have one, and link it to your listing.
Are There Fees Involved?
Fees for NFT creation and transactions can be high. Rarible, for example, charges both the buyer and the seller 2.5% of the transaction price to help maintain the network. This is on top of the listing fee, which is dubbed “Gas.” This Gas fee isn’t actually paid to the marketplace, but rather to the miners who process the transaction on the Ethereum network. All auction or transaction networks can be expected to carry fees, but if you’re offering a low-cost NFT for sale you might actually lose money if the fees are too high.
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Last updated: July 21, 2021