If you came to this article, it is most likely because you have been hearing about NFTs for a while but still don’t know what is an NFT
This “new” technology took the world by storm recently and the lack of context leaves more doubt than certainty. Pretty much out of nowhere, the first thing people say is that someone paid millions of dollars for an image and that many people are becoming millionaires with NFTs.
Well…both things are true. NFTs have become a very important part of the world of cryptocurrencies. (If you are new to crypto, I recommend reading our article What Are Cryptocurrencies: Complete Beginner’s Guide, before reading this one further)
So let’s start with the most important:
What is an NFT?
NFT stands for Non-Fungible Token or in Spanish non-fungible token. With “Not expendable” it is meant that it cannot be replaced since it is unique.
The best way to understand it is by making a comparison. If you have a $1 bill and I have another, absolutely nothing happens if we exchange them, because they are “the same.” In the same way it would happen if we exchange Bitcoins.
However, “non-fungibility” is the allure that non-fungible tokens have brought to the world of blockchain and cryptocurrency. Since if we wanted to trade NFTs (of the same collection), we would end up with something completely different than what we had.
Imagine that the two of us are filling out the World Cup soccer album. You have a picture of Messi and I have a picture of Cristiano Ronaldo: we both have a picture, but they are different. Additionally, in the NFT world you could know if that print is original, who all its owners have been, how much each one has sold it for; etc.
NFT Examples
An NFT can be practically any digital item.
- Design.
- Music.
- Video.
- Skins for video games.
- Photos.
- Gif.
- And more…
However, what has made the difference are the designs.
For example, one of the most famous (and therefore expensive) projects are CryptoPunks (CP). 10,000 unique designs, albeit with similar characteristics, created on the Etherium Blockchain.
For many people CPs are considered collectible pop art; something like having a painting designed by Andy Warhol. Not surprisingly, there was a purchase for 24 million dollars for CP #5822.
This leads us to wonder what a non-fungible token is for…
What is an NFT for?
There are several reasons why you will want to have one. Let’s see the main ones:
Earn money.
The main reason is to make money by creating a profitable business, but how you do it will depend on whether you are an artist (seller) or a collector (buyer).
Earn money as an NFT Artist.
If you are an artist, you will earn money from the sale of your works, with the characteristic of being able to do much more than “a simple sale”.
Remember that non-fungible tokens are on a blockchain (generally on the Etherium one, but many other protocols like Solana can also host them) and this gives artists the advantage of being able to make use of the tokens. smart contracts.
This would allow the artist, for example, to earn a percentage of royalties each time one of their non-fungible tokens is resold. Or automatically after every sale, send a percentage to a charitable cause he wants to support.
When making use of code writing, the alternatives on the blockchain are almost endless.
Earn money as an NFT buyer.
In this case, making money with NFT will be something similar to trading. You buy cheap and you sell expensive. And the best way to do it is to be the first to buy, in this way you are ensuring a very low price and if it appreciates, you can sell it at a higher price.
Digital identity.
If you want to know what time it is, you can look at a $10 watch or a $6 million watch. Both are watches, but for a collector, the Rolex Daytona Unicorn it is an invaluable piece that increases your status enormously.
The same thing happens in the digital world and worsens with the arrival of metaverses. If you have a CryptoPunk or a Bored Ape in your profile picture, you will automatically shout to the world what you are capable of.
Belong to a community.
Another reason why it is useful to have NFT is to be part of a community. I’ll give you a real example. If you want to be part of a community that teaches how to make money with NFT, you must have a non-fungible token from the project The Magic Mushroom Club House.
One of its creators made a lot of money buying and selling NFTs and he understood that if he wanted to earn even more, the best thing to do was to create his own project.
Over time, his followers became interested in the subject and one of the advantages or benefits of having an NFT in his collection was being part of an exclusive group of people who would have first-hand information on how to earn money with NFTs.
If you are interested in creating a collection of non-fungible tokens, below we will briefly tell you the steps to follow, but first I would like to ask you a favor. Simply vote from 1 to 5 to see how you’ve found this article so far. Thank you!
How to create an NFT
If you are interested in learning how to create a non-fungible token, or an entire collection, you will need to:
1. Define what you are going to sell.
Remember that there are different types of content.
2. Select which blockchain you want to host them on.
The main one is Etherium, however Solana and Binance have very well positioned marketplaces.
3. Set up your digital wallet.
Setting up your wallet is necessary for two reasons: to create a destination for the money generated from sales and to make an initial payment that will allow you to upload your art to the blockchain.
4. Choose the marketplace.
Each of the major blockchains has specialized NFT virtual shops. The most popular is OpenSea which operates on the etherium network.
5. Upload your art.
This process is known as mint, which in a nutshell means taking a digital file and turning it into a Digital Asset by storing it on the blockchain. In this way it will already be enabled for sale.
6. Set up the sales process.
This will depend on the marketplace you decide to use, but in general almost all of them handle the same types of smart contracts.
For example, you can sell your art at a fixed value or you can create an auction for a limited or unlimited time.
Apart from these steps, it is essential that you take into account the importance of building a community. If you have the best NFT in the world but have no one to sell it to, you ultimately have nothing.
Additionally, whether you want to sell your art or buy, analyzing the usefulness of the NFT is crucial and we will tell you why below.
Utilities from NFT projects.
To know what an NFT is and how it works, it is important to know its usefulness. This refers to the added values that owning one has.
You will understand that if you buy non-fungible tokens, it is very possible that you are interested in their appreciation, and one way to do it is by increasing demand. And since NFT collections usually have a set amount, the offer stays intact, and therefore the price will go up.
The utility plays a very important role in the price increase, since it can make the project much more interesting.
A very interesting example of this is CloneX. A project that has 20,000 avatars and if you own one, you will be able to use it as your character in the metaverse.
Not all projects have the same utilities as that will depend on the creators’ decisions. However, below you will find the most common utilities:
Vote.
As the owner of an NFT that is part of a project, you will want its price to increase; for this reason you will be interested in being part of the decisions that will be made.
If the project manages to sell all of its NFTs, it will get a large amount of money, which can be used, for example, to create new projects, donate it to social causes, hire staff, etc.
If one of the utilities of the project is to give voting power to the owners of the NFTs, those kinds of decisions will be made by all of us, as a democracy.
Receive physical accessories.
A great example of this is what Doodles does, one of the most successful NFT projects today. Only holders will be able to purchase this accessory made of vinyl.
This type of utility is widely used by companies that are releasing NFT collections and increasing engagement with their buyers by increasing their brand presence.
Access to events.
An example of this utility is what Gary Vaynerchuk, one of the most recognized digital entrepreneurs in the world, has done. He gave his NFT collection called VeeFriends access to Veecon. Other projects have given access to clubs, parties and so on.
Burn down.
Something very common in the world of cryptocurrencies is “burning”. That is to say that from time to time a certain amount of cryptocurrencies disappear from the blockchain, this in order to reduce the offer to increase its value.
In the same way, if the project allows it, buyers will have the opportunity to “burn” some of their NFTs with the intention of giving more value to the other NFTs they own from the same collection.
Access to communities on Discord.
This is the most common utility and it goes completely hand in hand with the example I gave you earlier about The Magic Mushroom Club Houseand.
Partial ownership.
In this case, 2 or more people can own the same non-fungible token. This would be useful in the case of not having enough money to buy it by gathering resources.
Airdrops.
Airdrops refer to what you receive additionally for the purchase of your NFT. Generally, what projects do is deliver another NFT. Projects like Bored Ape Yacht Club have had very lucrative airdrops for their holders.
Engender.
This utility allows you to join 2 or more NFTs to create new NFTs. Each union will create an increasingly rare and therefore more expensive NFT.
Staking.
This is a very common practice in cryptocurrencies as it is an easy way to generate passive income. And it consists of keeping the NFT with you for a certain amount of time to receive something in return.
For example, the Wolf project gives a percentage of its native WOOL cryptocurrency to its NFT holders.
Conclusion.
now that you know what is an NFT, you have seen that they present many novelties for the cryptocurrency economy, facilitating new opportunities to earn money; either you decide to sell your own non-fungible tokens and/or buy them.
And remember, if you are really interested in creating your own business, you can read our book “How to create a company while working: Discover how to manage your time, manage your money and motivate yourself while creating a company and working for another” , where you will find all the information you need to found your own company, without having to leave your job.
