NFTs for dummies
Last year, a collector sold an NFT for $11 Million after purchasing it for only $1,600 four years prior. Recently, another collector tried to sell an NFT that they had bought for a whopping $2 Million dollars. How much was the highest bidder willing to pay? $280.
Why are some JPEGs worth more than an island? And why do their values fluctuate so rapidly?
To understand this phenomenon, let's first understand what NFTs really are.
What is an NFT
A Non-Fungible Token (NFT) is a digital token that represents digital files like images, videos, and music (and many more).
NFTs listed on the NFT Marketplace, Rarible
A non-fungible item cannot be substituted with anything else. Consider 2 different 1-dollar bills. The value of one dollar bill is the same as the value of another dollar bill, which means that 2 different one-dollar bills are fungible. Now, think about the original painting of the Mona Lisa and other versions of Mona Lisa artworks. Although they look the same, the value of the original Mona Lisa painting cannot be substituted by its knock offs, which makes it non-fungible.
Similarly, an NFT image is completely non-substitutable by another NFT image, even if the images look the same.
The exact same image is sold for different prices because they are different NFTs - PAK
Why is it that even though the NFTs above look the same, they are valued at completely different prices?
When you buy an NFT, what you are really buying is a piece of data. That piece of data then points to an image or music or video on a server, which represents the NFT data. The piece of data for each image above is different. Every existing NFT has a unique ID that no other NFT has, just like our thumbprints.
What users are really buying is the data that makes up an NFT - Wipo
Some buyers mistake owning an NFT image as owning the image itself. But really, what they own is the data underlying that image. Until you sell that data, you own the NFT forever.
Different uses and types of NFTs
Critics of NFTs argue that NFTs are only hyped noise because they have no use for the buyer, which is why they will never be adopted widely. But, as NFTs continue to develop, projects have come up with many ways of making NFTs useful in gaming, job hunting, crowdfunding, and even supply chain management.
Today, many investors are entering the NFT space because of how applicable NFTs are in different situations for different demographics.
NFTs are also more versatile than most people perceive them to be. They can take the form of images, gifs, videos, music, SVG files, texts, and even HTML pages. This means that many types of creators can leverage NFTs to build and engage their audience.
Why NFTs became famous (a brief history)
NFTs are all the rage today because they do 2 specific things well:
Monetize digital goods, which are being consumed rapidly
Create scarcity and capture demand of digital goods
Rising consumption of digital goods & their monetization with NFTs
The digital economy has grown into a multi-trillion dollar market because consumers have a voracious appetite for digital goods.
Growth of the digital economy from 1997 to 2017 - BEA
From books to music to games, we are spending a lot of our money on virtual things. E-books and audio books readers are quickly catching up to the number of physical book readers.
With NFTs, many creators have a better way to monetize their product.
For instance, the royalties from books are barely anything through traditional publishing. When someone buys a book and then re-sells that book later on, the writer makes nothing from the secondary sales. But the royalties from NFTs always go back to the creator, no matter how many rounds of sales their product has gone through. NFT royalties are a huge incentive for creators to shift their creation to the blockchain.
Scarcity & Demand of NFTs
Another problem of digital goods today is their lack of scarcity. Historically, JPEGs and memes have not had a monetary value because anyone can own the same image with a simple right-button click.
With NFTs, each image is assigned a unique ID that can be owned. When the creator has control over the ownership of their good, they can transfer its value exclusively to a buyer.
But only having scarcity of a digital good is not enough. There must be people who want to own the good. Anyone can upload random images and put them up for sale. But, people will only buy them when they see value in it.
The first notable NFT demand can be pointed to the game, Cryptokitties. Players buy, trade and breed cats to create desirable traits for their cats. The collection of rare kitties became so fun that many users started valuing their kitties very highly.
Cryptokitties are valued for their traits
How to get started with investing in NFTs
Set up your wallet
Download Omni to connect to an NFT marketplace
Buy the token of your choice
Connect to an NFT marketplace using your Omni wallet.
Omni is a Web3 super wallet that supports multiple chains. Users can connect to NFT marketplaces for 14+ networks including Ethereum, Solana, Near, Cosmos, and many more! Download it today to connect your wallet to any marketplace.
Bonus: Once you purchase your NFT, you can also display it on your home screen and show it off easily on mobile.
Show off your slick NFT on the Omni NFT display
Pick your NFT marketplace
Our Top 4 picks of NFT marketplaces
OpenSea: The largest NFT marketplace
Rarible: Peer-to-peer marketplace for rare NFTs and collectibles
tofuNFT: Marketplace focused on GameFi and collectibles
NFTKEY: Non-custodial NFT marketplace dedicated to decentralization
Choose your favorite NFT projects
The NFT space is filled with funky new innovations. How do you start finding the projects that you can believe in? You can start by choosing the category of NFTs you want to focus on.
As NFTs continue to develop, their use cases are becoming more varied. Learn about different kinds of projects to discover NFTs that you feel more connected with.
Here are the top 3 categories of projects that are the hottest right now:
PFP NFTs are used as profile pictures on social media profiles like Twitter. PFP collections tend to display a "character" that buyers can display on their profile pictures. PFP projects collectively created the most NFT hype in 2021, and they continue to be the most talked about NFTs today.
PFP projects often provide membership access, that help to create a community around the JPEG owners. For example, the Bored Ape Yacht Club (BAYC) holders gain members-only benefits like exclusive access to the BAYC discord channel and access to additional NFT collectibles like the Bored Ape Kennel Club dogs, which are usually sent to BAYC holders for free.
The top PFP projects are also backed by the biggest names and influencers in crypto. They are the OG category of NFT projects and carry the ethos of community building at their core.
Pharrell Williams is the new Chief Brand Officer of the PFP collection, Doodles - CryptoTimes
Hot PFP NFT collections:
In-game tokens are not a new concept. But with NFTs, in-game tokens become a lot more valuable because they benefit from the perks of plugging into Decentralized Finance.
Blockchain-based games provide NFTs for:
Game rewards like jewels and coins
Avatar accessories like weapons and gears
Avatars with accessories and weapons NFT - Tales of Elatora
Hot Game NFTs:
Low royalties are an age-old problem in the music industry. Music NFTs are revolutionary for musical artists because they don't have to rely on centralized middle-men, who take the majority of the profit cuts.
Music NFTs for sale - ZORA
While the music NFT space is still developing, there are already a range of platforms you can explore to support music artists.
Hot music-related NFT platforms:
Buy and Display your NFT with Omni
With so many innovations happening in the NFT space, its rules are ever-changing. Delve into NFTs today by starting with the easiest-to-use wallet out there, which integrates seamlessly with all NFT marketplaces that support WalletConnect!