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Technology

NFTs are booming, but what are they and how do they work?

With an explosion of blockchain news such as ‘Bored Ape Yacht Club’ selling an NFT for a record $3.4 million USD and ‘Grimes selling $6 million USD worth of digital art as NFTs, some of us are still a little confused about what an NFT actually is and how it works.

What is an NFT?

NFT stands for ‘non-fungible token’, a token that represents ownership of a unique item that can only have one official owner at a time. They let us tokenize things such as digital art, music, drawings, videos, GIFs and virtual avatars etc.

How does it work?

NFTs exist on a blockchain and are generally built using the same kind of programming as cryptocurrency, like Bitcoin or Ethereum. They are typically held on the Ethereum blockchain, although they are also supported on other blockchains.

How is an NFT different from a Crypto-currency?

Physical money and cryptocurrencies are ‘fungible’, they can be traded or exchanged for one another and they’re also equal, so one bitcoin is always equal to another bitcoin. NFTs are different - they are ‘non-fungible’ - each has a digital signature that makes it impossible for NFTs to be traded as equal to one another.

How are NFTs expanding?

NFTs first launched in 2014 but more recently they have become an increasingly popular way to buy and sell unique art.  Social media has given influencers the ability to connect with a huge following and the opportunity to transform their images, music, life moments or content into an NFT. In April 2021, Eminen shared his first NFT called ‘Shady Con’ and it was reported that he made over $1.78 million USD from his first collection. Many celebrities have jumped onto selling NFTs with their huge audience base and social platforms includi Meta and Twitter have announced that they will be allowing previews to view NFTs.

What is the point of an NFT?

You can be either a buyer, collector or artist.

Buyer: There are many benefits of buying art as you are financially supporting other artists plus it gets you basic usage rights to be able to post the image online or set it as your profile picture.

Collector: NFTs can work as speculative assets, where you buy them and sit on them for a while hoping the value increases one day so you can sell them for a profit.

Artist: As an artist you can sell your work and you have the advantage that every time the NFT is sold you will receive a percentage of the pay.

How do I buy an NFT?

If you’re keen to start your own NFT collection, you’ll need to acquire some key items:

  1. Get a digital wallet that allows you to store NFTs and cryptocurrencies.
  2. Purchase some cryptocurrency, like Ethereum (depending on what currencies your NFT provider accepts). You can buy crypto using a credit card on platforms like Coinbase, Kraken, eToro and even PayPal and Robinhood now.
  3. Move it from the exchange to your wallet of choice.

You’ll also want to keep fees in mind as you research options. Most exchanges charge at least a percentage of your transaction when you buy crypto.

Bored Ape Yacht Club #8817 sells for $3,408,000 USD.

A rare gold Bored Ape NFT sold for a record price of $3.4 million USD. There is less than 1% of Bored Apes available, which is why this NFT is unique and of historical significance to sell for such a price. The Bored Ape Yacht Club has a collection of 10,000 unique Bored Ape NFTs.

Last week they announced a collaboration with The Rolling Stones and they launched a physical limited edition zine which sold out worldwide. The NFT collection will be available to purchase from today - go get it.

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