Can you imagine a tweet being sold for millions? Well, sounds crazy but then it’s not so when the tweet is an NFT. NFT artworks are fetching millions; the most expensive NFT to date is an NFT art collection that has fetched an awe-inspiring $91.8 million. Interestingly, the world of NFT explained is not limited to artworks and tweets only, rather covers a broad range of products. As of 2022, the NFT market is rising at around 35.27% CAGR and is predicted to clock in around $147.24 billion by the year 2026. Check out more at Multibank.
We will discuss in detail about the different use cases and monetization aspects of NFT but before that, let’s have a few words about NFT.
NFT- overview
When we are talking about NFT explained, well, NFT stands for “Non-Fungible Tokens”. These are digital assets that are one and exclusive- they are not fungible, i.e. they do not have any duplicate or anything identical of similar value. Each of these assets carries unique ID codes as well as exclusive metadata that separate them from all other NFTs. For example, a digital artwork NFT might house the artist’s signature in metadata that will serve as proof of the original creator of the product.
NFTs are built over blockchain platforms; the Ethereum blockchain is the most common hub for the development of NFTs. Cryptocurrency, especially ETH, is the currency for trading NFTs.
There are dedicated virtual marketplaces where NFTs are listed and traded.
NFT types
NFT can be almost anything and everything. Here is a list of the most popular forms of NFTs-
- Artwork
- Music
- Real estate
- Social media posts
- Photography
- Memes
- In-game characters
- In-game collectibles
- Physical assets, say cars
- Brand representatives (digital)
- And more
NFTs are not cryptos
There is a misconception that NFTs and cryptocurrencies are alike. No, this is not true. Yes, they both are digital assets and both are developed on blockchain. But, there is a fundamental difference between the two- the “non-fungible” part.
As mentioned previously, NFTs are always exclusive. Even if there is an NFT collection, each NFT in the series will be unique to one another. But, that’s not the case with cryptocurrencies. 1 Ether can always be exchanged with another 1 Ether. The ethos of “exclusivity” doesn’t work for cryptocurrencies. On the other hand, it’s the quotient of “exclusivity” that renders the unique value to every NFT.
NFTs enjoy blockchain benefits
As mentioned above, NFTs are developed on the revolutionary technology of blockchain. As a result, they enjoy all the benefits that make blockchain tech a disruptive force in the modern world.
Decentralization- Based on the decentralized platform of blockchain, NFTs eliminate the interference of any kind of intermediary. As a result, NFT trades happen directly between the creator and the buyer. The decentralized process makes the system faster and more streamlined.
Hacking prevention- The decentralized structure makes it extremely difficult for hackers to hack any application built on a blockchain platform. The same rings true for NFTs.
Immutability– The blockchain ledger is immutable and cannot be manipulated. As a result, any data featured on NFTs cannot be altered.
Transparency– Blockchain maintains complete transparency across the entire ledger. As a result, NFTs too assure transparency about their metadata which helps in the verification of creators and other data about an NFT.
Automatic execution with smart contracts- With NFTs, there is no risk of artists not getting royalties for their NFT artworks or any other compositions. The smart contracts ensure automatic execution of royalties for artists every time his/her is sold in the marketplace.
NFT use cases:
Here is a list of a wide range of use cases for NFTs-
- Representation of different digital assets
A big chunk of NFTs are created to represent unique digital assets, ranging from music to art to art, and so on.
- Decentralized marketplace in Metaverse
NFTs and Metaverse go hand-in-hand. NFTs can be utilized to represent the virtual property in a Metaverse world that users can rent or sell for monetization.
- Gaming collectibles
As mentioned above, NFTs can represent unique in-game collectibles
- Gaming characters
NFTs can also represent rare gaming characters.
- Physical assets
Surprisingly, NFTs can even be developed for representing physical assets, say a car. An automobile company can develop an NFT for representing a certain car model. The NFT would be transferred to new owners every single time the car will be sold.
Different ways to monetize NFTs
Interestingly, there are not one but multiple avenues to make money through NFTs-
Selling NFTs
If you are an NFT creator, you can always make money by selling your NFTs.
NFTs are one of the most cash-rich digital assets in the marketplace. So, if you can develop something potential for the current market, you might end up being a millionaire!
Royalties
If you are an NFT creator, your earnings from the NFT do not end with you selling it to a buyer. You have every right to receive royalty every single time the NFT will be sold. The royalties will serve as a fantastic avenue for smart passive income. And thanks to smart contracts, there is no risk of the seller depriving you of the deserved royalty.
Trading
A Miami-based collector of artworks had recently flipped a famous NFT artwork for a jaw-dropping 1000 times.
So, yes, if you have bought and own an NFT, you can always sell it to make money as a trader. Just remember, you have to be extremely careful about the timing when you are planning to trade NFTs. And, if you are in the plans of trading, please do it at the earliest. Digital assets are largely influenced by hype. The same NFT that is reigning the #1 in the NFT chart could be replaced by something new 6 months to 1 year later.
Renting
You can even make money from your NFT collection or assets if you are flexible about renting it to others.
Wrapping up
NFTs represent a fast proliferating market. The market rose to fame in 2021 and ever since there was no looking back. A good bunch of promising fledglings is working on potential NFT projects. If you believe in a bright future for NFTs, you can also make investments in these cutting-edge startups.
