Crypto Decoded

What Are NFTs And How Do They Work? Crypto Experts and Artists Explain

Some NFTs have been sold and purchased for millions of dollars, but how -- and why?

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NFTs are becoming widely popular, and some have even been sold for a hefty price.

A collage of 5,000 NFTs by an artist known as Beeple sold for $69 million at a virtual auction last March. It became the third-highest price ever achieved by a living artist at Christie’s, a world-renowned auction house.

The buyer, Vignesh Sundaresen who also goes by the moniker Metakovan, says he would have even paid more for it.

“This is a significant piece in art history and sometimes these things take some time for everyone to recognize realize but I’m ok with that,” Sundaresen said in a CNBC interview.

One NFT artist says that digital art is created at the intersection of technology and art, but lacks a certificate of authenticity.

“When you mix digital art and blockchain, what happens?” digital NFT artist @Soyfira asked. “Magic happens. That’s why Miami loves blockchain.”

Jorge Cortes, co-founder of Bitbasel, says that NFTs are a revolutionary technology that creative industries are using to sell artwork without the help middlemen or galleries.

What does NFT stand for and what does it mean?

NFT is an acronym that stands for non-fungible token.

Tokens can be used to refer to either cryptocurrencies themselves, or like NFT’s, assets that use those cryptocurrency blockchains to operate.

Fungible is the ability to be converted with other goods or assets of the same type such as commodities, company shares, precious metals, and currencies.

Money is a prime example of something fungible, where a one-dollar bill is easily convertible into four quarters or ten dimes.

When something is non-fungible it means it can’t be reproduced or substituted.

What is NFT art?

NFT art is a digital asset that is collectable, unique, and non-transferrable, Cortes explained.

Every NFT is unique in it's creative design and cannot be duplicated, making them limited and rare.

NFTs get their value because the transaction proves ownership of the art. When you own an NFT, you can keep or wait for it to appreciate, and then sell or trade it.

There were over $23 billion in NFT trades in 2021 and trading volume grew 38,000 percent year-over-year.

How do you buy and sell NFT art?

To buy or sell NFTs, a buyer or seller must first identify the blockchain that will be used for the transaction. A digital wallet must then be secured that can hold the blockchain.

MetaMask, Trust Wallet, and Coinbase Wallet can all support digital currencies used to buy NFTS.

There are many NFT marketplaces that allow buyers and sellers to connect digital wallets to upload and buy NFTs such as OpenSea, Rarible and Mintable.

Some digital artists post their artwork on social media platforms, like Instagram, to attract potential buyers.

“I just dropped my three NFTs, and one NFT collector told me ‘I just looked at your Instagram and I love it. I wanna be your first NFT collector,’” @Soyfira said. “And then another girl again looked at my Instagram, I wanna be the second, third and sold out.”

Two days later, @Soyfira was featured in a Forbes article about how she sold her first pieces of digital artwork in less than 24 hours.

One of her NFTs sold for 2 ethers, which was worth more than $9,000 at the time of the sale.

While it doesn’t cost anything to post NFTs on some platforms, others charge a “gas fee”, which rewards miners and other people working on the blockchain to maintain it and grow it.

The “gas price” also depends on network congestion. The higher the number of people posting, buying, and selling at a given time, the more expensive.

Some artists and collectives – like CryptoPunks, Bored Ape Yacht Club, and Art Blocks – also use NFT drops to get buyers excited about a new NFT.

NFT drops mirror limited drops from designers in the fashion industry and have helped artists reach much larger audiences that would be unattainable otherwise.

“This technology is the present, not the future, so it gives you more power in your heart to continue doing it and continue learning,” @Soyfira said.

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