- How are NFTs created?
- In what ways can you make money from NFTs?
- What are the major NFT marketplaces?
Innovations are at the core of the dynamic and chaotic world of blockchain and cryptocurrencies. In fact, blockchain itself is a groundbreaking innovation with advanced technology at its core. Prior to 2008, ‘blockchain’ and ‘cryptocurrencies’ were abstract words that were hardly used and rarely understood. And so was ‘Non-Fungible Token’ or ‘NFT’. But today, these words and terms are used every day.
But really, not many understand what Non-Fungible Token or NFT is, though they have heard friends or family members talk about it. Well, in this article, we will expose what Non-Fungible Token is and also show you how you can make money from it as a beginner.
What is Non-Fungible Token (NFT)?
A Non-Fungible Token or NFT for short, is a digital asset that has been tokenized via a blockchain, such as a work of art, digital content, or video. Tokens are distinct identification codes generated by an encryption function from metadata. The assets themselves are then kept somewhere else, and these tokens are kept on a blockchain. What distinguishes them is the link between the token and the asset.
Depending on their market and owner value, NFTs can be traded and exchanged for cash, cryptocurrencies, or other NFTs. For example, you could scribble a happy and a sad face on a piece of paper, snap a photo of it, add metadata, and tokenize it on a blockchain. The rights you have given that token belong to whoever holds the private keys.
Even if they look the same, two NFTs from the same blockchain are not interchangeable. NFTs are unique.
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According to Arry Yu, chair of the Washington Technology Industry Association Cascadia Blockchain Council and managing director of Yellow Umbrella Ventures, via Forbes, “essentially, NFTs create digital scarcity.”
One important thing to note about NFTs is that, like many cryptos, they are typically encoded using the same underlying software.
How do NFTs work?
Although other blockchains have adopted their own NFT implementations, the majority of NFTs are integrated into the Ethereum blockchain. Similar to Bitcoin or Dogecoin, Ethereum is a cryptocurrency, but unlike other cryptocurrencies, its blockchain records who owns and trades NFTs.
Source: DoitSoftware
NFTs are created from digital objects which represent both tangible and intangible items, including collectibles, designer sneakers, music, GIFs, grafic art, videos and more. Even tweets could come in here. For instance, Jack Dorsey, co-founder of Twitter (now X), sold his first-ever tweet as an NFT for $2.9 million. Essentially, NFTs are like physical collector’s items, only digital. So, instead of getting an actual oil painting to hang on the wall, the buyer gets a digital file instead.
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Simple ways to make money from NFT as a beginner
There are several ways you can tap from the multi-billion dollars wealth of NFTs
Create and Sell Your Own NFTs
One of the best ways to make money from NFTs is by "minting," or creating your own NFTs and selling them to make money. See this the same way you’d see creating a cryptocurrency. Even though minting is inexpensive, being successful depends on picking the best NFT marketplace and promoting your NFT in a way that makes it stand out. The buyer's cryptocurrency is transferred to your wallet after a sale.
Rent NFTs
The majority of NFTs have no use. On the other hand, some NFTs are used in games or other specialized platforms. This implies that you can charge someone to use your NFT on a game or other specialized platform. As a result, someone else can use the NFT without having to purchase it. Smart contracts are blockchain-based software programs that control these rental agreements. Unless the contract contains errors, the NFT is automatically paid and returned.
Trade NFTs
Trading NFTs is similar to trading stocks. Traders purchase cheap NFTs in anticipation of increases in popularity. Even though a lot of NFTs are still worthless, the secret to success is to quickly spot popular NFT collections.
Stake NFTs
It is possible to apply the idea of cryptocurrency staking to NFTs. You can get rewards by staking your NFTs on a platform and earning points during that time. Few platforms enable NFT staking in August 2022 because it is still a relatively new idea in defi (decentralized finance).
Similar to cryptocurrency staking, the platform's native token is typically awarded as a staking reward. This token's worth is determined by its use and level of popularity. Therefore, bear in mind that even though the stated APY (annual percent yield) is very high, actual rewards from NFT staking can vary greatly.
Play-to-Earn NFT Games
Play-to-earn (P2E) games, in which users earn cryptocurrency through gameplay, have become more popular in recent years. Players receive NFT collectibles in place of money, which can be worth a lot if they are rare and the game is well-liked. A game's associated NFTs could lose all of their value if it loses support or popularity.
Invest in NFT-related Companies
Investing in NFT-related companies is an alternative to purchasing NFTs. Investing in these companies allows you to profit in the event that NFTs become more well-known and the business prospers. Recall that you are putting your money—and not just NFT trends—on the management of these companies. Even if NFTs become very popular, bad business management can make your investment lose value.
Major NFT Marketplaces to Consider (June 2024)
Planning to make money from NFTs means you have to look for good NFT platforms or marketplaces. We have a few that you should research.
Opensea
By NFT standards, OpenSea is quite old, having debuted in 2017. In the past, it has played host to a number of well-known NFTs, such as virtual worlds, trading cards, music, and art.
Rarible
Rarible allows users to buy and sell art, collectibles, video game assets and NFTs. You can buy and deal on Rarible with Ethereum, Polygon, Tezos and Immutable X, for a fee though.
NBA Top Shot
For the NBA and WNBA, you can purchase play highlights, video clips, and artwork. However, not all of these Moments have been inexpensive. In February 2021, during the peak of the NFT market, a video featuring LeBron James making a slam dunk scored $208,000.
Binance
Binance is the largest cryptocurrency exchange. It added an NFT marketplace in 2021.
Binance NFT provides digital assets like artwork, gaming items, and collectibles that are commonly available on other large platforms. The extremely low fees that Binance NFT charges are one of its main advantages. The trading platform only takes 1% of the trade. Additionally, it is an easy-to-use platform that was created with layouts and technology akin to their exchange.
Disclaimer: This article was written for education and should not be considered financial advice. Before investing your money, please do your research.
