In this article, you will understand what are NFTs and why are they so popular. Also, you will learn ways how to earn a passive income from it.
Nowadays, NFTs are the popular trend in the cryptocurrency community amidst several testimonies of good investments. Besides, more and more celebrities and companies are interested in launching their own.
What are NFTs?
An NFT or Non-Fungible Token is a digital asset that represents tangible objects such as art, music, in-game items, and video clips.
These are bought and sold online with cryptocurrency and encoded with the same software as digital currencies.
Even though it has been existing since 2014, it only exploded in popularity during the coronavirus pandemic.
NFTs are built and managed on a blockchain, which is the same digital ledger system used by cryptocurrencies like Bitcoin.
Usually, these are based on the Ethereum network, but there are other NFTs that use Solana and Polkadot blockchain.
If you are still wondering, think of these digital assets as a type of virtual certificate similar to a title of a physical asset such as real estate.
Analysts described NFTs as “digital scarcity” because, unlike other creations that have an infinite supply, these are only limited.
Their staggering prices resulted from the cutting off of supply, given its high demand.
A key difference between NFTs, stocks, and cryptos is that the latter two are fungible, which means that each unit is just like the other.
For example, one share of Facebook is the same as its other share, and one Bitcoin token is equal to another.
On the other hand, NFTs are non-fungible, meaning the token you purchase represents a unique item that is not replaceable by anything else.
How to make money with NFTs?
NFTs are bought and sold through a purpose-built marketplace only for digital assets.
These can be used to purchase and NFT at a fixed price or function as a virtual auction, just like the buy and sell system for cryptocurrencies and stocks.
The NFT prices listed for sale through auction are volatile, which changed value depending on demand. A higher demand translates to a higher price.
How to buy NFTs
In buying NFTs, you need to have a digital wallet that will allow you to store them.
Also, you need to purchase some cryptocurrencies, depending on the accepted currency your NFT provider accepts.
You can purchase crypto using a credit card on exchanges such as Coinbase, Kraken, eToro, PayPal, and Robinhood.
Then, you can now move your digital tokens from the platform to your digital wallet.
Popular NFT Marketplaces
Once you set up and fund your wallet, you can now shop on your chosen marketplaces. Here are the largest NFT marketplace in existence recently:
OpenSea.io: This platform provides rare digital items and collectibles. You need to create an account to browse for NFT collections and sort pieces by sales volume to discover new artists.
Rarible: It is just similar to OpenSea but it issues RARI tokens to enable holders to weigh on features such as fees and community regulations.
Foundation: Unlike OpenSea and Rarbile, which are democratic, this platform is exclusive and artists must receive upvotes or invitations from fellow creators to post their arts.
How to sell NFTs?
Once you own an NFT, you can keep it as collectible, display it for others to see, or utilize it as part of a larger digital project. Also, you can list it for sale.
To sell your NFT, you need to upload it to the marketplace of your choice that supports the blockchain it was built on.
From there, you can list it for sale at a fixed price or for an auction, where buyers bid.
Once uploaded, the marketplace will verify your NFT.
After it was sold, the marketplace will handle the transfer of a digital asset from you as a seller to your buyer.
It will also transfer the crypto funds to your wallet minus the listing fee and other computing expenses.