NFTs are non-fungible tokens. They are unique items that you can't replace with something else. For example, a one-of-a-kind trading card is an NFT – you can't just replace it with any other card. If you trade your card for some other card, you have something different.
These differ from fungible items, which are often the same as each other. If you trade one bitcoin for another, you end up in the same position as where you started, for instance.
On the other hand, if you swap a near-worthless mass-produced late 80s baseball card for a 1909 American Tobacco Company T206 Honus Wagner card (valued at over $1 million), you've done very well for yourself.
Nowadays, most NFTs tend to be digital. This makes it particularly easy for creators to give their supporters something rare and unique. Some NFTs, for example, are digital artworks, and people are now collecting these digital artworks, just like collectors have collected physical paintings for years.
And some of these NFTs have gone for extraordinary prices. One NFT artwork by a digital artist called Beeple sold for $69 million at Christie's.
A more down-to-earth version of a modern digital NFT is CryptoKitties. They are an Ethereum blockchain game where users can buy, sell and breed digital "cats." Every "cat" is unique (just like your real-life pet).
In some ways, NFTs are similar to Bitcoins and other cryptocurrencies, except, of course, they are non-fungible and non-divisible. The first NFTs were part of the Ethereum blockchain, which stores extra electronic information to distinguish their uniqueness.
Other blockchains now also facilitate NTFs. Because of the differing blockchain technology behind particular NFTs, not all NFT marketplaces buy and sell all types of NFT.
Creators will often select an NFT marketplace based on whether that marketplace supports a specific NFC token standard. Ethereum has released two standards now: ERC-721 and ERC-1155. Competitor, Binance, has since released standards BEP-721 and BEP-1155.
The two "1155" standards differ from the original "721" standards because they allow multiple NFTs to be bunched and transacted together. Most NFT platforms require buyers to have a digital wallet and use cryptocurrencies to pay for their purchases.
How to sell NFTs
To sell your NFTs on a marketplace, you’ll need to locate them in your collection, click on them and find the “sell” button. Clicking this will take you to a pricing page where you can define the conditions of the sale including whether to run an auction or sell at a fixed price.
Ether and other ERC-20 tokens are the most common cryptocurrencies you can sell your NFTs for, however, some platforms only support the native token of the blockchain they were built upon. VIV3, for example, is a Flow blockchain marketplace and only accepts FLOW tokens.
By clicking on the “edit” button next to the collection image on OpenSea, signing the message using your wallet and scrolling down, you have the option to program in royalties and select which ERC-20 token you’d like to receive for selling the NFT.
Royalties allow NFT creators to earn a commission every time the asset is sold to a new person. This has the potential to create lifelong passive income streams for artists and other content creators automatically thanks to smart contracts.
Listing NFTs on a marketplace sometimes requires a fee in order to complete the process. While it’s not the case with every platform, it’s something to be mindful of when creating NFTs.
Is now a good time to get into non-fungible tokens?
The NFT craze is far from being over. Major brands and celebrities such as the UFC and Shawn Mendez have signed deals to release their own non-fungible assets soon, and even Elon Musk’s girlfriend Grimes has jumped on the bandwagon selling almost $6 million worth of digital artwork in minutes.
Messari analyst Mason Nystrom anticipates the NFT market will exceed $1.3 billion by the end of 2021 as more artists, brands and icons flock to the space to create their own distinctive tokens.
With more blockchains competing to produce better NFT services too and a growing range of platforms to choose from, now is a great time to take part in the space.