Discovering the World of Digital Collectibles: A Beginner's Guide to NFTs in 2023

NFTs have gained significant popularity as a way to verify ownership of digital items making them a valuable asset class in the blockchain space - and this beginner's guide to NFTs will help you understand why.

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Jay Crypto

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Last updated Apr 5, 2023 at 11:00 AM

Posted Apr 5, 2023 at 12:04 PM

World of Digital Collectibles

NFTs have stormed the internet in the past few years, and from top brands to celebrities, everyone is getting involved in the NFT space. In 2021, the NFT global market was estimated to be worth $7 billion overall, and JP Morgan predicts that the figure will surge to $75 billion by 2025. After gaining the spotlight in 2021, NFTs have revolutionized the art world and more and more NFTs are flooding into the market every day.

A beginner’s guide to NFTs

If you're a beginner and still not well acquainted with NFTs, you've come to the perfect spot to learn all there is to know about non-fungible tokens.

What is an NFT?

Simply put, an NFT is a one-of-a-kind authentic digital asset with non-interchangeable properties like unique codes and metadata that separate one NFT from another. Just like cryptocurrencies, its ownership information is securely stored on a digital ledger -- in this case, blockchain. Unlike cryptocurrencies, they are non-fungible – they cannot be traded or exchanged equivalently. Suppose you have a dollar bill and you exchange it with another person’s dollar bill. The value of money owned by you will remain the same: the fungibility of fiat currency. However, in the case of NFTs, you cannot interchange one NFT with another NFT because they both have distinct digital signatures. Bored Ape Yacht Club is one of the most popular NFT collections.

beginner's guide to nfts

As opposed to other digital assets like JPEG pictures, MP3 files, or digital media files which are lost once the storage is destroyed, NFTs are stored on a blockchain. By allowing the ownership and origin of the digital asset to be monitored and validated, blockchain enables a degree of authenticity and uniqueness that is not attainable with conventional digital files. Examples of NFTs include digital art pieces, such as "Everydays: The First 5000 Days" by artist Beeple, which sold for $69 million at auction in March 2021. In 2022, Another NFT “clock”, created by the artist Pak, was sold for a whopping $52.7 million. Other examples include tweets, memes, and even virtual real estate in video games.

History of non-fungible tokens

The history of NFTs goes back to 2014 when the first NFT “Quantum” created by Kevin McCoy was launched. NFTs got mainstream recognition in 2017 when several NFTs were launched on the Ethereum blockchain. Also in 2017, Larva Labs, a Canadian software developer company, launched Crypto Punks, a collection of 10,000 algorithmically generated 24x24 pixel portraits. These crypto punks became extremely valuable and many of them have been sold for millions.

Since then, NFTs have become increasingly popular in the art world.

cc punks

NFT trading reached $17 billion in 21, a 21000% increase as compared to 2020, making 2021 the “year of the NFTs”. In 2022, the trading volume reached $24 billion across the marketplaces despite falling prices. As the NFT space continues to evolve, a report by Verified Market Research (VMR) predicts that the NFT space's total market cap will exceed $231 billion by 2030.

Top 10 most expensive NFTs

NFTs are highly valued due to their rarity, scarcity, and the talent behind their creation. These attributes contribute to the significant market demand for them and to their overall worth. NFTs have seen exponential growth in the last couple of years; thousands of investors have spent millions to get one their favorite NFTs. From The Merge to Cryptopunks, here is a table of the top 10 most expensive NFTs ever sold.

most expensive nfts

Importance of NFTs in the digital world

NFTs have emerged as a revolutionary technology, empowering creators to monetize their digital work and sell it directly to buyers without interference from third parties. Their non-fungible nature also ensures that their digital assets cannot be duplicated or stolen.

Types of NFTs

Some people think NFTs are limited to digital art. However, they are much more than that. Here are some types of non-fungible tokens.

I. Digital art

The most common type of NFT is digital art, which takes the form of tokenized artwork stored on the blockchain. Digital art can exist solely in a digital format and is unique, with only one legitimate owner.

teennfts

While anyone can create a print of the artwork, the ownership and authenticity reside with the NFT holder. The non-fungible nature of NFTs ensures the value of digital art, as it cannot be replicated or duplicated.

II. Video game assets

The integration between blockchain and video gave rise to a new form of games known as play-to-earn (p2e) games. These games compensate players with different rewards including NFTs. These NFTs represent various game assets, such as in-game items, characters, and other virtual objects, that can be used and traded within a particular video game or gaming ecosystem. Some of these NFTs are even interoperable, which means the NFTs earned in one game can be transferred or spent in another game through cross-platform integration.

III. Virtual real estate

Virtual real estate means owning land or property in the digital world, known as the metaverse. Numerous celebrities have jumped on the bandwagon of buying virtual land estates. Snoop Dogg, the American rapper, established a collaboration with the Sandbox, a popular metaverse corporation, in September 2021, and encouraged his followers to attend his events by purchasing tickets.

Property owned in the metaverse can be as valuable as property in the real world. Owners can build their own structures, organize events, and even rent their properties to others to earn passive income.

IV. Photography

Blockchain technology has provided photographers with the opportunity to tokenize their photographs and sell them as NFTs. Many photographers have already entered the NFT space, including Isaac Wright, also known as Drifter Shoots, who is currently the highest-selling photographer in the NFT market. Quantum Art is one of the well-known marketplaces for NFT photographers.

V. Music

By using blockchain technology, music artists can now re-release their music albums as NFTs on marketplaces. Fans can buy pieces of music albums from their favorite artists and enjoy a portion of the profit when the music is released on other media channels.

VI. Sports as NFTs

The sports industry, worth billions of dollars, has ventured into the NFT space, resulting in improved fan engagement for sports leagues. Futera United, the pioneer sports club to join the space, has its own Futera Dome, a metaverse stadium situated in SandBox. NFT holders of the club are granted exclusive access to various facilities, such as purchasing virtual goods from the club's store.

How to buy NFTs?

Once you know enough about NFTs, here are some steps to follow to become a part of the NFT space.

First of all, you need to sign up for a digital wallet to store your cryptocurrencies and NFTs. There is a multitude of virtual currency wallets out there including hot wallets which are connected to the internet and cold wallets which are offline just like a flash drive and are considered safer than hot ones. • You will need to add cryptocurrency to your wallet to buy NFTs. Most of the platforms accept Ethereum as a payment option. • After adding the cryptocurrency to your wallet, you will need to visit an NFT marketplace to make the final purchase.

Top NFT marketplaces

Here is the list of the most popular NFT marketplaces right now:

I. Opensea

Built on the Ethereum blockchain, Opensea is the largest and most popular NFT marketplace right now. Opensea is a user-friendly platform known for trading rare and unique non-fungible tokens. With over 1 million registered users in 2023, it is one of the easiest platforms on which to create, mint, or trade NFTs.

opensea111

II. Rarible

While its features are not as user-friendly as Opensea, Rarible still has established itself as one of the best NFT marketplaces right now. Just like Opensea, it facilitates the minting, creating, and trading of non-fungible tokens. It is also built on the Ethereum blockchain and its features appeal to both beginners and experienced traders.

raribleee

As an NFT marketplace, Rarible services are not limited to the buying and selling of non-fungible tokens: it also facilitates creators with royalty fees on secondary sales. Overall, Rarible provides a safe and secure environment for traders and creators to engage with each other.

III. SuperRare

Specializing in curated artworks, SuperRare is one of the best NFT marketplaces for CryptoArt and music NFTs. SuperRare operates on an exclusive invite-only mechanism; artists can join the platform once their application is accepted.

superrare

Unlike Opensea and Rarible, SuperRare is only for well-known and top artists and is not suited for beginners.

IV. Nifty Gateway

Nifty Gateway is a premier NFT marketplace that is equally suitable for both beginners and experts. The platform offers a wide range of NFTs including digital art, music, sports, video game assets, and much more.

nifty gateway

Nifty Gateway routinely unveils limited release drops of NFTs, generating a perception of scarcity and selectivity that may increase demand, interest, and prices. Nifty Gateway charges 5% on all sales carried out on the platform along with a $0.30 transaction charge.

Advantages of NFTs

From providing unique value to potential appreciation and diversification, NFTs are being seen as a new investment opportunity in the world of digital assets. Here is how NFTs can offer potential benefits as a part of your investment portfolio.

i. Ownership

Purchasing an NFT grants ownership of a unique digital asset, as NFTs are non-fungible and cannot be duplicated. Proof of ownership is recorded on the blockchain, which also protects against counterfeit NFTs. This exclusive ownership provides a sense of pride that physical art purchases cannot match.

ii. Decentralized marketplace

The decentralized nature of blockchain and NFTs gives artists the chance to generate income directly from their art, eliminating the interference of middlemen who would charge for their selling and marketing services. Now, creators can simply list their NFTs on an authentic marketplace and sell them directly to customers by paying a small fee

iii. Transferability

Blockchain games compensate players with various rewards, such as NFTs, for spending time and performing various tasks within the game. These games are built on smart contracts, so rewards earned in one game can be used in another game or transferred directly to the user's private wallet

iv. Portfolio diversification

As NFTs are a relatively new form of assets, they might be a good option to diversify your portfolio in addition to stocks and bonds.

The problems with NFTs

Although NFTs provide various opportunities to generate high returns and profits, investors must also be aware of all the risks associated with NFTs. Some of these issues and risks are given below:

I. Interoperability issue

Interoperability means NFTs of one metaverse could be used in another. There have been claims that most NFTs such as art images are interoperable -- they can work across the metaverse. However, interoperability is still not possible in the case of 3D assets. Users are still not able to use their 3D assets in other metaverses

II. Wash trading

Some traders manipulate the trading volume of NFTs temporarily by repeatedly placing buying and selling orders, increasing the demand for a specific NFT. NFT wash trading is illegal and it is considered an NFT scam. However, the decentralized nature of crypto makes it hard to apprehend the culprits.

III. Environmental concerns

Like cryptocurrencies, NFTs also have a negative impact on the environment. Because NFTs operate on blockchain technology, they require significant computational power, ultimately consuming a large amount of energy.

Future of NFTs

Despite the fact that NFTs are facing serious challenges like wash trading and environmental concerns, their future still looks promising. Together with the emergence of web3 and blockchain technology, it is widely expected that NFTs will revolutionize many industries and contribute to the creation of a decentralized future and economy.

Conclusion

The surging expansion of NFTs points to a bright future, but potential investors must also be aware of the risks involved with the NFT space. If you are considering entering the NFT arena, now may be the perfect time to enter the NFT arena to capitalize on the various benefits NFTs provide.

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