NFTs explained.

This Article is brought to you by Xeus from Nirvana Academy

Contact Xeus for more information on the opportunities that lie within NFTs, DeFi
(Decentralised Finance), and Cryptocurrency.

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In this Article, you would be enlightened on what NFTs are, and a detailed guide
on how to be a part of the opportunities that may lie within it.

In this Article :

• NFTs and what they really mean

• Difference between Non-fungible Tokens (NFTs) and Fungible Tokens.

• How NFTs work

• Value of NFTs

• Growth of NFTs

• How to Create, Sell / Buy NFTs.

• Where to Create, Sell/ Buy NFTs

• Conclusion

NFTs stand for Non-fungible token. In economics, a fungible asset is something

with units that can be readily interchanged like money.

With money, you can swap a 1000 Naira note for two 500 Naira notes and the
value will remain the same.

When you lend someone money, you would care less as to whether it's the same
note you gave them, that was returned to you. This being because the value of
the money remains the same.
However, if something is Non-fungible, this is impossible because a Non-fungible
object has unique properties and cannot be interchanged.

If you have a car you just got about a year ago and you lended it to someone, if a
different car but the same model and colour is returned to you, you would likely be
pissed off. Although, your reaction would also be based on the state of the car as
compared to your original car.

Therefore, we can say your car is Non-fungible to you because if the same model
and colour is given to you, the value will not remain the same to you.

NFTs are basically things that have no inherent value but are given value based on
human psychology. As you should know, value can be created when a large group
of people consider something to have value, even when it has no inherent value in
reality. This is what the art industry thrives upon.

There are three crucial features of NFTs:

•Unique

Each NFT has its own metadata which represents a piece of unalterable record.

•Rare

With NFTs, the developers are able to create a limited or unlimited supply of a
certain asset making it extremely rare.

•Indivisible

NFTs can only be sold in whole and cannot divide into smaller pieces.

Although they’ve been around since 2014, NFTs are gaining recognition now
because they are becoming an increasingly popular way to buy and sell digital
artwork. A mind-blowing $174 million has been spent on NFTs since November
2017.
NFTs are also generally one of a kind, or at least one of a very limited run, and
have unique identifying codes. “Essentially, NFTs create digital scarcity,” says Arry
Yu, chair of the Washington Technology Industry Association Cascadia Blockchain
Council and managing director of Yellow Umbrella Ventures.

This stands in stark contrast to most digital creations, which are almost always
infinite in supply. Hypothetically, cutting off the supply should raise the value of a
given asset, assuming it’s in demand.

But many NFTs, at least in these early days, have been digital creations that
already exist in some form elsewhere, like iconic video clips from NBA games or
securitized versions of digital art that’s already floating around on Instagram. (Cite
more examples here)
For instance, famous digital artist Mike Winklemann, better known as “Beeple”
crafted a composite of 5,000 daily drawings to create perhaps the most famous
NFT of the moment, “EVERYDAYS: The First 5000 Days,” which sold at Christie’s
for a record-breaking $69.3 million.

Anyone can view the individual images—or even the entire collage of images
online for free. So why are people willing to spend millions on something they
could easily screenshot or download? Because an NFT allows the buyer to own
the original item. Not only that, it contains built-in authentication, which serves as
proof of ownership. Collectors value those “digital bragging rights” almost more
than the item itself.

An NFT is created, or “minted” from digital objects that represent both tangible
and intangible items, including:

• Art
• GIFs

• Videos and sports highlights

• Collectibles

• Virtual avatars and video game skins

• Designer sneakers

• Music

Even tweets count. Twitter Co-founder & CEOJack Dorsey sold his first ever tweet
as an NFT for more than $2.9 million to an anonymous Malaysian investor.

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.

They also get exclusive ownership rights. That’s right: NFTs can have only one
owner at a time. NFTs’ unique data makes it easy to verify their ownership and
transfer tokens between owners. The owner or creator can also store specific
information inside them. For instance, artists can sign their artwork by including
their signature in an NFT’s metadata.
Many insanely priced NFTs have been sold over the past year.
How do NFTs work?

The old traditional works of art such as paintings are valuable because they are
one of a kind. But digital files can easily and endlessly be duplicated. With NFTs,
artworks can be "tokenised" to create a digital certificate of ownership of that can
be bought and sold.

As with Cryptocurrency, a record of who owns what is stored on a shared ledger

known as the block chain.

And these records cannot be forged because the ledger is maintained by

thousands of computers around the world.

NFTs can also contain smart contracts that may give the artist, for example, a cut
of any future sales of the token.

Value of NFTs
Depending on the asset that the NFT represents, value is weighted differently
across four components. This framework can be used by investors to evaluate if
an NFT is worth investing, and by NFTs developers to think of ways to increase
the value of NFTs to attract users and investors. The key takeaway is that NFTs
creates many new ways for values to be created for both developers and asset
owners.

Utility
Utility value is depended on how the NFT can be used. Two major categories that
have high utility value are game assets and tickets. For example, a rare and
powerful Crypto Space Commander battleship was sold for $45,250 in 2019, and
the value of an NFT ticket is the price of an event ticket. Another dimension of
utility is the ability to use the NFT in a different application. Imagine if you can use
the same battleship in a different game, the value would definitely be even higher.

Another way to increase utility value that is easier to achieve is to form

partnerships with other businesses to provide benefits to people who hold your
NFT. For example, Dapper Labs can co-operate with NFT event organizers to
negotiate a discount for CryptoKitties owners.

Ownership history
Value depends on the identity of the issuer and previous owners of the NFT. NFTs
with a high ownership history value are often created or issued by famous artists
or companies with a strong brand. There are two ways to increase value. First is to
co-operate with companies or individuals with a strong brand to issue NFT tokens.
That naturally brings traffic and users to the ecosystem. For example, the first
authorized NFT that represents a Formula 1 car was sold for $113,124. The second
way is to resell NFTs that were previously owned by people who are influential.
Currently, it’s challenging to find out who are the previous owners, although that’s
valuable on-data data. Marketplaces and sellers can provide easy-to-use tracking
interface to increase the value of NFTs. For example, OpenSea can highlight
addresses of investors who make the most money from trading NFTs and list
other NFTs they own.

Future Value
The future value of an NFT is derived both from valuation changes and future cash
flow. Valuation is driven by speculation and can sometimes be the main driver
behind price appreciation. For example, the price of CryptoKitty #18 jumped from
9ETH to 253ETH in just three days in December 2017. Some may argue price
movement that is driven by valuation is negative to NFTs, but speculation is
human nature and is a non-trivial part of the current financial system. If the right
balance is made, developers can increase NFT value and attract new users.
Valuation is driven by scarcity of supply and speculation. Speculation can be
guided by including price performance charts of NFT items or by highlighting
NFTs that appreciate in value. The sneaker marketplace, StockX, achieves its $1
billion valuations partly because it creates a rare sneaker market by encouraging
people to speculate on the price of sneakers.

Future cash flow is the interest or royalties earned by the original owner of the
NFT. For example, SuperRare allows creators of NFT artworks to receive 3%
royalty every time their artworks are sold subsequently on the secondary market.
In the future, companies can borrow concepts from DeFi innovations. NFTs are
assets and can be leased and collateralized to create additional cash flow. In a
game, there is demand from players who want a specific game asset for one day
to complete a mission.

Liquidity premium
High liquidity translates to a higher value of NFT. The liquidity premium is the
primary reason why tokens that are created on-chain should have a higher value
than off-chain assets. ERC standard NFTs can be traded easily without friction on
secondary markets with anyone who holds ETH, which increases the number of
potential buyers. Investors prefer to invest in NFT categories that have a high
trading volume because liquidity lowers the risk of holding the NFTs. In an extreme
scenario where the NFT loses its utility value after the associated platform is
closed, a highly liquid NFTs still has value as long as there are people willing to
buy and sell. On the other hand, NFT standards that are not based on Ethereum
suffer from lack of liquidity, and the value of NFT created on those platforms is
often discounted.

Decentraland and My Crypto Heroes (MCH) have the highest value according to
the framework, and their values are confirmed by on-chain data compiled by
NonFungile.com. In 2019, the active market value, calculated by multiplying
average active users by the average price per asset, for Decentraland and MCH
were 350,000 ETH and 331,260 respectively, while the active market value for
CryptoKitties was around 2,500 ETH.

Growth of NFT

NFTs have become one of the hottest crypto trends of 2021, with overall sales up
55% already since 2020, from $250 million to $389 million.

Many reports have been published on the intense power (electricity) consumption
of NFTs. This is not looking to reduce anytime soon, and as a matter of fact is
rising exponentially. Debates are still ongoing on how to tackle this every problem.
How to create NFTs

Creating your own NFT artwork, whether it be a GIF or an image, is a relatively

straightforward process and doesn’t require extensive knowledge of the crypto
industry. NFT artwork can also be used to create collectibles like sets of digital
cards.

Before you start, you will need to decide on which blockchain you want to issue
your NFTs. Ethereum is currently the leading blockchain service for NFT issuance.
However, there is a range of other blockchains that are becoming increasingly
popular, including:

● Binance Smart Chain

● Flow by Dapper Labs
● Tron
● EOS
 ● Polkadot
● Tezos
● Cosmos
● WAX

Each blockchain has its own separate NFT token standard, compatible wallet
services and marketplaces. For instance, if you create NFTs on top of the Binance
Smart Chain, you will only be able to sell them on platforms that support Binance
Smart Chain assets. This means you wouldn’t be able to sell them on something
like VIV3 – a Flow blockchain-based marketplace – or OpenSea which is an
Ethereum-based NFT marketplace.

The main Ethereum NFT marketplaces include:

● OpenSea
● Rarible
● Mintable
● Maketplace also allows you to create your own NFTs but you have to
register to become a listed artist on the platform beforehand.
● OpenSea, Rarible and Mintable all have a “create” button in the top right
corner.

How much does it cost to make NFTs?

While it costs nothing to make NFTs on OpenSea, some platforms charge a fee.
With Ethereum-based platforms, this fee is known as “gas.” Ethereum gas is
simply an amount of ether required to perform a certain function on the
blockchain – in this instance, it would be adding a new NFT to the marketplace.
The cost of gas varies depending on network congestion. The higher the number
of people transacting value over the network at a given time, the higher the price
of gas fees and vice versa.

Top tip: Ethereum gas fees are significantly cheaper on average during the
weekend when fewer people are transacting value over the network. This can help
keep costs down if you’re listing multiple NFTs for sale.
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.

Selling NFTs on OpenSea(OpenSea)

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.

How to buy NFTs

Before you rush to buy NFTs, there are four things you need to consider first:

• What marketplace do you intend to buy the NFTs from?

• What wallet do you need to download in order to connect with the platform and
purchase NFTs?

• Which cryptocurrency do you need to fund the wallet with in order to complete
the sale?

• Are the NFTs you want to buy being sold at a specific time, i.e. via a pack or art
drop?

As you can probably guess by now, certain NFTs are only available on specific
platforms. For example, if you want to purchase NBA Top Shot packs you will need
to open an account with NBA Top Shot, create a Dapper wallet and fund it with
either the USDC stablecoin or supported fiat currency options. You will also have
to wait for one of the card pack drops to be announced and try your luck in trying
to buy them before they sell out.

Pack and art drops are becoming increasingly common as a method for selling
scarce NFTs to an audience of hungry buyers. These drops normally require users
to sign up and fund their accounts beforehand so that they don’t miss out on the
opportunity to purchase NFTs when they drop. Pack and art drops can be over in
seconds, so you need to have everything ready ahead of time.

Where to buy NFTs

For crypto traders who are primarily interested in buying NFTs, here is a list of the
most popular NFT marketplaces in 2021:

• OpenSea

• Rarible

• SuperRare

• Nifty Gateway

• Foundation

• Axie Marketplace

• BakerySwap

• NFT ShowRoom

• VIV3

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.

Should You Buy NFTs?

Just because you can buy NFTs, does that mean you should? It depends, Yu says.
“NFTs are risky because their future is uncertain, and we don’t yet have a lot of
history to judge their performance,” she notes. “Since NFTs are so new, it may be
worth investing small amounts to try it out for now.”

In other words, investing in NFTs is a largely personal decision. If you have money
to spare, it may be worth considering, especially if a piece holds meaning for you

But keep in mind, an NFT’s value is based entirely on what someone else is willing
to pay for it. Therefore, demand will drive the price rather than fundamental,
technical or economic indicators, which typically influence stock prices and at
least generally form the basis for investor demand.

All this means, an NFT may resale for less than you paid for it. Or you may not be
able to resell it at all if no one wants it.

That said, approach NFTs just like you would any investment: Do your research,
understand the risks—including that you might lose all of your investing
dollars—and if you decide to take the plunge, proceed with a healthy dose of
caution.

Conclusion

Some argue that the currently popping wave of NFTs is just a bubble and soon
enough we would be approaching the burst of the bubble. Just like how it
happened during the Dot-com crash in US back in the 1990s. But the potential of
NFTs is far beyond what could be addressed or treated as a bubble waiting to
burst.
Although, artworks were the first users of NFTs, the essence of NFTs is bigger
than artworks and it would eventually be integrated into our society and lives just
as Cryptocurrency and payment is today.

NFTs most important property is Uniqueness. Humans are unique beings, and
thus we can expect that NFTs would be used in recording identity. We would find
ourselves using NFTs to record ownership for even the most mundane items. This
could literally change the way property is being protected from theft.

The Potential of NFTs is one that cannot be emphasized enough in this Article, nor
any Article at all. We can either sit back and watch the greatness unfold before
our eyes, or step up and be a part of it!

NB : For clarity purpose, A bubble is simply an economic cycle that is

characterized by the rapid escalation of market value, particularly in the price of
assets. This fast inflation is followed by a quick decrease in value, or a
contraction, that is sometimes referred to as a "crash" or a "bubble burst." Bubbles
are typically attributed to a change in investor behavior, although what causes this
change in behavior is debated.

This Article was created by Xeus from Nirvana Academy.

Contact Xeus for more information on the opportunity that lies within NFTs, DeFi
(Decentralised Finance), and Cryptocurrency!

https://wa.me/+2348138023797+Hello%20Xeus on WhatsApp

https://t.me/NirvanaAcademy21 on Telegram.