In the simplest terms, NFTs transform digital works of art and other collectibles into one-of-a-kind, verifiable assets that are easy to trade on the blockchain.
So why is the NFT phenomenon taking off now?
“Some of that interest is from people who enjoy supporting the work of independent creators by purchasing their works,” Artsy CEO Mike Steib told CNN Business. “Others are intrigued by the idea of taking a digital asset that anyone can copy and claiming ownership of it. The recent headline price records for NFTs seem to have been largely driven by newly minted crypto millionaires and billionaires looking to diversify their bitcoin holdings and more interest to the crypto ecosystem.”
Here’s what else you need to know:
What are NFTs?
Non-fungible tokens, or NFTs, are pieces of digital content linked to the blockchain, the digital database underpinning cryptocurrencies such as bitcoin and ethereum. Unlike NFTs, those assets are fungible, meaning they can be replaced or exchanged with another identical one of the same value, much like a dollar bill.
NFTs, on the other hand, are unique and not mutually interchangeable, which means no two NFTs are the same.
Think of Pokémon cards, rare coins or a limited-edition pair of Jordans: NFTs create scarcity among otherwise infinitely available assets — and there’s even a certificate of authenticity to prove it. NFTs are typically used to buy and sell digital artwork and can take the form of GIFs, tweets, virtual trading cards, images of physical objects, video game skins, virtual real estate and more.
How to buy NFTs
Essentially, any digital image can be purchased as an NFT. But there are a few things to consider when buying one, especially if you’re a newbie. You’ll need to decide what marketplace to buy from, what type of digital wallet is required to store it and what kind of cryptocurrency you’ll need to complete the sale.
But be wary of fees. Some marketplaces charge a “gas” fee, which is the energy required to complete the transaction on the blockchain. Other fees can include the costs for converting dollars into ethereum (the currency most commonly used to buy NFTs) and closing expenses.
How to sell NFTs?
NFTs are also sold on marketplaces and the process can vary from platform to platform. You’ll essentially upload your content to a marketplace then follow the instructions to turn it into an NFT. You’ll be able to include specifics such as a description of the work and suggested pricing. Most NFTs are purchased using ethereum but can also be bought with other ERC-20 tokens such as WAX and Flow.
How to make an NFT?
Anyone can create an NFT. All that’s needed is a digital wallet, a small purchase of ethereum and a connection to an NFT marketplace where you’ll be able to upload and turn the content into an NFT or crypto art. Simple, right?
— CNN’s Oscar Holland and Rishi Iyengar contributed to this report.