In this article the author and SafeMoon educator Gandalf, gives a basic analysis of the NFT’s and how they play into the real world.
What is an NFT?
NFTs stand for non-fungible tokens and act as a unique way to represent ownership of items like art, video clips, music and other items that are crafted digitally. Crypto assets act as certificates of authenticity of specific items in your wallet, which are bound to the Seed phrase on the blockchain.
NFT emerged out of the idea of “coloured coin” which is a term for a class of methods (so basically programming parameters) representation of real world assets on the blockchain used to prove real ownership between 2012 and 2013. Originally, Bitcoins blockchain was set to have the idea to having assets like digital collectibles, coupons, property, company shares, ids and more, provided by these asset classes called “coloured coins”.
The first ever NFT has been created by Kevin McCoy on May 3rd, 2014. It was a test of a picture called “Quantum”, a pixelated image of an octagon filled with denoting circles which he put on the blockchain and is now for sale with a worth approximately 7 million USD.
Why is this important for current times in the crypto market?
NFTs are allowing people to buy and sell digital assets with a unique ownership. While cryptocurrencies can be interchanged, NFTs remain the same and are limited to a specific number or unique and can develop a value of rarity over time.
While people could assume that you can copy pictures, download music and create other assets without buying them, NFTs give people with a collector`s urge a sense of value, which increases the price even further. Most of the times, NFTs are only highly valued because they are rare, give out in promotions or been handed out in a specific time event as a unique chance to get them e.g. Christmas Giveaways.
Also, people claim that NFTs are the biggest money laundering possibility on the planet as decentralized units can not be tracked down and money laundering could be done easily. While there is some truth to each story, for most purposes this is unlikely to be the case, as reporting to local tax offices is required, as this is also a traded crypto asset. For security reasons, I will not go into further detail here, as I do not want to advertise the possibilities for this.
What is the biggest place to buy or build NFTs?
The biggest place to buy or create your NFTs on and mint it (i will explain the term in the building segment later on) are OpenSea with a volume of over 6.5 billion USD floating around in NFTs. Axie Marketplace and CryptoPunks are following the cases, rariable and SuperRare are valid alternative to OpenSea.
How to start with NFTs ? What Wallet to use ? How do i create NFTs?
You need an idea, a fitting theme or maybe just a beautiful picture or piece of music. It can be everything, while you should also reconsider not to upload copyrighted content as that might high potentially get you into trouble if the company itself sees the object on the distributed NFT-Store.
You need a wallet to have the possibility to create, mint and pay the fees for your NFTs. Minting describes the process of how digital art becomes a blockchain by paying fitting fees to set your digital art on the referring blockchain with a kind of a footprint. A unique address set to your specific NFT-Art which will be stored on the regarding platform. For easy explanation in this case, I would use Raraible as it provides an easy way for new NFT-Lovers to try out and test their Art on the vast crypto space.
You would need your Wallet (in this kind preferable Metamask) and login on the website with your account. Your art, music or diverse digital asset should be ready at this point as you want to put it on the blockchain. You can then navigate to create a collectible and decide whether you want a single, unique NFT or a multiple NFT which has a certain amount of the same item in store until its bought out. Then, you have to put in information like name and a description to your art. At the end, you can use the rarible – Tokens from rarible – which may be used as a platform currency – to mint your item. Be advised that most of the platform have ETH, as of rarible has the same possibilities to use ETH for the minting process, while the fees are currently extremely high.
You can also use other services to create NFTs, for example create and mint a NFT on the new Solana Blockchain. In that case, you would need to contact the Solana Devnet via console in NodeJS, which is more advanced as the simple process through a website, but the fees are extremely low as of 0.00025 $. There are a lot of tutorials which explain it easily and can help out, but visual presentation would be much advised as the lines of code to be put up are easily to be replicated.
Are NFTs taxable?
Yes. They are crypto assets in which case have a fee between 10-37%, which varies due to the reason of location you are at, paying the taxes and the actual considered income. For further information I would highly suggest you to talk to a local tax adviser as this can not be regarded as a financial advice due to the unclear regulation on this subject. Also, we have people from all nations here, so there is no answer to be given which can suit everyone here, unfortunately. But we all know the game: If you have gain, the state will be your pain.
The future of NFTs
NFTs are already more than just pictures of pixelated apes, aliens and dots. They can be used as a crypto asset to store money in it and even get a rising, passive value due to the factor of holding and storing an NFT. They rise in their popularity and will become more rare, which will also increase the value of your basic investment and may bring you a fortune. In the future, there will be more digital assets to be looked at.
There are already companies out there digitalizing everything they can, whether its players cards of card games or collectibles on sports person or pictures and soundtracks of bands and events. Even games come forward with play2earn and possibilities to gain low NFTs during normal gameplay and combine them to higher NFT’s which might be rare, super rare or epic in their quality and gain a huge amount of value. Most likely, we will see a potential rise of personal information stored on the blockchain, e.g. drivers licences, personal ids, credit card information or anything regarded to be private and unique. The use cases are nearly endless, everything you can imagine can be put on an NFT.
Is it something you should consider thinking about now ? Maybe, if you are not only invested into cryptocurrencies but also want to expand your portfolio and possible, long term graphical or musical assets. If you tend to go the way of day trading, it is also possible to think about NFTs because some of them will be published in special events and are worth way more after they are deployed on the market.
But be aware: More and more companies start to step a foot into the NFT-Scene and requesting regulation for copyrighted stuff that they own. As for this, there might be a big change in the future regarding the possibilities of what you are allowed to mint or not. Therefore, always do your own research before you act.
Disclaimer: The information provided on this page does not constitute investment advice, financial advice, trading advice, or any other sort of advice and it should not be treated as such. This content is the opinion of a third party and this site does not recommend that any specific cryptocurrency should be bought, sold, or held, or that any crypto investment should be made. The Crypto market is high-risk, with high-risk and unproven projects. Readers should do their own research and consult a professional financial advisor before making any investment decisions.