What You Need To Know About Non-Fungible Tokens (NFTs)

Editorial note. Forbes Advisor may charge a commission for sales from affiliate links on this page, but this will not affect the opinions or ratings of our editors.

Automatically save և invest your future with acorns

Join over 8 million people և start investing in your backup changes for the future.

No-nonsense (NFT) characters seem to be off the air this year. From art to music to toilet paper, these digital assets sell like exotic 17th-century Dutch tulips, some for millions of dollars.

But are NFTs worth the money or the fuss? Some experts say that they are a balloon that is ready to fly, like dotcom craze or Beanie Babies. Others believe that NFTs are here to stay, that they will change investments forever.

What is NFT?

NFT is a digital asset that represents real-world objects such as art, music, games, and videos. They are bought and sold online, often in cryptocurrency, and they are generally encrypted with the same underlying software as many cryptocurrencies.

Although they have been around since 2014, NFT is now gaining popularity as they become an increasingly popular way to buy and sell digital artwork. A staggering $ 174 million has been spent on NFTs since November 2017.

NFTs are also generally unique, or at least very limited in operation, and have unique identification codes. “Essentially, NFTs are creating digital scarcity,” said Arri Yoon, chairman of the board of the Cascadia Blockchain Association of the Washington Technology Industry Association and CEO of Yellow Umbrella Ventures.

This is in stark contrast to most digital creations, which are almost always unlimited in supply. Hypothetically, supply disruption should increase the value of an asset, assuming it is in demand.

But many NFTs, at least in these early days, have been digital creations that already exist elsewhere, such as videos of NBA games or secured versions of digital art already floating on Instagram.

For example, the famous digital artist Mike Winklman, better known as “Beeple”, created a composite of 5,000 drawings a day, which created the most famous NFT at the moment – “EVERYDAYS. The First 5000 Days “, which sold at Christie’s for a record price. breaking $ 69.3 million

Anyone can view individual images for free or even a whole collage of images online. So why are people willing to spend millions on something that they can easily screenshot or download?

Because NFT allows the buyer to own the original product. Not only that, it also contains built-in identification that serves as proof of ownership. Collectors value these “digital bragging rights” almost more than the item itself.

How is NFT different from cryptocurrency?

NFT stands for Non-Functional Sign. It is generally built using the same software as cryptocurrency like Bitcoin or Ethereum, but that’s the end of the story.

Physical money և cryptocurrencies are “exchangeable”, ie they can be exchanged or exchanged with each other. They are also equal in value. One dollar is always worth another dollar. one Bitcoin is always equal to another Bitcoin. Crypto functionality makes it a reliable way to make transactions in blockchain.

NFTs are different. Each of them has a digital signature, which makes it impossible to exchange NFTs with or equal to each other (hence incompatible). One NBA Top Shot video, for example, is not equal to EVERY DAY, as both are NFT. (One NBA Top Shot video does not even have to be the same as another NBA Top Shot video).

The best cryptocurrencies in 2021

We have collected leading exchange offers և data collection to determine the best encryption exchanges.

How does NFT work?

NFTs exist on a blockchain, which is a distributed public registry that records transactions. You are probably most familiar with blockchain as the underlying process that enables cryptocurrencies.

In particular, NFTs are typically hosted on the Ethereum blockchain, although other blockchains support them.

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



Videos և Sports events


Virtual avatars և video game skins

Designer sneakers


They even count the tweets. Twitter co-founder Jack E. Dorsey sold his first tweet as NFT for more than $ 2.9 million.

In essence, NFTs are like a collection of physical objects, only digital. So, instead of hanging on the wall with real oil paint, the buyer gets a digital file.

They also receive exclusive property rights. Right is right. NFTs can have only one owner at a time. NFT’s unique data makes it easy to verify their proprietary “transfer between owners” tokens. The owner or creator can also keep certain information inside. For example, artists can sign their artwork by including their signature in NFT metadata.

What are NFTs used for?

Blockchain technology և NFTs enable artists և content creators to monetize their products. For example, artists no longer have to rely on galleries or auction houses to sell their art. Instead, the artist can sell it directly to the consumer as NFT, which allows them to make more profit. In addition, artists can plan royalties so that they receive a percentage of the sale when their art is sold to the new owner. This is an attractive feature as artists generally do not receive any future revenue after the first sale of their art.

Art is not the only way to make money with NFT. Brands such as Charmin and Taco Bell have auctioned off NFT-themed art to raise money for charity. Charmin called its offer “NFTP” (non-collapsible toilet paper), and Taco Bell’s NFT art sold in minutes, with the highest bids at 1.5 wrapping (WETH) at $ 3,723.83 at the time of writing.

Nyan Cat, which in 2011 It was the GIF of the era with a pop-tart body that sold for almost $ 600,000 in February. And the NBA Top Shot at the end of March earned more than $ 500 million. One LeBron James NFT cost more than $ 200,000.

Even celebrities like Snoop Dogg and Lindsay Lohan jump on the NFT, releasing unique memories, artwork and moments as NFT-enabled.

How to buy NFTs

If you want to start your own NFT collection, you need to get some basic elements.

First, you need to get a digital wallet that allows you to store NFT: cryptocurrencies. You will probably need to buy some cryptocurrency, such as Ether, depending on the currency your NFT provider accepts. You can now buy passwords via credit card on Coinbase, Kraken, eToro և even PayPal և Robinhood platforms. You will then be able to transfer it from your exchange to your preferred wallet.

You will want to consider fees when exploring options. Most exchanges charge at least a percentage of your transaction when you purchase encryption.

The best cryptocurrencies in 2021

We have collected leading exchange offers և data collection to determine the best encryption exchanges.

Popular NFT markets

There will be no shortage of NFT shopping sites after setting up and financing your wallet. Currently the largest NFT markets are:

OpenSea.io:This peer-to-peer platform considers itself a provider of “rare digital items: collections”. All you have to do is create an account to view NFT collections. You can sort by sales volume to find new artists.

Mobile:Like OpenSea, Rarible is a democratic, open marketplace that allows artists և creators to release: sell NFTs. RARI tokens on the platform allow owners to consider features such as fees և community rules.

Foundation:Here, artists must receive “no” votes or an invitation from creative friends to post their art. The uniqueness of the community and the entrance fee. Artists also have to buy “gas” to make NFTs, which means it can boast of higher-caliber works of art. For example, Nyan Cat creator Chris Torres sold NFT on the Foundation platform. It can also mean higher prices. This does not have to be a bad thing for artist collectors seeking to capitalize on, assuming that demand for NFTs remains at current levels or even increases over time.

If these հարթ other platforms are home to thousands of NFT creators and collectors, be sure to research carefully before purchasing. Some artists have fallen victim to imitators who have listed and sold their work without their permission.

In addition, the processes for checking creators և NFT lists are not consistent across platforms. Some are tougher than others. OpenSea և Rarible, for example, does not require an owner check for NFT lists. Buyer protection seems to be rare at best, so when shopping for NFTs, it may be best to keep in mind the old “warning blank” (let the buyer beware).

Need to buy NFTs?

Just because you can buy NFTs, does that mean you should? It depends, says Yoon.

“NFTs are risky because their future is uncertain. We do not have much history to evaluate their work,” he said. “Because NFTs are so new, it might be worth investing a little money to try them now.”

In other words, investing in NFTs is largely a personal decision. If you have money to save, it might be worth considering, especially if the piece matters to you.

But keep in mind that the cost of NFT is based entirely on what someone else is willing to pay for it. Therefore, demand can drive price, rather than the fundamental, technical or economic indicators that usually affect stock prices, at least as a general basis for investor demand.

This means that NFT can resell for less than you paid for it. Or you may not be able to resell it at all if no one wants to.

NFTs are also subject to capital gains tax, just as you are when you sell shares for a profit. However, as they are considered collections, they may not receive long-term capital gains, and may even be taxed at higher tax rates, although the IRS has not yet determined what NFTs are for tax purposes. Keep in mind that cryptocurrencies used to buy NFTs can be taxed if they become more expensive after purchase, which means you can contact a tax professional if you see an increase in NFTs in your portfolio.

That said, approach NFTs just like any other investment.