2021 Has Been the Year of the NFT. But What Exactly Is an NFT?

Why own NFTs?

The demand for NFT art has exploded recently. However, there is still a lot of skepticism. After all, NFTs are generally tied to digital files. How is owning such an NFT different from a screenshot of a photo?  Does “proof of ownership” mean anything? To help you decide, here are some of the main reasons why people own NFTs.

1) It empowers artists

Publishers, producers, and auction houses often strong-arm creators into contracts that don’t serve their interests. With NFTs, artists can mint and sell their work independently, allowing them to retain the IP and creative control. Artists can also earn royalties from all secondary sales of their work.

In this respect, NFTs have the potential to create fairer models by bypassing the gatekeepers that currently control creative industries, and many individuals buy NFTs because it’s a way of empowering and financially supporting the creators that they love.

2) Collectibility

Despite costing less than 5 cents to make, a 1952 Mickey Mantle rookie card sold for $5.2 million. This happened because of the history, rarity, and cultural relevance of the card. NFTs are, in many ways, the digital version of this. For individuals who want to build a collection of digital assets, NFTs offer a unique opportunity that hasn’t existed outside of traditional collectibles and art markets ever before.

3) Investment

Some NFT owners simply want an asset that will increase in value. In this respect, some collectors treat NFTs as an investment — much like traditional art. Want proof? Mike Winkelmann, a prominent American digital artist known professionally as Beeple, sold his Everydays: The First 5000 Days composite at Christie’s for $69 million in March of 2021.

This may seem strange to some, as everyone can see and interact with the image. However, as noted, there can only be one NFT owner. For some, this is enough. Yet, market volatility makes NFT investment a high risk, with the potential for major losses.

NFT Ownership also comes with social benefits, as many creators have turned their NFT projects into vibrant communities. The Bored Ape Yacht Club is, perhaps, the best example of community building in relation to an NFT project. Collectors get access to a members-only discord, exclusive merchandise, a vote in the future of the project, tickets to virtual meetups, and more. As such, for many collectors, owning an NFT how they socialize with friends and a matter of identity.

Как создать свой NFT и где его продать

Как заработать на NFT? Допустим, у вас уже есть объект, к которому вы хотите привязать токен. Ценность NFT — это понятие очень субъективное, её определяет сам создатель. В целом итоговая цена на объект зависит от его уникальности и эксклюзивности. И далеко не всегда стоимость коррелирует со временем и усилиями, затраченными на создание произведения. Так, в феврале 2021 года создатель гифки Nyan Cat выставил её на аукцион в формате NFT. По сообщениям СМИ, работу приобрели за 561 000 $.

Кстати, объектом NFT могут быть не только виртуальные предметы, но и реальные вещи. Например, токены можно использовать для продажи реальной картины или скульптуры. Известны случаи, когда NFT-токены применяли в сфере недвижимости, например, чтобы продать долю в доме при помощи NFT. Правда, такая практика пока не слишком распространена.

Самый простой способ создать NFT — это загрузить свою работу на маркетплейс. Есть довольно много сайтов, где можно публиковать свои токены. Некоторые площадки специализированные, там можно размещать только арт или игровые объекты. Чтобы загрузить туда файл, придётся перечислить комиссию.

Популярные сайты, где продают NFT:

Большинство сайтов, где продают невзаимозаменяемые токены, работают на базе блокчейна криптовалюты Ethereum (так называемые эфиры). Чтобы продать свой NFT, нужно завести специальный кошелек и купить криптовалюту Ethereum.

Площадка берёт комиссию в момент создания NFT, но некоторые сайты могут брать её сразу после загрузки файла или в момент продажи.

Создадим собственный NFT-токен на сайте OpenSea:

Популярная площадка для продажи NFT opensea.io

Свои произведения в виде NFT могут продавать художники, музыканты, иллюстраторы и дизайнеры. В общем, любые творческие люди, у которых есть уникальный объект, подходящий для токенизации.

Beyond digital art

NFTs have many other applications as well, such as representation of real-world goods. In a possible harbinger of the future real-estate market, an apartment was sold as an NFT. Mainstream companies such as Nike (NKE), TIME Magazine, and Tiffany & Co. (TIF) are using or issuing them and they also offer a vehicle for a much more richly experiential system of ticketing for events.

Make no mistake. For all of their potential, NFTs are not an unalloyed force for good. No one should be an apologist for the excesses they’ve fueled – scam sales like those seen in some cryptocurrency markets, plus new crimes, like artist identity theft. For these reasons, technical tools like those described here as well as community-based means of consumer protection will be important.

NFTs will in any case continue to evolve in powerful and exciting ways. Like it or not, they – or something like them – are a cultural force here to stay.

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Creating, buying, and selling NFTs

Unfortunately, wading into the NFT market isn’t as simple as it might sound. After all, you can’t exactly buy an NFT with a dollar and then carry it home with you. You’ll need cryptocurrency to fund your NFT transactions and a crypto wallet to safely store the data when you purchase (or mint) your own NFTs. And that’s just the beginning. In this section, we’ll talk about how NFTs are created, traded, stored, and managed.

So, if you’re wondering how you can get started with NFTs, this is the section for you.

Credit: nft now

Step 1 – Get a crypto wallet

In short, a crypto wallet is a physical device or computer program that allows you to store and transfer digital assets. There are two basic types of crypto wallets: software and hardware wallets. When it comes to minting and shorter-term trades, a hot wallet is the way to go. But for safety reasons, you should use a hardware wallet to store your most valuable assets.

A software wallet (also known as a “hot wallet”): This is an application that can be downloaded and installed on your device. Software wallets are more convenient and can be accessed more easily than hardware wallets, as they are always connected to the internet. However, these wallets are more open to attacks and easier to hack. As a result, they are typically seen as being less secure.

A hardware wallet (also known as a “cold wallet”): This is a physical device that is generally pretty similar to a USB stick that you might use to store files from your computer. Except that, in this case, you are storing your crypto and NFTs. Because these wallets can be completely isolated from the network, assets stored in hardware wallets are often considered to be far more secure than software wallets.

FURTHER READING: Everything You Need to Know About Crypto and NFT Wallets

Step 2 – Buy crypto

FURTHER READING: How to Buy and Sell Cryptocurrency in 5 Simple Steps

Step 3 – Find a marketplace

If you intend to mint 1/1 NFTs, on the other hand, platforms like SuperRare, Foundation, and Zora are your best bet.

And do be prepared, minting comes with an initial cost. Most of the time, you’ll only need to pay a gas fee (transaction fee) to mint, but sometimes marketplaces will tack on extra costs. Similarly, make sure you do your due diligence when researching royalty splits. You are not guaranteed to have cross-platform royalties when you mint on a platform like OpenSea or Rarible. Though there are smart-contract and minting tools like CXIP that help tackle this problem and 0xSplits that help with automated royalty splits to ensure you receive secondary sales royalties no matter where your NFTs are resold.

Step 4A – Mint an NFT

Once the minting process is complete, you’ll have all the relevant information regarding your new NFT, and that NFT will be registered to your digital wallet. Now you can keep it, sell it, or trade it at your leisure.

Step 4B – Buy or sell NFTs

Keep in mind that some NFTs may not be available on the open marketplace or may only be purchased through specific vendors. For example, CryptoPunks have historically been sold through the Larva Labs website rather than through a public marketplace.

Once you’ve found an NFT that you’d like to purchase, you may have the opportunity to buy it outright. In other cases, you’ll need to bid on the NFT of your choice and wait until the auction closes. If you’re the top bidder after the auction closes (or if the seller accepts your bid), the transaction will complete and ownership of the NFT will transfer to your wallet.

At that point, you now own the NFT and can buy, sell, or display it as you see fit.

What’s an NFT?

Like any new technology, understanding NFTs and everything that’s happening in the space can be challenging. But no worries: we’re here to explain what NFTs are, how they’re made, the various benefits and drawbacks, and how you can determine whether NFTs are right for you.

When it comes to creating and selling NFTs, the process is really rather simple. It works like this:

As you might imagine, the technical definition is a bit more convoluted. If you’re interested in that kind of breakdown, our NFT dictionary gives you a comprehensive overview of all the technology and infrastructure in the NFT ecosystem.

How are NFTs different from cryptocurrency?

In this respect, NFTs are non-fungible and cryptocurrencies are fungible.

To better understand this, it makes sense to think of traditional fiat currencies. If we asked you to let us borrow a dollar, you wouldn’t open your wallet and say, “Which dollar bill do you want?” Doing so would be silly, as each $1 bill represents the same thing and can be exchanged for any other $1 bill. That’s because the U.S. dollar is fungible. Cryptocurrencies are also fungible. They’re not unique and can easily be traded and replaced.

NFTs, on the other hand, are non-fungible in the sense that no two are the same. Each NFT is a unique unit of data that cannot be replaced by an identical version because there is no identical version.

When it comes to NFTs, uniqueness and scarcity increase their appeal and desirability. And as is true of all rare items, this scarcity allows individuals to sell their NFTs for premium prices.

NFT scams explained

NFTs are still a new phenomenon. As a result, the market is vulnerable to scams that can take advantage of unsuspecting collectors. Here are a few scams and problems with the NFT market that you should watch out for.

FURTHER READING:  How to Identify and Avoid NFT Scams

Rug pulls

Even though large generative projects are preferred by collectors, there’s not always safety in numbers, and no NFT project is entirely without risk. In fact, many projects have fallen apart due to rug pull scams. A rug pull occurs when the project creators take the investment money for the project and disappear. By absconding with all of the money, the team leaves collectors with a valueless asset.

Notably, these kinds of rug pulls often aren’t illegal. Are they unethical? Sure. But if a project promises to donate funds and then chooses to keep the money, there isn’t much that anyone can do. In rare instances, a rug pull may count as fraud, but this often isn’t the case.

Rug pulls can also happen when NFT developers remove the ability for investors to sell their tokens. These kinds of rug pulls are illegal, and you may be able to recoup your money. However, it will probably cost you a lengthy court battle. Additionally, many NFT creators don’t use their legal names, so it may be difficult (or even impossible) to track them down.

FURTHER READING: What Are Rug Pulls? Are They a Crime?

Wash trading

As with stocks and other collectibles, market manipulation can happen during NFT auctions.

When many transactions like this are executed, the trade volume rises. As a result, it looks like the underlying asset is highly sought after. This has the effect of increasing the value (the price) of the NFT in question. In fact, some NFT wash traders have executed hundreds of transactions through self-controlled wallets to try and increase demand.

FURTHER READING: What is a “wash trade” in NFTs?

Phishing scams

Whether through fake advertisements, NFT giveaways, or some other form of coercion, scammers will sometimes ask for your private wallet keys and/or other sensitive information like your seed phrase.

Are NFTs right for you?

So far, we’ve given you everything you need to better understand NFTs, how they operate in the market, the benefits and risks, and how to get started with them. But are NFTs right for you?

It’s a hard question to answer. In the end, it really just comes down to your personal preference and why you want to get involved in the first place. But here’s what we can tell you:

If you do decide to get into the NFT ecosystem, we hope you enjoy the ride – we know that we certainly have.

FURTHER READING: Should You Buy an NFT? Should Anyone?

Editor’s note: This article has been updated to reflect changes in the greatly reduced carbon footprint of crypto and NFTs since the Ethereum Merge.

Can brands use NFTs for more than digital art?

NFTs for digital art, collectibles, and metaverse real estate or accessories, get plenty of public attention. But, a recent Harvard Business Review article suggests that brands focusing on using NFT collections to represent their physical products in the digital work (think NFTs for digital Nike sneakers) may miss the bigger opportunity.

Eventually, the article suggests, “​​NFTs could be the central digital touchpoint between brands and their consumers — and one that is controlled by the brand itself.” Instead of using NFTs for digital assets, brands could use them to identify unique experiences or objects in the physical world.

So-called “utility NFTs,” as Buddy explains, are NFTs that unlock something. Buddy points to Gary Vaynerchuk’s VeeFriends NFT project. Buying a VeeFriends NFT unlocks different functionality (e.g., a one-on-one coaching session with Gary, access to an exclusive part of his Discord community). In this case, buying the NFT is akin to purchasing a pass or ticket for some extra value.

In a brand scenario, the company would decide what that pass in the form of an NFT would unlock. It could be for something your business would ordinarily charge, like an extended warranty or an event experience. “You get this whole experiential marketing thing,” Buddy says.

One of the most visible NFT projects, Bored Ape Yacht Club, offers both a creative asset and utility in each token. Owners of Bored Ape NFTs can access a social club with benefits like a private Discord server where members can chat with other members.

Earlier this year, a free NFT collection for the Grammy Awards offered access to a private Discord channel. And one of the NFTs unlocked a “golden ticket,” which paid travel and lodging costs for the winner and a friend to go to the awards ceremony.

Что покупают во время сделки с NFT

Покупая NFT, люди как бы приобретают сертификат на произведение. Саму работу, допустим, видеоролик, никуда не пересылают и не перемещают. Файл находится в специальном хранилище (IPFS). А сам токен, по сути, представляет собой набор данных о сделке, продавце, покупателе и сумме, которая была заплачена. Данные подтверждают, что владелец токена является владельцем оригинального объекта. То есть с помощью этой технологии закрепляют свои права на какое-то произведение в цифровом мире.

После продажи токена само цифровое произведение могут скачивать, копировать и пересылать. При этом обладателем оригинала считается тот, кто купил NFT.

Технология невзаимозаменяемых токенов подходит, чтобы зафиксировать права на единственный в своём роде цифровой объект и «токенизировать» его, то есть перевести из реального мира в цифровой.

Объектами для превращения в NFT могут быть: музыка, изображения, фотографии, видеоролики, гифки, даже скриншоты. Фактически любой хоть сколько-то уникальный контент.

В последние годы NFT стали ценными среди криптоинвесторов, геймеров и коллекционеров искусства. Их продают и покупают на специальных маркетплейсах, аукционах и зарабатывают на этом.

NFT usage and ownership rights

For example, let’s say you buy an NFT that contains the very first digital copy of Harry Potter and Sorcerer’s Stone. You own the NFT. But that doesn’t mean you have the right to sell Harry Potter merchandise, make Harry Potter movies, or give others permission to use the Harry Potter IP for commercial purposes.

Sadly, NFT ownership and usage rights are often conflated, which has given rise to some buyers purchasing NFTs with the mistaken understanding that an NFT effectively gives them the rights to expand upon (and capitalized from) well-established IPs.

Of course, there are some exceptions to these hard and fast rules.  Bored Ape Yacht Club has stated publicly that all BAYC NFT owners have full commercial rights to that Ape.  It can be monetized however the NFT owner sees fit to do so.  Some projects like CrypToadz and Nouns have taken this even further by releasing their IP to the public domain under Creative Commons (known as CC0). But they should be viewed as the exception, not the rule.

Copyrighted content

We’ve combed through the leading exchange offerings, and reams of data, to determine the best crypto exchanges.

Should my brand’s content strategy include NFTs?

While you are the best person to know if your brand’s content strategy should include NFTs, Buddy suggests using the 3 Cs of content marketing to make your decision – content, community, and consistency.

Again, Buddy points to Gary Vaynerchuck, who has nurtured his community with consistent free content for a decade. When he dropped an NFT collection, his community was ready for it.

But brands will struggle with NFTs if they don’t pay attention to the fundamentals, JK cautions. That means educating the audience about the value your NFT project has to them and not just jumping on the bandwagon because other brands are doing it.

“We as brand stewards or consultants need to be honest and transparent with our brands,” Buddy explains. That means doing the hard work that goes into evaluating any content marketing initiative. Most of that work happens before you even start thinking about what kind of content (NFT or not) to create.

Buddy suggests asking these questions before delving into NFTs:

I’d add one more question: Does it align with what your brand stands for?

Salesforce learned the hard way about NFT alignment with brand values. A sustainably committed company, Salesforce found hundreds of its employees protesting its plans to create an “NFT cloud” where creators could mint and sell the tokens. The employees thought the environmental impact of NFTs conflicted with the company’s commitment to sustainability, which it had recently touted in an ad that ran during the Super Bowl.

Royalties

There are countless stories of artists who died penniless before they became famous, like Vincent van Gogh. These stories are reminders of how often artists get the short end of the stick in art markets. It is striking that they generally don’t receive royalties for sales of their works in secondary markets in the U.S., despite the practice being common elsewhere. Famously, the artist Robert Rauschenberg was at the Sotheby’s sale where his painting “Thaw” was sold for $85,000 by a collector who bought it from the artist for $900. Rauschenberg yelled at the collector, “I’ve been working my ass off just for you to make that profit.”

A timeline of innovative and popular NFTs

In this section, we’ll cover some of the most notable NFT projects to date. But be warned — this list is far from exhaustive. So be sure to check out our resources on historical NFTs for a more in-depth blast from the past.

Quantum (2014)

As noted, the world’s first NFT was minted by Kevin McCoy on Namecoin in 2014. It’s called “Quantum,” and it was sold in 2021 via Sotheby’s for $1.47 million. This led to a subsequent lawsuit due to ownership disputes.

However, given that NFTs are largely unregulated, it remains to be seen exactly how this will play out from a legal perspective.

Spells of Genesis (March 2015)

Credit: Spells of Genesis

Rare Pepe (September 2016)

https://youtube.com/watch?v=mN9JbKj5rqs%3Ffeature%3Doembed

Out of the nearly 1,800 cards issued across 36 series, the Series 1, Card 1 is the rarest and most valuable. It pays homage to Satoshi Nakamoto, the person or group that created Bitcoin. It’s called the Nakamoto Card, and holding one (there are only 300 total) is the only way to gain entry into the 300 Club.

CryptoPunks (June 2017)

Credit: Screenshot of Larva Labs website/nft now

CryptoPunks first hit the market in 2017 and was launched by product studio Larva Labs. The project was one of the earliest NFT generative art collections ever launched, and it directly inspired the current crop of popular generative PFP projects, like Bored Ape Yacht Club. In this respect, it’s one of the most influential NFT projects of all time.

Each Punk is algorithmically generated and entirely unique, with some characteristics rarer than others.

To date, CryptoPunks is still one of the most sought-after NFT collectibles, and any NFT from the collection is considered a rare and exclusive item in the community. The Punks themselves typically go for hundreds of thousands, with some trades easily climbing into the millions.

FURTHER READING: A Guide to CryptoPunks NFTs

And it’s not just collectors that are after these valuable NFTs.  Some companies, like Visa, have also purchased Punks in the past, which has further driven up scarcity and demand among NFT aficionados.

CryptoKitties (November 2017)

CryptoKitties is a collectible game where players purchase, breed, and trade virtual cats. Each cat is assigned 12 unique traits, including fur patterns, accent colors, eye shape, and nose shape.  The attributes have varying levels of rarity, and attributes are designed to be passed down through the breeding mechanics of the game.  Each cat is 100% unique.

Of course, breeding your CryptoKitties isn’t free.  You’ll need to spend ETH on the platform to trade and breed your cats.  However, because you can effectively generate new assets via breeding and then sell that new NFT on the open market, the game comes with a unique appeal for many prospective gamers.

Axie Infinity (March 2018)

Credit: Screenshot of Axie Infinity website/nft now

However, the game isn’t without its faults.  Some have likened the game’s payout system to gambling, and the buy-in price for new players has dropped dramatically in recent years.

Decentraland (February 2020)

Along with virtual world CryptoVoxels, Decentraland is often cited as one of the earliest demonstrable models for the metaverse.

Admittedly, the game itself has been plagued by subpar development, poor reviews, and lower player counts for years.  However, that hasn’t stopped big brands and celebrities from buying their virtual plots and setting up shop on the platform. Though the game has seen technical improvements recently, it’s safe to say that Decentraland is an ambitious undertaking that may be limited by the browser technology it relies on to be truly immersive. That said, some speculators believe that the game could take the market by storm – if it can overcome its own technical hurdles.

NBA Top Shot (October 2020)

Credit: Screenshot of NBA Top Shot website/nft now

One of the more popular NFT collections on the market is NBA Top Shot. The NFT project lets sports fans own a piece of the game they love. This collection is one of the first to transform cultural moments – via sports footage – into digital collectibles.

FURTHER READING: NBA Top Shot: The Ultimate Guide

Art Blocks (November 2020)

FURTHER READING: 5 Generative Art and Music Projects You Need to Know

Bored Ape Yacht Club (April 2021)

A wildly popular PFP NFT, Bored Ape Yacht Club has received massive critical acclaim since its founding. It was created by product studio Yuga Labs. The collection features 10,000 unique NFTs, and NFT holders have full commercialization rights to the Ape that they own.

With most Ape sales going for hundreds of thousands of dollars, this NFT collection is considered one of the most prominent and profitable examples of the medium.  Bored Ape also played a major role in kicking off the avatar craze (using NFTs as profile pictures). In many ways, it’s directly responsible for cementing NFTs as a pop culture phenomenon.

FURTHER READING: A Guide to Bored Ape Yacht Club

However, the art behind the BAYC NFTs isn’t exactly what started the Bored Ape craze. The status and prestige of owning one of these highly valued NFTs greatly increases their value and demand. In this respect, the community aspect is key to the brand’s success – and it certainly helps that a number of prominent celebrities are members of the BAYC community.

Other interesting NFTs

In all likelihood, we’ll continue to see more quirky and innovative NFT uses, as brands and independent creators push the boundaries of the collectibles market even further in the years to come.

What Is an NFT?

An NFT is a digital asset that can come in the form of art, music, in-game items, videos, and more. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.

Although they’ve been around since 2014, NFTs are gaining notoriety now because they are becoming an increasingly popular way to buy and sell digital artwork. The market for NFTs was worth a staggering $41 billion in 2021 alone, an amount that is approaching the total value of the entire global fine art market.

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.

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 2021, “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.

Кто и как зарабатывает на NFT

В NFT вкладываются криптовалютные миллионеры, разбогатевшие на биткоинах и желающие «вписать» таким образом своё имя в историю. В мире блокчейна и крипты владеть NFT распиаренного объекта искусства престижно и почётно. Ещё токены покупают энтузиасты криптоискусства и «спекулянты» крипторынка. Большая часть сделок с NFT проходит именно в криптовалютах.

Для многих покупка NFT — это способ вложить средства. Впоследствии токен можно попробовать выгодно продать.

Для креативных людей и художников NFT — это вариант монетизировать свои произведения и стать известнее. По очевидным причинам продавать произведения искусства в цифровом мире легче, чем в реальном. Также благодаря NFT digital-художники получили возможность подтвердить подлинность своих произведений и зарабатывать на них.

Сейчас большинство покупателей NFT не разбираются в искусстве и приобретают токены с целью перепродажи через короткое время в надежде заработать на растущем рынке. Для них это форма инвестиции и способ заработать.

52 500 ₽

2 188 ₽/мес

47 600 ₽

3 966 ₽/мес

Problems and potential solutions

NFT markets today are rife with problems. Unauthorized copying is rampant. So too is wash trading, artificially generated trading volume intended to stoke sales. Preventing the decay of physical works of arts – such as sharks in formaldehyde – is challenging. NFTs pose the same problem in digital form. The archival integrity of the NFT ecosystem could turn out to be a ticking time bomb, as many NFTs have content that is stored with paid cloud services and could disappear if payment lapses.

Another big problem is the incursion of bots. NFTs are often sold in drops, i.e., in the form of a collection of thousands of NFTs offered at once for sale. When a popular drop takes place, schemers will often deploy bots to snap up NFTs, later reselling them at a profit. Enforcing a fair cap on per-customer purchases has proven tricky.

A strong system of identities can also help ensure that people are buying NFTs from legitimate creators rather than impersonators.

Ultimately, NFT marketplaces can include a “policy engine” that empowers creators to shape the lifecycle of their works in a rich variety of ways. They can set sale and resale conditions. They can make their NFTs dynamic. They can offer discounts and rewards to fans. They can cultivate communities of aficionados in the world of NFTs like those that galleries aim to foster in traditional art markets. Perhaps a policy engine can also address problems like the fun-eroding “speculative pricing and investment mentality” that led the Microsoft (MSFT)-owned video game Minecraft to ban NFTs earlier this year.

How Is an NFT Different from Cryptocurrency?

NFT stands for non-fungible token. It’s generally built using the same kind of programming as cryptocurrency, like Bitcoin or Ethereum, but that’s where the similarity ends.

NFTs are different. Each has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another (hence, non-fungible). One NBA Top Shot clip, for example, is not equal to EVERYDAYS simply because they’re both NFTs. (One NBA Top Shot clip isn’t even necessarily equal to another NBA Top Shot clip, for that matter.)

Table of Contents

NFT stands for non-fungible token. That clears everything up, doesn’t it? (No? Not for me, either.)

Buddy helpfully likens an NFT to the deed to a house. Just as a deed proves you own the house, an NFT proves you own a digital asset.

Here’s where things get a little murky, though.

The answers to what ownership rights come with an NFT purchase is evolving. Anyone considering creating, buying, or selling NFTs should study this closely (and, ideally, get good legal advice).

Provenance

Thomas Hoving, a former director of the Metropolitan Museum in New York, estimated that about 40% of the objects he examined – including many in the museum itself – were fakes, forgeries or misattributions. While many question this figure – and even the definition of fakes – it’s clear that problems in traditional art markets abound.

Many of these problems relate to provenance, the history of production of an artwork and who later owned it. Provenance is helpful in establishing the authenticity and value of a piece of art. Where it’s lacking, nasty surprises can turn up, like Steven Spielberg learning that he owned a stolen Norman Rockwell painting or the Getty Museum paying $10 million for a dubious ancient Greek statue.

Не только контент

При взаимодействии с NFT-токенами следует проявлять осторожность, поскольку хакеры уже начали использовать технологию для распространения вирусов и вредоносных программ. По данным ESET, геймерам все чаще предлагают NFT-токены с суперсилой или оружием, в который вшит вирус, а в мобильные приложения вшивают инструменты для тайного майнинга криптовалюты. В ESET подсчитали, что в 2021 году на Россию пришлось 11,2% пострадавших от криптовалютных угроз, страна осталась лидером по этому показателю.

— Когда Shiba Inu вернется к историческим максимумам. Прогноз от экспертов

— Хешрейт биткоина обновил исторический максимум

— Трейдер заработал более $3 млн за три месяца на «мемном» токене

— Майнеров в США освободят от налоговой отчетности

Больше новостей о криптовалютах вы найдете в нашем телеграм-канале РБК-Крипто.

Taxes and NFTs

Tax responsibilities will vary by country, but due to the trading value for most NFTs, acquiring a large sum of money in this way is likely to be considered capital gains. If you’re an NFT creator — meaning that you’ve minted and sold your own NFTs — that income is likely to be considered some form of business income, and you’ll need to claim it when filing your tax returns.

The specifics will vary based on the legalities within your region, but NFTs are not a tax-free investment. Be careful if you plan to treat them as such.

FURTHER READING:  6 Critical Things to Know About NFTs and Taxes

But what about crypto philanthropy? We’ve seen a sharp rise in “intentional charitable donations” made via NFTs in recent years. The geopolitical crisis in Ukraine stands as a perfect example of how NFTs can be used to positively impact communities in need.

In fact, more than 1,300 nonprofits accepted crypto-based donations in 2021, which are considered tax-deductible in the U.S., among other countries. Meaning that taxpayers can get a tax-deductible write-off for donations they made in crypto or NFTs. But again, this will vary from country to country.

FURTHER READING: NFTs and Charity: What to Know About Deductions and Tax Hurdles

Где используют NFT

В феврале невзаимозаменяемые токены активно внедрялись в сферу искусства. Например, диджей 3LAU стал первым музыкантом, который токенизировал собственный альбом и продал его ограниченным тиражом. На этом ему удалось заработать $11,6 млн. Аналогично поступила певица Граймс, известная как мать ребенка Илона Маска (родился в мае прошлого года). Она продала 400 NFT-токенов, которые были привязаны к четырем рисункам, созданным лично ей и ее братом. Всего за 20 минут продажа токенов принесла Граймс $5,8 млн.

Также невзаимозаменяемые токены используют в игровой индустрии для подтверждения владения виртуальными активами, при регистрации доменных имен, а также в сфере недвижимости.

How to Buy NFTs

If you’re keen to start your own NFT collection, you’ll need to acquire some key items:

First, you’ll need to get a digital wallet that allows you to store NFTs and cryptocurrencies. You’ll likely need to purchase some cryptocurrency, like Ether, depending on what currencies your NFT provider accepts. You can buy crypto using a credit card on platforms like Coinbase, Kraken, eToro and even PayPal and Robinhood now. You’ll then be able to move it from the exchange to your wallet of choice.

You’ll want to keep fees in mind as you research options. Most exchanges charge at least a percentage of your transaction when you buy crypto.

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Popular NFT Marketplaces

Once you’ve got your wallet set up and funded, there’s no shortage of NFT sites to shop. Currently, the largest NFT marketplaces are:

•  OpenSea.io: This peer-to-peer platform bills itself a purveyor of “rare digital items and collectibles.” To get started, all you need to do is create an account to browse NFT collections. You can also sort pieces by sales volume to discover new artists.

•  Rarible: Similar to OpenSea, Rarible is a democratic, open marketplace that allows artists and creators to issue and sell NFTs. RARI tokens issued on the platform enable holders to weigh in on features like fees and community rules.

Although these platforms and others are host to thousands of NFT creators and collectors, be sure you do your research carefully before buying. Some artists have fallen victim to impersonators who have listed and sold their work without their permission.

In addition, the verification processes for creators and NFT listings aren’t consistent across platforms — some are more stringent than others. OpenSea and Rarible, for example, do not require owner verification for NFT listings. Buyer protections appear to be sparse at best, so when shopping for NFTs, it may be best to keep the old adage “caveat emptor” (let the buyer beware) in mind.