What is an NFT and how can you create an NFT for sale? These frequently asked questions about NFT and the Metaverse explain how creators can earn with NFTs.
NFTs and the Metaverse are all the rage today and there are many NFT art services cropping up on gig platforms that allow you to create and offer NFTs for sale. But what is an NFT and how can creators use them to make money online?
- #1. What is the Metaverse?
- #2. What does NFT mean? What are NFTs?
- #3. How do NFTs work?
- #4. When did NFTs start?
- #5. How are NFTs created? How does NFT minting work?
- #6. Where are NFTs stored?
- #7. Where can NFTs be used?
- #8. Why are NFTs so expensive? Why do NFTs have value?
- #9. How can NFTs make money?
- #10. How does NFT trading work? Where to buy & sell NFTs?
- #11. Are NFTs scams? Are NFTs illegal?
- #12. Will NFTs be worth money? Can NFTs make you rich?
- #13. Why are NFTs the future? How will NFTs change the world?
- #14. Are NFTs bad for the environment?
- #15. Can NFTs be copyrighted? Can NFTs be copied?
- #16. Can NFT be a screenshot?
- #17. Can NFTs be physical? Can NFTs be a photo?
- #18. What NFT should I create? What NFT sells best?
- #19. How to create and sell NFTs for creatives?
- #20. How to create and sell NFTs with physical assets?
- #21. How to create and sell NFTs with royalties?
- #22. How do NFT games work?
- Business Tips & Tools
#1. What is the Metaverse?
The Metaverse is a new and developing field where technology is being used to create a near real-life experience in the virtual world.
Xrtoday describes it as a simulated digital environment that uses augmented reality (AR), virtual reality (VR), and blockchain, along with concepts from social media to create spaces for rich user interaction mimicking the real world.
Blockchain technology-based NFTs are being used to provide ownership of different digital virtual assets used in the metaverse. They also make it easy to trade in those digital assets among participants in a particular metaverse.
The key point is that the ownership of all these digital assets is recorded in a smart contract deployed on a decentralized blockchain ledger that cannot be manipulated or deleted.
#2. What does NFT mean? What are NFTs?
NFT, meaning Non-Fungible Token, started when the Ethereum blockchain network came out with ERC721 (Ethereum Request for comments 721) protocol to create a token standard for NFTs using a smart contract on the Ethereum blockchain.
In the blockchain and crypto-token world, there are mainly two categories of tokens – Fungible Tokens (FT) and Non Fungible Tokens (NFT). Fungible tokens of one type have the same value and can be exchanged for another of the same type, for example, Bitcoin.
Whereas non-fungible tokens are unique tokens and are not interchangeable. NFTs are created and stored on a blockchain using a smart contract.
NFTs when associated with a digital file like JPEG, mp4, a digital video, etc. represent the value of the respective underlying file. Such NFTs can be bought and sold in the crypto market.
The person who holds a particular NFT is the owner of the associated digital file. So NFTs also define or show the ownership of digital files or content.
NFTs are solving a long due problem of digital content ownership on the Internet. With the advent of NFTs, it is becoming easier for someone to own and trade digital assets.
NFTs are also helping content creators to directly reach out to their audience and get the real value of their creation without the need for an intermediary.
#3. How do NFTs work?
NFTs are used to tokenize and represent ownership of unique items. They are redefining the internet world by helping provide ownership of digital files.
The Internet with NFT
The Internet today
|NFTs are digitally unique, no two NFTs are the same.||A copy of a file, like .mp3 or .jpg, is the same as the original.|
|Every NFT must have an owner and this is of public record and easy for anyone to verify.||Ownership records of digital items are stored on servers controlled by institutions – you must take their word for it.|
|Creators can retain ownership rights over their own work, and claim resale royalties directly.||Platforms, such as music streaming services, retain the majority of profits from sales.|
NFTs are used to assign ownership of any unique digital data and are stored on a decentralized blockchain ledger. The ownership can be verified by anyone.
An NFT can represent digital art like GIFs, music, videos, etc. NFT art can also be used to represent physical assets like a Picasso painting, a ticket to an event, etc.
An NFT can have only one owner at a time and the ownership is managed through the unique ID and metadata that no other token can replicate.
An NFT owner can sell or transfer their ownership or NFT to another person in a direct peer-to-peer transaction, executed and recorded on a blockchain.
#4. When did NFTs start?
The idea of NFTs came from colored coins that were issued on the Bitcoin blockchain in 2012-13. The very first NFT called Quantum – an octagon-shaped animation – was created by New York artist, Kevin McCoy, in May 2014.
In 2017, John Watkinson and Matt Hall of Larva Labs created 10,000 unique characters as NFTs on the Ethereum blockchain. These are known as CryptoPunk and were distributed for free to anyone who shared their Ethereum address.
Today, the CryptoPunks are well sought after and are sold for millions of USD. Recently, the most expensive NFT was sold for $23 million and purchased by an Indian.
#5. How are NFTs created? How does NFT minting work?
NFTs are created or minted by executing code stored in a smart contract that conforms to NFT standards like ERC721. The NFT minting process includes the following steps:
- Writing an NFT smart contract
- Deploying it on the blockchain by creating a new block
- The block gets validated
- The information gets recorded into the blockchain
Minting NFT is the process of creating NFTs, using a smart contract. They are linked to their respective public address and are recorded on the blockchain ledger.
#6. Where are NFTs stored?
NFTs are stored on the blockchain and can be accessed with your respective cryptocurrency wallet.
#7. Where can NFTs be used?
NFTs have various use cases beyond digital artworks and have immense potential to be used in the metaverse and online gaming space.
#8. Why are NFTs so expensive? Why do NFTs have value?
It is a general perception that all NFTs are expensive. NFTs on their own do not have any value – they derive their value from the underlying asset. NFTs can represent any digital asset on a blockchain thus making it scarce, provable, and valuable.
To illustrate this concept with one of the best NFT examples, the popular NFT, Beeple Art – Everydays: the first 5000 days, was sold for $69.3 million. This NFT digital art piece represents the artist’s lifetime work in the form of a collage.
Then there are NFTs representing online gaming assets being sold for as low as a couple of dollars. Essentially, NFTs represent the value of their underlying asset.
#9. How can NFTs make money?
Anyone can mint an NFT for their artwork, digital assets, etc, and sell them on an NFT marketplace. You make money when your minted NFT is sold. You can also make money by trading in NFTs, where you buy NFT at a low price and sell it at a higher price.
The trick is to identify a prospective NFT project with a strong team behind it and buy the NFT at the mint price. When these NFTs are launched and prices are at your desired level, you can sell your NFT and generate profit.
#10. How does NFT trading work? Where to buy & sell NFTs?
NFT trading works like any other trade where the transaction takes place when there is a price match between a buyer and seller. There are online NFT marketplaces that bring buyers and sellers together in order to execute the trade and charge a service fee for their services.
There are many good NFT marketplaces where you can trade NFT. You can sell and buy NFTs on NFT websites like:
You can also trade various types of NFTs available on these popular NFT marketplaces. To buy an NFT, you will need a web3 wallet or crypto wallet like MetaMask.
You will also need the respective cryptocurrency – Ether, in the case of Ethereum blockchain – to pay for the network fee and also for the price of the NFT.
There are new NFT projects being launched all the time, where you can get the NFTs at the floor price or mint price. Always do your due diligence before buying an NFT, and buy it only when you’re convinced about the future value of the NFT.
#11. Are NFTs scams? Are NFTs illegal?
NFTs are not scams but there may be NFT projects with suspicious teams behind them. Many NFT projects are launched with anonymous teams and have risks where these teams use future promises to raise crowd money using NFTs.
Once they have raised money, the teams suddenly disappear, and these NFTs lose most of the value.
#12. Will NFTs be worth money? Can NFTs make you rich?
As described earlier, NFTs represent the value of the underlying asset. If the value of those assets increases, it reflects in the price of the respective NFT. If you have an NFT with a good underlying asset and a strong team behind it, your NFT can make you rich.
#13. Why are NFTs the future? How will NFTs change the world?
NFTs are still in the early phase of development. They have the potential to tokenize assets and create a market for them in the online space.
Though more than 90% of the current NFTs may lose value over the long term, NFTs have good use cases and will have future use cases in the virtual, metaverse space. They will also play a key role in the tokenization of the economy or physical assets.
#14. Are NFTs bad for the environment?
NFTs are digital data recorded on a blockchain. Now they can be created on blockchains that use proof of stake consensus mechanism and run with low energy requirements.
#15. Can NFTs be copyrighted? Can NFTs be copied?
NFTs cannot be copied or counterfeited. The NFT shows the ownership of an underlying asset to the person holding the token. They are not copyright but can be used as an alternate to copyright once accepted by governments and regulators.
#16. Can NFT be a screenshot?
NFTs are stored on the blockchain, but the associated data files like images are stored on a central server or cloud. They can also be stored on a distributed storage network like IPFS (InterPlanetary File System). IPFS storage ensures that the stored files are always accessible.
#17. Can NFTs be physical? Can NFTs be a photo?
NFTs are digital representations of the underlying assets that can be digital or physical. NFTs can be created for a photo file, video file, audio file, etc. NFTs represent the ownership of an underlying asset or file and these underlying assets can be anything.
#18. What NFT should I create? What NFT sells best?
If you want to offer an NFT for sale, assess your strengths and your skill sets to create art forms or digital files that people may find useful and interesting and are willing to pay for.
For example, people who like to own and collect comics may find NFT comics interesting. NFTs with good aesthetic values command high prices, whereas NFTs with utility value, like the ones used in the gaming space, are traded often.
#19. How to create and sell NFTs for creatives?
Whether you want to create and sell NFTs for writers, artists, photographers, or musicians, the process remains the same for all types of digital files, including art, photo, music, video, etc.
#20. How to create and sell NFTs with physical assets?
NFTs need to be linked with the physical asset in such a way that whenever the physical asset is sold, the NFT is also transferred to the new owner.
#21. How to create and sell NFTs with royalties?
When a smart contract is written for minting NFTs, it can be coded in such a way that with every resale, a portion of the total price goes to the original creator as a royalty fee.
Many NFT marketplaces provide this feature where the creators get a royalty fee whenever there’s a resale of their NFTs.
#22. How do NFT games work?
NFTs represent gaming assets and can be traded in the respective game network where gamers buy and sell these assets to augment their skill and advantage.
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Disclaimer: The ideas and strategies on this website are based on personal opinions. They do not and should not be considered as professional financial investment advice and should never be used without first assessing your own personal and financial situation, or without consulting your professional investment advisor. All investments are speculative in nature and involve a substantial risk of loss. We advise you to do your due diligence before acting on any information that we publish and do not, in any way, warrant or guarantee the success of any action you take in reliance on our statements or recommendations.
© 2022, Satyakam Chakravarty. All rights reserved.
Satyakam Chakravarty is the Founder of DataBlock Technologies, a leading Blockchain organization, focused on building a Blockchain ecosystem and industry-agnostic blockchain solutions. As Visiting Professor on Blockchain at IIM Udaipur, his aim is to educate people about Blockchain technology and crypto-assets.