Non-fungible tokens could be the new online goldmine
By Antony Mutunga
Anyone who spends a considerable amount of time online has come across ways to make money through online portals. You may not have made cash the entire time you have been using the internet, but many are taking advantage of the diverse opportunities that the digital space offers.
Since the start of 2021, nothing has skyrocketed in popularity more than non-fungible tokens (NFTs), which can be described as unique assets or digital certificates in the digital world that can be turned into income – they can be bought and sold like any other asset such as property, or a car, but have no tangible form of their own.
Unlike currency or cryptos like bitcoin which are replaceable, NFTs are irreplaceable. While a dollar or one bitcoin can be exchanged with another without losing its value, NFTs cannot. Instead, NFTs are created, or minted from digital objects that represent both tangible and intangible items, which include the likes of art, GIFs, tweets, collectibles, videos, in-game assets or avatars.
The digital tokens can be compared to physical collector’s items. So, instead of getting an actual oil painting to hang on the wall, buyers get a digital file instead. It is also important to note that anyone can create, buy, or sell the them without asking for any prior permission.
As a result, the creator gets exclusive ownership rights meaning that a token can only have one owner at a time. NFTs’ unique data makes it easy to verify their ownership making transfer between owners easy. The owner or creator can also store specific information inside them. For instance, artists can sign their artwork by including their signature in an NFT’s
There are many different blockchains that are able to mint and host NFTs. Ethereum is currently the largest and most used by market cap and transaction volume. But due to high transaction fees and minting fees being high on Ethereum, many users have opted to explore other blockchains to mint NFTs. This has given rise to secondary marketplaces which enable users to more easily mint, buy, and sell NFTs as they help by covering a part of the fees necessary to mint.
An example of these secondary marketplaces is OpenSea which has emerged as the leader among the secondary peer to peer marketplaces. During the month of November, it had an estimated $1.9bn of traded volume, which represented about 95% of the NFTs trading volumes.
It is a fact that digital tokens have given artists and content creators a unique opportunity to monetize their content. For instance, paintings are usually one of a kind but when they are online, users tend to duplicate them. NFTs looks to curb this duplication as they create a digital certificate of ownership which is stored on the blockchain, due to being maintained by various computers – this makes it difficult to forge the records and alter their forms.
Artists and content creators no longer have to rely on third parties such as galleries and auction houses as they can sell their work directly to the consumer as NFT, which also lets them keep more of the profits. Additionally, NFTs contain smart contracts, and artists can factor in royalties to receive a percentage of sales whenever their art is sold to a new owner in the future.
The concern is; with users joining the craze in big numbers to make a profit, there will be a rise in cyber attacks and online fraud. At the same time, majority of those eyeing the tokens are focusing more on the aspect of earning instead of learning more about the new technology making them susceptible to online attacks – if potential investors aren’t educated, there will be tales of people purchasing fake replicas for the price of an original.
Additionally, NFTs might push up online fraud as hackers impersonate famous artists in order to sell replicas. Another challenge touches on intellectual property rights. As much as only one person can own NFTs, it can be duplicated online just like almost everything on the internet.
It is up to a buyer to ensure that the digital token they want to purchase is owned by the seller. To guarantee this, buyers can go through the metadata of the smart contract as it includes the terms and conditions for ownership of the particular token. Otherwise, if one was to buy a replica, they will only have the right to use it but not its intellectual property rights.
With no clear way of evaluating NFTs, there is a constant uncertainty in determining its actual price. Until factors are determined to drive the value, the prices will continue to fluctuate according to how people weigh their uniqueness, scarcity and creativity.
Last but not least, the fact that NFTs are not widely regulated as of date, anything currently goes, a seller can put up any price and thus anyone can take advantage. As an example, in early 2021, at NFT marketplace OpenSea, an executive was flipping tokens he had purchased after featuring them on the site’s homepage in order to make profit. If that was to happen in terms of shares, or stock, it would be “insider trading”, which is illegal. However, it terms of NFTs, because there is no regulation in place at the moment, insider trading is allowed.
Examples of no-fungible tokens
Twitter CEO Jack Dorsey, selling his first-ever tweet on Twitter as an NFT, that got bids as high as Sh282.3 million ($2.5 Million),
Beeple’s “Everydays: The First 5000 Days was the first purely NFT digital artwork that was auctioned at a major auction house for Sh7.8 bn ($69 million)
Nyan Cat GIF – this was a popular GIF that was conceptualized in the 2010s, it was recently turned into an NFT and auctioned off for 300 ETH which is more than Sh145 million.
The potential of NFT is massive, though not all countries have all the provisions/laws to properly support NFT, and it’s still a relatively new concept, so definitely it will take time to reach the last man in the chain. So, if you are looking to invest, it is important to first be aware of what NFTs entail, it is the best way to profit from them.