What Are NFTs and How Can I Use Them to Earn Money
26 May, 2022
What Are NFTs and How Can I Use Them?
The excitement around NFT is growing rapidly. It’s a booming sector connected with the decentralized finance and crypto industries. People invest real money in virtual pictures to collect, resell and earn more than their initial investment. But why is it happening, and what are the prospects for the development of the sector?
In this article, we will analyze the transcendental success of NFTs and explain their basic principles. Let's explore the concept of NFT in more detail and learn how to make money with NFT.
What Are NFTs?
NFT stands for Non-Fungible Token, simply put, it’s a unique token that cannot be divided into parts. With the help of NFT technology, we can create a digital representation of any object. Among the things that can be turned into NFT are paintings, photos, videos, music, or GIFs. This means that almost any unique content up to real estate can be made virtual.
But why has an object that cannot be divided or replaced by another suddenly become popular and useful? Let’s consider a real-life example. Imagine you have a cat called Sally. Sally is a unique cat; no other cat can be Sally. You don’t want Sally to be replaced by anything since she’s yours, the only one. The same works with NFTs: people enjoy their assets as they are not fungible, have no analogs, and are easily verifiable.
One of the main advantages of NFTs as digital assets is that they have unrepeated features that make them one of a kind, a unique token address, and a certain owner. Thus, if you buy, for example, a picture with an ape from the BAYC collection, then you own it. Since its uniqueness and rarity increases its value, it could be resold after a while at a much higher price if the collection is successful on the market.
NFT tokens were created as an opportunity for creators of digital content to confirm copyrights, earn money by selling assets to collectors, create unique objects for games, and satisfy art lovers. Today, the main direction is the monetization of NFT popularity. We witness that new collections and crypto communities are created daily. Developers try to find state-of-the-art solutions to increase the usefulness of tokens.
Difference Between NFT and Crypto
You've probably already heard about cryptocurrencies and tokens of various types. Typically, they are divisible and interchangeable, used as a means to pay or make instant transfers around the world. Popular cryptocurrencies such as Bitcoin, Ether, USDT, and others are fungible.
Cryptocurrencies work like traditional money: if you have $2,000, it doesn't matter which bills you use to pay for dinner at a restaurant. Bills and coins are interchangeable. Also, you can buy 10 Ether, 0.5 Ether, and 0.02 Ether. Cryptocurrencies have the property of divisibility.
NFT tokens are a completely different kind of digital asset. It really matters which digital image you possess. For example, an asset that is incompatible with a video game cannot be used as a resource or skin. NFTs with some outstanding characteristics and a high level of rarity (SR/SSR) will have more value in the marketplace than high-frequency (Normal) NFTs with more common features.
If you are an artist or a content creator, basic NFT characteristics will be useful for you. A third-party user cannot copy and resell your NFT, as the copy will not be verified by the blockchain, will not be considered the original, and will have no value. Thus, your digital asset is protected.
How Does NFT Work?
NFTs are stored and verified using blockchain technology. Just like cryptocurrencies, NFT tokens that you own can be stored in your crypto wallet or account on the platform. The vast majority of NFT tokens are created on the Ethereum blockchain using the ERC721 standard (a set of standard interfaces for the release of NFT in the network); however, there are other possibilities, such as ERC1155 or ERC20 standards or other blockchains like Tron. Such a creation mechanism adds unique identifiers to each NFT, which allows you to track all transactions related to the token.
The most crucial component in transactions using NFT is the opportunity to declare your indisputable right of ownership. As a result of the NFT purchase, you receive a token that contains data about the transaction, the seller, the buyer, and the amount of money that was spent on the asset. If a token is resold multiple times on the same platform, you can also track the price alterations.
What Is the Use of NFTs?
NFT tokens are valued among gamers, collectors, and art enthusiasts. First of all, NFTs are used to create and confirm the copyright of digital art. Even in real life, with the help of NFT, you can confirm the ownership of real estate or a valuable item.
Modern NFT tokens are introduced into games to provide users with possession of unique or useful in-game tools. NFT tokens are also an excellent investment tool. NFT can be bought at the time of release (mint) of the collection and resold on the secondary market.
What Gives an NFT Value?
The value is determined not by the item or artwork itself but by the ability to prove ownership of a particular asset. The total transparency and publication of data on all transactions with no exceptions causes the value of an NFT to increase.
The main differences between different collections are based on several criteria:
- The blockchain on which they were created;
- The NFT platform on which the collection was released;
- The number of tokens issued;
- Respect for the authors of the collection;
- The success of previous NFT collections from an author;
- Token utility. If we are talking about the NFT collection and the difference between the price of tokens, then the token's rarity plays the main role. The rarer the NFT of a certain type, the more expensive it is.
How to Sell NFTs Art
It’s possible to trade NFT tokens through crypto marketplaces, specialized websites, and auctions. Some of them even have a narrow specialization. The most famous NFT platforms include OpenSea, Axie Marketplace, Larva Labs, and Rarible. Let’s explore how to sell NFT art.
Select Your Marketplace, Mint the NFT, and Link Crypto Wallet
How do NFT creators make money? The first step to releasing your token or collection is to choose an NFT marketplace. It may depend on the platform whether the launch will be successful and which audience will be covered by the advertising campaign.
As a rule, for the release of NFTs, platforms charge a commission in cryptocurrency. A fee is usually charged for the creation of the token. You can choose a platform that suits your goals based on the criteria of low commissions or popularity and reliability.
Minting is a specific term that refers to the release of the NFT collection for sale. It is used by both the authors and the audience, who can purchase the NFT during the mint. Such releases can be paid, free for all, or free for a group of privileged users. They serve as an advertising tool, and, most often, it is profitable to redeem NFTs on mint.
A crypto wallet is a special program that makes it possible to receive, send and store cryptocurrency or digital assets. The most important thing is to link your crypto wallet, where the NFT is stored. Also, money from the sale will be sent there.
List NFT for Sale
It only takes a few clicks to list a token:
- Select an NFT asset
- Specify the address of the token
- Specify the price (it can be fixed or auctioned)
- Specify the listing (on sale) period if the marketplace has such requirements
- Click "List for sale." It is necessary to monitor whether your token remains on sale, the money came after the purchase, and the auction is functioning correctly. Often the authors of the NFT receive an additional reward for each resale of their NFT token.
Can I Trade NFTs?
How do you make money from NFT? Apart from popularity and usefulness, the value of NFTs lies in their short-term and long-term resale value. Here comes an answer: the more success the collection has, the more potential NFT earnings a trader may have. We need to pay attention to market trends, blue chips (the most expensive NFT collectibles), and communities around projects. The main thing is not to enter the market too late, since after passing the peak of popularity or increasing the offer of NFT, the floor price may decline.
What’s the Easiest Way to Profit from NFTs?
Creating your own NFT and collections is labor-intensive. This requires an initial investment for the mint. Its value depends on the platform and the number of tokens issued. You may need a development team to create a worthwhile, expensive, and successful collection. The easiest way to profit from NFTs is resale. You need to buy promising tokens and sell them at a higher price. If the collection has an active turnover, then purchases and sales will be profitable.
What Is the Future of NFTs?
It seems that interest in the topic of NFT will only increase. Platforms regularly announce various innovations and attract investors; there are many new projects and collections and huge active crypto communities. Artists and musicians are beginning to show more and more interest in the new niche. Perhaps we will see even more opportunities for the use of NFT in the future. We must not forget that trends change quite quickly, so you need to keep an eye on innovations and tendencies.
Conclusion About NFT Earnings
Initially created to preserve copyright and confirm ownership of an asset, NFTs exploded onto the world stage, allowing the resale of digital art for millions of dollars and creating private non-fungible tokens or collections. The easiest way to profit from NFTs is to resell them on NFT platforms and marketplaces like OpenSea or Axie.
The core NFT mechanism allows tracking transactions related to an NFT token, and such transparency increases the value of the whole concept. Many experts are arguing about the future of NFT, but so far, it is impossible to deny their ascent and the emergence of new use cases. We see prospects for their further development, as well as opportunities to benefit from them.