NFT FOR BEGINNERS

INTRODUCTION

This blog will provide you with a clear understanding of what an NFT is, as they can often be confusing to comprehend. You will learn about their value and the buying process, addressing the biggest question that we had when researching them.

What is an NFT?

A non-fungible token, or NFT, is a form of digital asset or token. They are often compared to digital paintings or trading cards. When you purchase an NFT, you are essentially buying the ownership rights to that specific asset. The term "non-fungible" refers to the fact that once an NFT is created, it cannot be altered, divided, or mistaken for something else. Unlike bitcoins, which are identical to one another, each NFT is unique and considered a token.

A non-fungible token (NFT) represents a unique digital asset that can be compared to owning a small piece of data. When you own an NFT, you are essentially buying the rights to that specific asset, which remains unchanged over time. Technically speaking, an NFT is a piece of data owned by an address, and whoever has the password to that address owns that piece of data. This data can be bought and sold to different addresses, and it is verified on a blockchain. The owner history is always trackable with an NFT, and you can check it. For instance, the CryptoKitty that sold for $600,000 is essentially a small URL owned by an address, and the only thing the owner owns is that tiny piece of data. The data points to a server somewhere that usually hosts an image, and the server owner could technically change the image. Therefore, it's crucial to know exactly what you are purchasing when buying an NFT.

Purchasing an NFT means acquiring a piece of data that directs to a server that holds an image or a GIF. It's worth noting that the server or the content itself may change over time. What you're actually owning on the blockchain is the specific data piece that points to the server, not the access to the server or the content. In a way, buying an NFT is akin to purchasing a fraction of a larger entity, similar to buying a stock where you don't own the whole company, and unless it's a dividend stock, you don't receive any benefits from it. So the question that arises is "What is the reason for buying an NFT?" There are several reasons, but currently, the primary motive for most people is to view NFTs as collectibles in the investment category.

Why would you want to buy an NFT?

There are various reasons why someone may want to buy an NFT. For some, it could be a form of investment or speculation, hoping that the value of the NFT will increase over time. Others may see NFTs as a way to own a unique digital asset, such as artwork or music, that can't be replicated or copied. Additionally, owning an NFT can give a sense of ownership and exclusivity, and some may collect NFTs as a hobby or for personal enjoyment. However, currently, the main incentive for many individuals is to consider NFTs as collectibles in the investment sphere.

Factors That Contribute to the Value of an NFT.

1. 1. Early Editions: Similar to how Bitcoin's popularity stemmed from being the first cryptocurrency, the first NFTs created by certain artists or companies can also hold significant value. For instance, the earliest edition of Pokemon cards is highly sought after, making them the most expensive. Thus, owning the first NFT of a specific creator or business could potentially be valuable. so let us say you have the first indigenous Nigerian NFT, it will likely have some perceived value than those after it.
2. 2. Utility or real-world value: The second factor that can contribute to the value of an NFT is its utility or the practical benefits it offers in the real world. For example, imagine if the late Fela Anikulapohad sold 50 NFTs that granted lifetime access to any of his shows. These NFTs would likely become highly sought after and expensive due to their tangible benefits. Personally, I believe that owning an NFT with real-world benefits is the only reason worth investing in one, and I expect that more and more NFTs will incorporate this aspect in the future. Creators may sell NFTs as a means of generating income while offering access to a membership community, monthly meetings, or other similar benefits.
3. 2. Utility or real-world value: The second factor that can contribute to the value of an NFT is its utility or the practical benefits it offers in the real world. For example, imagine if the late Fela Anikulapo had sold 50 NFTs that granted lifetime access to any of his shows. These NFTs would likely become highly sought after and expensive due to their tangible benefits. Personally, I believe that owning an NFT with real-world benefits is the only reason worth investing in one, and I expect that more and more NFTs will incorporate this aspect in the future. Creators may sell NFTs as a means of generating income while offering access to a membership community, monthly meetings, or other similar benefits.
4. 3. Rarity: The third factor that contributes to the value of an NFT is its uniqueness or rarity. Consider the example of the Mona Lisawhile anyone can have a copy of it, only one individual or a museum can display the original painting by Leonardo da Vinci for public viewing. Similarly, the original copy of the Nigerian Constitution or a Football jersey signed by Christiano Ronaldo is rare and therefore valuable. For instance, if Stephen Hawking minted only three NFTs, they would hold immense value due to their scarcity. Even if these NFTs were merely pictures of the universe, other people may possess similar pictures, but they wouldn't have the original ones minted by Stephen Hawking.
5. 4. Ownership history: The final factor that I discovered that contributes to the value of an NFT is its ownership history. To illustrate, consider your favorite celebrity; for me, it's the late Fela Anikulapo. Let's say Fela decides to sell his trousers and purchase a new one. When Fela first bought the trousers, he may have paid two hundred naira for it. However, I may be willing to pay a million dollars just to own the same trousers that Fela wore. Similarly, when it comes to NFTs, someone might be willing to pay a hefty sum for an image of a duck that was once owned by MKO Abiola , for instance.

To determine the value of an NFT, it's important to consider the factors that contribute to its worth. These include whether the NFT is the first of its kind, whether it has a real-world benefit, its rarity, and its ownership history. For instance, let's evaluate the value of purchasing Jack Dorsey's first tweet for $2.5 million using these factors.

Firstly, it's the first NFT in that category, making it unique in its own right. However, it doesn't offer any practical utility, such as the ability to modify the tweet or use it for advertising. Secondly, it is rare, making it a potentially valuable investment. Lastly, while it is Jack Dorsey's first tweet, it hasn't had any notable owners to further boost its value.

Thus, buying Jack Dorsey's first tweet NFT is essentially a bet that someone else will want to purchase it for a higher price in the future. Holding the NFT offers no practical use, making it more of a novelty or investment. However, if Jack Dorsey were to offer to have lunch with the holder of the NFT once a month, for example, its value could increase significantly.

Now that we've discussed what NFTs are and how they function, let's delve into their immense popularity. A quick glance at Google Trends data from February and March 2021 reveals their widespread interest. With that said, I'd like to present the top 11 most valuable NFTs.

11 Most Valuable NFTs.

1. 1. At the top of the list is CryptoPunk 6965 - sold for 800 Ethereum on February 19, 2021
2. 2. CryptoPunk 4156 - sold for 650 Ethereum on February 18, 2021
3. 3. CryptoPunk 2890 - sold for 605 Ethereum on January 24, 2021
4. 4. Dragon CryptoKitty - sold for 600 Ethereum
5. 5. CryptoPunk 6487 - sold for 550 Ethereum
6. 6. Land in Decentraland - 12,600 square meters sold for 514 Ethereum
7. 7. Hashmask 9939 - sold for 420 Ethereum
8. 8. F1 Delta Time car concept - sold for 415 Ethereum
9. 9. Another CryptoPunk - sold for 400 Ethereum
10. 10. Land in Decentraland - actual lot sold for 345 Ethereum
11. 11. Nyan Cat - sold for 300 Ethereum on February 19, 2021

Can Someone Duplicate Your NFT?

Technically, it is possible for someone to duplicate an NFT in the same way they could copy any other artwork. However, the original creator of the NFT can be traced through its transaction history, which is recorded in the NFT's log. It is also worth noting that someone could create a new NFT that points to the same hosting address as the original, or they could link it to a different address with the same image or GIF. The value of an NFT lies not in the image itself, but in the specific data it represents. For instance, while a person could make a free throw at their local YMCA, and LeBron James could do the same in front of thousands of spectators, the value of the two events would be vastly different because people value YMCA, and LeBron's free throw more highly. Even though the actions are essentially the same, the perceived value of LeBron's free throw is much greater than that of an amateur player.

How do you buy an NFT?

Buying an NFT is a relatively straightforward process, similar in difficulty to purchasing company stock. NFTs are typically sold on specialized marketplaces, similar to eBay , Amazon , and Facebook Marketplace, but specifically for NFTs. One potential drawback of purchasing an NFT is that they are typically bought with Ethereum or other digital currencies that depend on the NFT's underlying blockchain which means that you will need to have some cryptocurrency on hand before you can purchase a CryptoKitty or CryptoPunk.

Purchasing cryptocurrency and transferring it to an NFT-compatible wallet often requires some technical expertise, as any mistakes in the transaction can result in the loss of your funds. However, several NFT exchanges make buying and selling NFTs much more accessible. The four most frequently used NFT exchanges are app.rarible.com, niftygateway.com, opensea.io, and superrare.co.

Here are the general steps you can follow to purchase an NFT:

1. 1. Get a cryptocurrency wallet: Since most NFTs are purchased using cryptocurrency, you will need to have a wallet that supports the specific cryptocurrency required to buy the NFT. Common wallets include Coinbase, MetaMask, and Trust Wallet.
2. 2. Purchase cryptocurrency: Once you have a wallet, you will need to purchase the required cryptocurrency to buy the NFT. You can do this on a cryptocurrency exchange such as Coinbase, Binance, or Coinbase, Kraken.
3. 3. Choose an NFT marketplace: There are various NFT marketplaces where you can buy and sell NFTs, such as opensea.io, Rarible, and Nifty Gateway. Choose one that supports the NFT you want to buy.
4. 4. Browse and select the NFT: Once you have found the marketplace and the NFT you want to buy, select it, and verify that it is the genuine item you want to purchase.
5. 5. Make the purchase: After you confirm the details of the NFT, complete the transaction by following the instructions provided by the marketplace. This typically involves transferring the cryptocurrency from your wallet to the marketplace.
6. 6. Transfer the NFT to your wallet: Once the purchase is complete, transfer the NFT to your wallet for safekeeping. The NFT will be stored in your wallet as a unique digital asset that can be sold or traded later.

In conclusion, NFTs are a form of digital asset that represent a unique piece of data owned by an address on the blockchain. Buying an NFT means purchasing the rights to that specific asset, which cannot be altered or divided, but it's essential to understand that you are owning the piece of data that points to a server holding the content, not the access to the server or content itself. The primary incentive for most people is to view NFTs as collectibles in the investment category, and factors such as rarity, early editions, utility or real-world value, and ownership history contribute to their value. As more and more NFTs incorporate real-world benefits, it's likely that owning an NFT with tangible benefits will be the only reason worth investing in one in the future.