The Lowdown on Making Money with NFTS
You’ve heard of cryptocurrency and selling or trading ‘money’ that is entirely digital or virtual. You might even be aware of the various types of cryptocurrencies that have proved popular and successful over the last few years, the most famous of which is Bitcoin. However, there is another form of crypto that could be more up your street, particularly if you are a creative person or art fan, and that is NFT.
What does NFT stand for?
NFT is an abbreviation of non-fungible token, ‘fungible’ meaning physical money or other forms of currency that can be exchanged or traded.
Therefore, NFT is data that is stored on a blockchain that can be sold or swapped. However, it is a non-interchangeable unit of data, such as photos, music, art, videos or audios.
As the data is unique, their value can soar, depending on demand for them. Consequently, its value is determined by the market and how popular the item is or could be.
How much are NFTs worth?
As each NFT is different from each other, each is worth a different value. This is in contrast to Bitcoins or other cryptocurrencies, as each is equal in value to another.
In this respect, NFTs can be worth a lot of money, as their uniqueness makes them more valuable.
Consequently, the Financial Times reported the marketplace for NFTs had reached $41 billion (£32.63 billion) by the end of 2021.
Blockchain data company Chainalysis stated this is the result of NFTs having “exploded in 2021”. It added “tens of billions of dollars’ worth of cryptocurrency [have been] invested in the asset class this year”.
According to Forbes, this is the equivalent in value to the entire global fine art market, demonstrating just how big the industry is becoming.
Digital Ownership Worth More Than The Item
Although lots of people love owning a piece of art, the special thing about NFTs is the value is more in the digital ownership than the item itself.
As NFTs can only have one owner, it gives exclusivity to whoever buys it. This is what makes them collector’s items in a digital format.
The article in Forbes suggests: “Collectors value those ‘digital bragging rights’ almost more than the item itself.”
NFT Market Soared In 2021
Although NFTs have been part of the crypto world since 2014, last year saw the market really take off.
They are almost as valuable as the traditional art market, which was worth $50 billion in 2020.
Although Chainalysis estimated NFT sales to have exceeded $41 billion, this figure varies depending on reports.
For instance, data from market tracker DappRadar revealed sales reached $25 billion last year, Reuters reported, rising from $94.9 million in 2020.
In comparison, Nonfungible.com stated trading in NFTs peaked at $17.6 billion in 2021, revealing huge disparities between the results.
What is indisputable, however, is how the sector has taken off recently.
Ian Kane, a spokesperson for DappRadar, told Reuters: “What we have seen are a few NFT collections popping up in the last few weeks that have been very successful at launch and sold out.”
He added: “That activity has then filtered over to OpenSea where buyers look to flip their NFTs for a higher price.”
Indeed, investors have been able to ‘flip’ the items for a profit within just a few days, making money from selling these digital ownership rights.
One NFT buyer bought a cartoon penguin for $139 worth of ether, before selling it for $3,956 just four days later, making a profit of $3,826.
Even more impressive was a buyer who purchased a cartoon squiggle NFT for $33 and sold it for $4,900 seven hours later.
Why did NFTs take off at an unprecedented rate?
Statistics clearly show 2021 was the year for NFTs, but why? Well, according to MichaelK, a 30-year-old buyer, the pandemic had a big part to play in its popularity.
As people were forced to spend more time at home and many were out of work, they had the time, opportunity and incentive to make money, which led them to invest in NFTs.
“I want to look at it as something new that’s going to be a big wave,” he told the publication.
This popularity continued, and even surged, following the national lockdowns of 2020, as people realised they could make substantial amounts of money on the market.
In fact, DappRadar revealed 545,000 wallets traded NFTs in 2020, but this figure soared to 28.6 million a year later.
What’s more, the amount of money and transactions per trader is high, with just one-tenth of traders accounting for the vast majority (85 per cent) of NFT sales.
How to get started in NFTs
Being part of the NFT world involves either buying and trading the cryptocurrency, or creating it.
Those who are more financially-minded rather than creative should first acquire a digital wallet to store your NFTs. Secondly, check which cryptocurrency your NFT provider accepts and buy some, so you can use this to purchase your NFTs of choice.
There is a huge variety of different NFT marketplaces to choose from, so make sure you choose the best NFT marketplace for your needs and interests.
It is definitely worth looking around each website carefully to see the different projects they host and doing your research before committing.
Creative types who want to make money from their works of art should certainly consider making their own NFTs. All they need is a marketplace, a digital wallet, Ethereum, and their digital creation, which has to be in a format that is accepted by marketplaces.
When it comes to choosing what to make into an NFT, it is important to consider how rare the piece is, if you have an established audience, and if you are a reputable artist yourself. Make sure your piece has some value to others, otherwise nobody will buy it.