The Emergence of NFTs as a Money-Making Tool

Written by Carly Hallman

Non-fungible tokens, or NFTs, have been a huge trend in the world of digital trading. And with the rise of peer-to-peer lending, cryptocurrencies, and other NFTs, we may soon see a completely digital form of trading. The use case for these tokenized items is simple: instead of having to sell your valuable collectible or item at a garage sale or online auction, you can now just sell it as an ERC721 token – a standard for non-fungible tokens – instead. This not only makes your item more liquid, but also opens up avenues for previously unavailable monetization. More developments are expected in the industry as it generates notable profit. In fact, there are many ways to make money from NFTs – both in terms of capital gains and trading profit.

What is an NFT?

To put it simply, a non-fungible token (NFT) is an asset that has a unique and identifiable digital persona. Unlike fungible assets, such as stocks, gold bars, or other commodities, NFTs are non-fungible as every single one of them is unique and has a specific set of attributes like color, design, and more that can’t be copied by anyone else. The first NFT was issued in participation in the NFT ICO; it was a digital collectible called CryptoKitties. The website where you could get an image of your cat was among the first catalyst that led to the rise of this new asset class. The NFT market is still in its infancy, and it will take some time for it to develop into a mature and profitable industry. But this is the future of trading and investing in the digital world. The growth of blockchain technologies and the rise of non-fungible tokens have opened up new and exciting avenues for trading assets.

How Do NFTs Work

The most important thing to note about NFTs is that they do not represent a physical asset. Digital collectibles, as the name suggests, are not physical objects, but only have a digital persona that you can own and trade. You can’t hold or store these tokens like you hold gold bars or other fungible assets. And unlike cryptocurrencies that are decentralized, NFTs are technically centralized as their source resides in one location. That is the main difference between NFTs and cryptocurrencies.

Another very important thing to note is that these tokens can be traded between two parties who wish to buy or sell them. Unlike cryptocurrencies, where trading is limited to a select group of participants, NFTs allow trading between anyone who has a digital wallet that can store the tokens. You can send or receive tokens as you wish and hold them in a wallet to earn interest on them.

How Are NFTs Created?

You can create an asset token on any blockchain with a programmable contract, unlike cryptocurrencies, where mining is the only way to create new tokens; for NFTs, you don’t have to invest in computing power or any other costly means. These contracts feature what makes the whole process of creating NFTs possible. The beauty of this is that anyone can make an asset token, and you don’t need to have any background in coding to do so. All you need to do is create an asset contract on a blockchain that allows other people to create an asset via tokens.

Purchasing NFTs

Purchasing NFTs is a very straightforward process. First, you create an account on the NFT marketplace or platform where you want to begin trading. Once there, you can create a list of desired NFTs and start trading them. Some popular NFT marketplaces include

  • EtherDelta: A decentralized exchange that supports the trading of ERC20 tokens.
  • IDEX: A decentralized trading platform that supports Ethereum-based tokens. The decentralized, open-source protocol for asset management and transfer trading is called Gnosis.

NFTs as Investments

Investing in NFTs is a bit different than trading them. Unlike cryptocurrencies, where you can invest in a range of different asset types like stocks, bonds, commodities, and others, with NFTs, you can only invest in specific types of assets like artwork, real estate, sports cars, and more. The asset types are curated by experts and are reviewed by a community of token holders before being added to the market. This curation process ensures that the asset types you invest in are worth something. Some of the most popular investment asset types include:

  • Collectibles: The most popular category of investment in the NFT market that focuses on trading digital assets like artworks, cars, and other items.
  • Real Estate: A new asset type in the NFT market that aims to bring more liquidity to real estate assets.
  • Sports Cars and Bikes: A new asset type that caters to the growing sports car and bike market.