You may have heard about cryptocurrency and NFTs (non-fungible tokens) in the news lately. Sales of NFTs exceeded $2 billion in the first quarter of 2021, thanks in part to high-profile items such as Nyan-Cat or tweets going viral and then being sold as NFTs.
However, the true potential of NFTs is often misunderstood. NFTs can be any type of digital asset, from audio and video files to images and animated GIFs. They hold monetary value that can be assigned by the owner. These types of assets may not be valuable to everyone, but they may be useful to more people in the future. Buying an NFT gives you digital proof of ownership, so they could eventually be used to buy and sell houses or other properties.
Realtor Shane Dulgeroff put up the first physical home for sale as an NFT on OpenSea in April 2021. Along with the physical property located in Thousand Oaks, California, the NFT was packaged with an artsy digital video interpretation of the home.
The auction failed to attract bids because the market was not ready for an IRL home in NFT form. Although some may be willing to invest disposable income into NFTs, the average person may be hesitant when it comes to buying a home or something significantly expensive. The biggest NFT sales range in the tens of millions price point and get all the attention, but a study by artist Kimberly Parker found the majority of NFTs are sold for $200 or less.
However, this could change in the future as NFTs and cryptocurrency become more common as an international form of payment. The draw of purchasing big investment items such as a house as an NFT is the proof of ownership. The sale of an NFT is secure, and can’t be forged if it is minted properly.
“There’s nothing more secure than selling a digital item as an NFT. There’s a permanent record of each transaction,” says Darren Rodrigues, a junior IT administrator at Lunarstorm Technologies.
Rodrigues helped NOW Magazine and the Georgia Straight create NFTs of select culturally important magazine covers – including signed editions – and put them up for sale. The covers feature Drake, Grimes, Sarah McLachlan, Seth Rogen and more.
Buyers may choose to keep the NFTs as collectibles or as an investment they can resell later at a higher profit.
A digital asset’s creator can also go through the process of “minting” an NFT to authenticate it as legitimate. This is when the creator decides to make their piece a one-of-a-kind NFT, release a limited-edition run or release hundreds of copies. Each time an NFT is sold, the buyer is charged with what’s called a “gas fee” to validate the sale. These gas fees can range in price depending on demand.
For example, buying an NFT in the middle of the night probably means the gas fee will be a lot cheaper because the servers necessary for validating the sale won’t be as busy, Rodrigues explains.
If you’re an artist, selling your work as an NFT can be highly profitable. The creator of an NFT can enact a royalty fee during the minting process so that every time it is sold to another person, the creator will still receive a percentage of that sale. The artist known as Beeple has been successfully selling his art as NFTs, most notably earning $69 million in his biggest sale.
What’s in your digital wallet?
As NFTs become more accessible to the masses, they could be used as a more commonplace method to buy and sell unique items such as the deed to a house, digital art, rare items in video game marketplaces, music, awards and more. Once an NFT is bought, it can’t be forged, changed or replaced. There is also an automatic authentication process that logs the sale, which means you can see who previously owned the NFT.
Anybody can start selling things they own as NFTs, from rare baseball trading cards to a signed copy of a famous book, and even your home video of an alleged UFO sighting. Keep in mind that every time you mint a new NFT, you will have to pay a gas fee to validate it. This means you probably shouldn’t create NFTs of your family vacation photos, as there might not be a big market for those unless you’re a celebrity.
As NFTs become more popular, there are more and more ways to use them. It’s possible that NFTs and other cryptocurrencies could become a universal currency for selling private property between individuals, international online shopping, as investments similar to stock trading, and more. The applications are endless as the market for NFTs keeps growing.
