On September 29, 2021, emerging Cryptoartist, Osinachi released an Afrobeats NFT tribute along with popular music producer, Don Jazzy and sparked renewed NFT interest in the Nigerian Twittersphere.
If you have an online presence on any of the major social media platforms, odds are that you’ve already heard about NFTs in connection with photographers, illustrators and other visual artists. And even if you’re either not the curious type or you have no interest in Crypto topics, the sums these NFTs are being sold for are enough to make anyone sit up and take notice.
What are NFTs?
To understand what non-fungible tokens are, you first need to understand what a fungible asset is. A fungible asset is any easily-interchangeable medium of exchange such as currency or Bitcoin – you can exchange ₦1000 for five ₦200 notes and you’d still have the same overall value and also break down Bitcoin and other crypto coins in the same way.
How NFTs differ from fungible assets is that each NFT is a unique collectible item in the same way valuable stamp collections, family heirlooms and baseball cards are. The exclusivity of non-fungible items is what gives them their value and there will always be people who spend staggering sums to own and show off valuable, rare items.
Simply put, NFTs are unique digital assets that can be traded like any other marketplace item backed by the usual market laws of demand and supply.
For this reason, pop culture can be made into NFTs such as this viral Chloe GIF.
How do NFTs work?
Despite NFTs being different from traditional cryptocurrency assets like Bitcoin, they share a key similarity- they are both built on the Blockchain.
A blockchain is a network of personal computers used to store information across a network. Its decentralized nature makes it secure as everyone pitches in to use and help run it, making it hard for one person/group to take down the network.
When blockchain is used for crypto transactions like Bitcoin and NFTs, the information shared is stored in unchangeable blocks. As NFTs are essentially a digital certificate of intellectual property, the person who owns the NFT possesses proof of ownership of whatever is linked to the certificate.
According to TechCabal, NFTs are like “sticking a barcode on everything” and as a creator, you can create almost anything and mint it on platforms like Foundation and Rarible. The minting process then makes it easy for anyone around the world to access and view information about the item and then buy and own a piece of it.
How do NFTs attain value?
Like any other collectible item, NFTs increase/decrease in value based on supply and demand and factors like the reputation of the artist. If you feel an artist’s reputation will increase over time, buying NFTs of their art now can be very profitable.
For example, a visual artist like the Vunderkind, who has created visual designs that were well-received and who also has a favorable reputation with many people, is the perfect kind of creator to invest in because as his reputation rises, so will demand for his original work.
When the point where demand for his work exceeds the supply available is reached, the value of any NFTs you own of his original work will rise, allowing you to either cash in, or enjoy owning “an original Vunderkind”.
At the moment, the market for NFTs is at its peak as creatives the world over have realized that this is an amazing way for them to directly share their art with a desired audience and make huge profits off them.
In many quarters, there is a legitimate worry that NFTs can be easily copied, making owning the original an irrelevance. As anyone can save a picture of the Mona Lisa or even commission an artist to reproduce the famous painting, anyone can also go online to save a picture of a valuable NFT.
However, just as reproducing the Mona Lisa doesn’t affect the value of the original, owning a copy of an NFT doesn’t affect the value of the original as the unique token transferred to your wallet upon payment validates your ownership of the NFT.
In March this year, an artist named Mike Winkelmann aka "Beeple" had an NFT of his art sold at a Christie's auction for $69 million dollars, making him one of the most valuable living artists.
There have been doubters who rightly wonder how long this can last and if people are being taken advantage. Last year, Goldman Sachs called crypto “not an asset class” but has now been eclipsed in value by Coinbase, making it a valid possibility that NFTs could take over the collectibles market the same way.
There have been instances where NFT Fraud has been committed as unscrupulous people have predictably started to submit the work of other people in an attempt to wrongfully establish ownership and enjoy the benefits. Many artists have already discovered that their art has been stolen and made into NFTs without their permission and since major NFT platforms like Rarible and Open Sea have neglected to implement a verification process, such scams have continued.
While some experts have labeled NFTs “a bubble” that will burst sooner or later, others see it as the logical next step in the crypto evolution and have urged the collectibles-loving world to embrace it.
Here at Obiex, we will state the same thing we’ve always said… this article was written by the writer to provide guidance and understanding of trading NFTs. It is not an exhaustive list and should not be taken as financial advice. Obiex Finance will not be held liable for your investment decisions