Even if you buy and sell cryptocurrency on a regular basis, you might not fully understand NFTs. Don’t worry, you aren’t alone. A lot of business professionals need the concept behind NFTs explained. What are NFTs, and how are they connected to cryptocurrency? Where can you buy NFTs? And what brands have been able to turn NFTs into profitable business models? Keep reading to find out.
What Are NFTs? – NFTs Explained
What are NFTs and what does NFT stand for? NFT is an acronym for non-fungible token, a new type of digital asset based on the Ethereum cryptocurrency that allows users to own “the official copy” of a digital file.
Simple enough, right? Here’s the confusing part. Owning a NFT asset doesn’t mean that you own the only copy, or the copyright, publishing, reproduction or distribution rights. Instead, owning an NFT just means that you are the official owner of a digital file or asset. It’s essentially bragging rights for collectors, and the opportunity hold or sell it to someone else whenever you want, hopefully for a profit.
Think about that for a moment. What if you had NFT blockchain proof of ownership for an iconic song like “American Girl” by Tom Petty or “Home Sweet Home” by Motley Crue? People could still listen to it and buy copies of the song, but you would be the only owner of its NFT. Owning a collectable digital asset like a famous song would be a value-holding investment that other collectors and fans would want, badly.
How will that NFT’s value change over the years?
Successful Examples Of How To Make Money Selling NFTs
If you’re still struggling for ideas on how to make money selling NFTs, here are some examples from both businesses and individuals that have already had some very impressive successes.
Christie’s Art Auction House – NFT Art Auctions For Artists & Collectors
In October 2020, art collector Pablo Rodriguez-Fraile purchased the NFT for a 10-second piece of video art called “Crossroad” by the artist named Beeple. The video is a loop of 3D animated people walking past a giant naked Donald Trump covered in graffiti. He paid $67,000 for the NFT even though you can go anywhere online to see it. He then sold “Crossroad” a few months later for $6.6 million dollars.
Not surprisingly, the famous art auction house, Christie’s, noticed non-fungible token sales like this and moved quickly to become an early adopter of NFTs. Christie’s first ever digital art sale consisted of a collage of 5,000 pictures by Beeple called “EVERYDAYS: THE FIRST 5000 DAYS.” It sold for $69 million.
NFTs have the potential to evolve the financial value of digital art. If current trends continue, someday digital files could be seen as valuable as rare paintings from the Italian Renaissance.
NBA Top Shot – NFT Video Highlight Clips
If you had to pat someone on the back for pushing NFTs into the mainstream, it’s the NBA. Once the National Basketball Association showed other organizations that NFTs powered by blockchain technology could be profitable, everyone jumped on the bandwagon.
The NBA’s Top Shot website gave sports fans an opportunity to collect video highlight clips of their favorite players. The experiment worked, and in the first five months after the Top Shot site went live, the NBA made $250 million dollars from over 100k buyers. But the majority of that revenue didn’t come from fans buying NFTs from the NBA, it came from fans buying and selling NFTs to each other. The NBA smartly takes a royalty fee from every transaction.
Just to give you an idea of the value changing hands, a collector named Nate Hart bought a LeBron James Cosmic NFT on NBA Top Shot for $40k in January, and turned around and sold that NBC Top Shot clip for $125k a month later.
3LAU – NFT Music Albums
In February 2021, 3LAU, the cryptocurrency advocate and electronic music producer, made history when he sold a limited edition album as a NFT. Music fans and collectors paid a record-breaking $3.6 million dollars for the album. In addition to his album, 3LAU also sold other exclusive items for a final total of $11.6M.
3LAU’s auction definitely got the attention of the music industry. Many artists have been struggling lately to earn a living. Streaming revenues only pay a fraction of what they would make from CD sales. That combined with limited touring opportunities during COVID-19 and the music industry is in a state of crisis. NFTs might be a way for them to recover some of that lost revenue. If 3LAU can make $11M, what would happen if an artist like Radiohead, Imagine Dragons, or Billie Eilish released an NFT only album?
Axie Infinity – Pokémon Inspired Video Game
While most people are struggling to understand the concept behind seeing value in virtual assets, gamers have embraced it for decades. Everything from virtual weapons to property can either be earned or purchased in various video games.
But what happens when you get tired of playing a game? What happens to all of those virtual assets that you used money or time to acquire? Shouldn’t you be able to sell or trade them to other players? Integrating NFT technology into video games would make these virtual assets more valuable and let gaming companies profit from these transactions between players.
Currently, the biggest NFT-based game is Axie Infinity. Similar to Pokémon, players control digital creatures, known as Axies, that battle other players and earn various digital collectibles. The Axie characters are NFTs that can be bought and sold. But what makes the game so popular is that players can earn Ethereum cryptocurrency just by playing the game. The Axie community boats about 1 million daily active users and has generated over $1 billion in trading volume since the game’s debut.
The NBA took a big risk with NFTs, and it paid off to the tune of hundreds of millions of dollars. If a popular game like Call Of Duty Mobile adopted NFTs, I have no doubt they would be another multi-million dollar NFT success story.
Sorare – Fantasy Football Game That Pays You In Ethereum
Sorare is a NFT-based fantasy football game enabling gamers to buy and sell NFTs attached to individual players as they build and grow their own fantasy teams. Similar to NBC Top Shot, gamers can buy and sell various soccer stars (aka footballers) from 150+ teams around the world. The company has secured licensing agreements with football clubs around the world to make this possible. But unlike NBC Top Shot, you can use your players in fantasy football tournaments to win Ethereum cryptocurrency prizes.
The reason that I like Sorare so much, is that the value of your players is tied to their real-world performance and you can use them to make money. In comparison, NBA Top Shot is more or less just digital baseball cards that value is tied to popularity contest.
Charmin & Taco Bell Sells NFTs For Charity
NFTs don’t always have to be celebrity or “fine art” related. Several brands, including Charmin and Taco Bell have auctioned NFT items to help raise money for charity.
Charmin called their NFT digital assets “NFTP” (non-fungible toilet paper). The popular toilet paper brand auctioned off five pieces of NFT art with proceeds going to Direct Relief, a humanitarian aid nonprofit.
Taco Bell even used their official Twitter account to promote their NFTs and tweeted “Our Spicy Potato Soft Tacos can now live in your hearts, stomachs and digital wallets.”
Both Charmin and Taco Bell’s NFTs sold off in the matter of minutes and generated several thousands of dollars.
Where To Buy NFTs
The best way to learn about NFTs is to start buying some for yourself. Prices range from small pocket change to your entire 401k. Here are some of the most popular NFT marketplaces.
- Nifty Gateway: Founded in 2018 by Duncan and Griffin Cock Foster, the digital art auction platform has since been acquired by Cameron and Tyler Winklevoss (aka the bad guys in the Social Network movie). The platform is now partnered with Sotheby’s and has plans to modernize the world of art collecting.
- Cryptozoo: Founded by 25-year-old YouTuber, Logan Paul, Cryptozoo is supposedly going to “change the game” for NFTs. Time will tell. The site launches on September 1, 2021.
- SuperRare: If you want rare, unique, single-edition digital artworks, then SuperRare is the place for you. All of their art is curated.
- OpenSea: OpenSea is a decentralized platform for digital goods, including collectibles, gaming items, digital art, and other digital assets that are backed by and part of the Ethereum blockchain.
- Audius: Audius is a decentralized streaming platform operating on multiple nodes to ensure music is owned solely by the artists themselves. The platform has over 3 million monthly users and opens the possibility to include your NFT library in the network.
- Tune.fm: Looking to leapfrog major music marketplaces like Amazon and Apple, in March 2021, Tune.fm announced their NFT marketplace for artists to sell directly to fans. When you sign up, Tune.fm gives users 100 free tokens. When fans listen to a song on the platform, tokens get subtracted from your account and transferred to the artist. The platform has potential but Tune.fm hasn’t lured any major artists yet, beyond some instrumental Beyoncé tracks.
Why Do People Buy NFTs?
NFTs became very popular very quickly. Digital content creators, including animators, photographers, filmmakers, and designers can’t mint NFTs fast enough to feed all the tech billionaires looking to grow their collections of digital assets. Even the Nyan Cat meme NFT sold for $600,000.
Why, what’s fueling this craze? Why are people buying NFTs? Here are some of the most common factors feeding the motivation of individuals to invest in NFT assets.
- Business Investment: Buying and selling NFTs can be very profitable. People have purchased NFTs for thousands of dollars and then resold them for millions.
- Prestige: There’s an element of prestige that comes from collecting rare items like famous paintings or even popular memes like Nyan Cat. NFTs are rare and not just limited to a physical object.
- Connection To The Creator: If you are a fan, what better way to connect yourself to your favorite artist than, buying their NFT. This creates a unique connection to the creator that other fans won’t have.
- A Way To Use Cryptocurrency: One of the biggest issues with cryptocurrency is finding outlets that accept it as payment. Companies like Square (Jack Dorsey) and Tesla (Elon Musk) are still experimenting with accepting cryptocurrency, but until using crypto is an easy as swiping a credit card, using the blockchain as an everyday payment option won’t fully become a reality. But thanks to a few savvy organizations, like the NBA, you can now use your digital currency to purchase exclusive digital assets, or NFTs.
The Downsides & Risks Of Investing In NFTs
There’s a lot of hype around NFTs right now. While most people are still asking “What are NFTs?” savvy investors are trying to cash-in the same way people discovered Bitcoin in its early days. NFTs haven’t fully caught on just yet so there are definitely lots of risk and downsides.
- Hype Bubble: Lots of money is being invested in NFTs right now. If those investments don’t continue to hold their value, the NFT market could burst like a bubble. There’s always a risk of major losses once investment hype dies down. But with washed up celebrities like William Shatner and Lindsay Lohan already creating their own versions of NFTs, a bubble is likely inevitable.
- NFT Fraud: Anytime consumers need to adapt to new technologies, it creates plenty of opportunities for fraudsters. Without protection from governments or insurance companies, investing in NFTs or cryptocurrency can be extremely risky.
- Non-Exclusivity: The digital NFT assets that you purchase are not exclusive to the point where no one else can see or listen to the items that you bought. WTF right? So the people who paid millions of dollars for a NFT of an album of music won’t be the only ones who can listen to that album. To put this into perspective, anyone can buy a Mona Lisa t-shirt or postcard, but there’s only real thing of the original physical artwork. The same goes with NFTs. Anyone can download a copy of Beeple’s 50-second video called Crossroad, but only one person “owns” its unique token and that video is worth $6.6M.
When Were NFTs Invented?
While most people around the world were still struggling with COVID-19 in the early weeks of 2021, something groundbreaking in the world of cryptocurrency blew up, NFTs. But that’s not when they were invented. The concept behind NFTs dates back to 2012 when Kevin McCoy and Anil Dash attached an NFT to a piece of art as a test.
NFTs Explained: What Did We Learn?
Are you down with NFTs? Well, you should be. There’s clearly a lot of money and interest connected to them.
For example, let’s say a famous artist creates a painting on a canvas. There’s only one copy of that painting, and it has value that the art community can verify. But what about digital artists? What if a digital artist wanted to sell their artwork? Now they can. The blockchain can now verify that single digital copy of the file, so it can maintain its exclusive value. Until NFTs, there wasn’t a secure way for digital artists to sell their artwork.
Frank Wilson is a retired teacher with over 30 years of combined experience in the education, small business technology, and real estate business. He now blogs as a hobby and spends most days tinkering with old computers. Wilson is passionate about tech, enjoys fishing, and loves drinking beer.