NFT in simple words: what is it and how to make money on it

Sasha lives in Saransk and is studying to be a programmer. Upon admission, he decided to organize a small project that he spied on YouTube – to take selfies every day of training in order to mount a video after graduation about how he has changed during this time. For three years, he has accumulated more than a thousand pictures, where every time he looks at the camera with almost the same emotionless expression on his face.

Most recently, our hero began to get involved in cryptocurrencies and read a story about how an artist painted pictures for 5,000 days, and then put them all at once in the form of one NFT token and sold it for a lot of money at an auction.

After some thought, Sasha decided that the situations were very similar, and he also put 1000 of his selfies on the NFT exchange.

What will come of this?

What is NFT

An NFT, or Non-Fungible Token, is a unit of account that creates a digital impression of any unique item. Among them can be: paintings, photographs, videos, music, gifs – in a word, any content that claims to be at least some kind of uniqueness. They are highly prized among collectors, gamers, and art lovers, and are bought and sold through auctions.

These same tokens are stored in the so-called blockchain – a huge chain of blocks, each of which contains information. Unlike, for example, servers, where data is stored in one place, these blocks can be located on many devices in various parts of the world.

This kind of encryption makes the blockchain very difficult to hack, because at best you will be able to hack just one block of information, and not the entire chain. That is why most of the cryptocurrencies work on the blockchain.

A token is just a record in one of the blocks, and, as a rule, there can be a lot of such records of the same type. For example, each individual bitcoin is an exact copy of another such bitcoin, which makes it possible to compare them with a currency.

But what if you need to create a unique token that has no analogues? The answer is NFTs.

An NFT token is a way to transfer unique items from the real world to the blockchain. Each of these tokens is unique, inseparable and exists in the singular. In addition, all the necessary information about it is securely stored in the blockchain. 

Uniqueness may vary. So, the very first SMS was sold for 150 thousand dollars, and the first tweet of the founder of Twitter, Jack Dorsey, went for almost 3 million. After that, other stars began to look at the NFT.

When did they appear

Blockchain and cryptocurrencies have been around for years, but it was NFTs that appeared just a few years ago. In many ways, they owe their popularity to the game CryptoKitties, where you need to grow and breed virtual crypto cats. The cost of one such kitten can sometimes exceed hundreds of thousands of dollars.

An important role was played by the connection of NFTs with cryptocurrencies , as well as by the fact that during the pandemic, many new non-professional players appeared on the stock markets who want to make money.

But the biggest influence on the popularity of these tokens was played by big names that actively stir up interest in the topic. Every day you can read the news about how another celebrity sold something in the NFT for a huge amount of money. It is one thing when NFTs are talked about in narrow cryptographic circles, and quite another when such information giants as Elon Musk, Jack Dorsey, Mark Zuckerberg and others come into play. 

Where apply

Although, as planned, NFT tokens were created as an opportunity for digital content creators to earn money on collectors, gamers, and simply art connoisseurs, now the main direction is the monetization of popularity.

For example, Elon Musk, the founder of Tesla, auctioned his NFT tweet for $1 million. In the end, it was never sold, but received a lot of attention from the online media.

In Russia , too, you can find many examples. So, comedian Idrak Mirzalizade, who was deported from the country for a bad joke, put up for auction his canceled residence permit, noting that he would return and the price for it would increase.

Pokras Lampas was one of the first artists who started selling his paintings in the form of tokens – his painting Transition, which he designed for the Chirkeyskaya HPP, sold for 2 million rubles.

For a long time , the $70 million record was held by the work of digital artist Mike Winkelman in the form of a collaboration of all his paintings over the past 5,000 days.

Inspired by the cost of the painting, Sasha immediately decided to put his set of selfies on one of the online platforms. Our hero sensibly assessed the value of his creations, so he put quite symbolic money for each photo. 

And in the case when a certain amount is needed right here and now, it would be best to take a loan. Calculate the amount on the calculator and fill out an application at Sovcombank.

How to sell NFTs 

There are many platforms where you can place your tokens. Some of them even have a narrow specialization – for example, only game items or only art.

The most popular are OpenSea, SuperRare, Foundation and Rarible. As a rule, platforms charge a commission in the Ethereum cryptocurrency, or ethers, as it is called in the common people. The size of the commission can be different, but usually it is several tens of dollars (such a cost is due to the fact that the new token will need to be included in the blockchain).

The commission is always charged at the time of token creation, but depending on the site, this can be either immediately after the file is uploaded or at the time of the sale.

To pay the Halva commission , open a foreign currency account and profitably exchange rubles for dollars. 

How to create an NFT

A step-by-step guide on how to create your own NFT token using the OpenSea site as an example (any crypto wallet is required):

1. open the site;
2. select Create – My collections;
3. create a collection, name it, add a description and a logo;
4. add tokens to the collection. To do this, select Add items, and then Add new item;
5. after successful loading of the token, we put it up for auction;
6. we are waiting for it to be bought for 70 million rubles.

Copyright

One of the main reasons why NFTs are criticized is the rather confusing relationship of tokens with copyright . People who buy NFTs often wonder, “Do I now own the rights to something?”

No. The fact is that NFT does not give any rights to own an item outside the boundaries of the blockchain platform. Let’s look at an example. 

10 years ago, a Nyan Cat video appeared on YouTube, which quickly gained popularity and spread into memes that are not completely dead today. In a simple video, an animated pixelated cat flies through the sky and leaves a rainbow trail behind it. The author of the video, Christopher Torres, sold an NFT GIF with his creation last year for $580,000.

But nothing prevents you from watching a video on YouTube, downloading it or using a cat as a screensaver – you definitely won’t face a lawsuit from the owner of the token.

Or you can take the famous Quentin Tarantino film Pulp Fiction. Recently, the director announced that he plans to sell cut scenes in the form of a token. The person who purchases it will receive a unique digital artifact, which they can then dispose of as they wish within the platform.

Of course, it is yet to be decided by law how the tokens relate to copyright, but it is unlikely that you will have to pay the owner of the token to view the same scenes on the Internet. 

Then why are they needed?

Yes, after buying tokens dedicated to some films or art objects, we can still use them, but this is not important. The most valuable thing about NFT is exclusivity . No one else has the same token as you, and all information about it is securely recorded in the platform. For collectors, art lovers or gamers, it’s like buying an original.

But that’s not all. NFT tokens do not have to be considered only as something valuable in terms of uniqueness, they are also an excellent investment tool .

But if in the real world we have a rough idea of ​​how the price of art objects is formed, then in the case of the blockchain, a completely new and incomprehensible creative market appears, where the price does not depend on artistic factors at all.

For example, in 2020, you bought an NFT picture for two ethers (at that time, $170 each). And decided to sell it now. At the moment, the cost of the coin is already $2300.

Questions immediately arise: “what am I actually investing in” and “at what rate the buyer will take it.”

It is very difficult to answer them, and each auction at the auction is held individually. Some lots go cheaper, and for some collectors they fight for more than one day, overstating the original cost by a thousand times. 

What’s next

NFT has become the buzzword of 2021 and it looks like interest in this topic is only going to grow. Platforms are already announcing various innovations and attracting investors, and artists and musicians are starting to show more and more interest in a new niche.

But there are still many questions about what rules the blockchain should play by: copyright issues have yet to be resolved and, perhaps, content distribution formats have to be reconsidered.

For a long time, Sasha’s selfies lay untouched, and dreams of earning money poured in every day. Suddenly, they were accidentally noticed by a local crypto enthusiast. With his submission, other Internet users also learned about Sasha. His emotionless gaze and quirky room decor have become a great start for memes. 

The cost of each Sasha selfie grew along with his popularity – people began to photoshop his face to all possible photographs and even created communities where they shared their work. But, like many local memes, this one did not last long – two months later, no one even remembered about it. 

However, during this time the guy managed to sell most of the photos, and for one of them some madman gave as much as 100 thousand rubles. Of course, 70 million dollars does not smell here, but our hero still managed to collect some amount, albeit in a rather unexpected way.