NFT’s are all the rage right now. But most of us still don’t know much about these digital assets. This guide will give you an idea of what the hype is all about.

What is an NFT?

An NFT is simply a digital asset for representing a real-world object. For example, a piece of music, a video, or an in-game item. While NFT’s have been around since 2014, they are gaining more popularity today because they are the most common way to trade digital artwork. Online users buy and sell NFT’s through cryptocurrency.

Typically, these assets are limited and have unique identifying codes. However, many NFTs represent digital creations that already existed in another form elsewhere. These may include securitized digital art on Instagram or iconic video clips from NBA games.

For instance, renowned digital artist Mike Winklemann, aka ‘Beeple,’ designed a composite of 5,000 daily drawings for creating one of today’s most popular NFT, ‘EVERYDAYS: The First 5000 Days.’ Vignesh Sundaresan, popular as MetaKovan in the cryptocurrency community, purchased this innovative NFT for over $69 million in 2021. According to Sundaresan, this beautiful NFT is an essential piece of art history.

Since individuals can view these images online for free, an important question arises. If any online user can view, download, or take a screenshot of these images or collages, why spend millions on buying these assets?

That’s because an NFT allows you to own the original item once you buy it online. Furthermore, it includes built-in authentication, which proves that you are the sole owner of the content.

What is the Difference between Cryptocurrency and NFT?

NFT means non-fungible token. Generally, NFT’s are built with the same programming used for cryptocurrency, like Ethereum or Bitcoin. However, that’s the only similarity between the two.

Cryptocurrencies and physical money are ‘fungible.’ Which means users can trade or exchange them with one another. Since they are equal in value, one Bitcoin is always equal to another Bitcoin. The fungibility of cryptocurrencies makes it a secure trading method on the blockchain.

NFTs don’t work like that. Every NFT has a digital signature, making it impossible for users to exchange them. In other words, these items are non-fungible.

So How do NFTs Work?

NFTs exist on a blockchain. Most of us are already familiar with the concept that blockchain is a distributed public ledger that records transactions. Typically, NFTs exist on the Ethereum blockchain. But, other blockchains support them as well.

NFTs are ‘minted’ or created from various digital objects, representing intangible and tangible items. Some of these include:

  • GIFs
  • Artwork
  • Sports highlights
  • Videos
  • Collectibles
  • Music
  • Video game skins
  • Virtual avatars
  • Designer sneakers

You will be surprised to know that even tweets are popular ways to sell NFTs. For example, Jack Dorsey, the Twitter co-founder, sold his first-ever tweet for over $2.9 million as an NFT.

Fundamentally, NFTs are the same as physical collector’s items. The only difference is that they are digital. That means the buyer receives a digital file in place of a tangible thing. Buyers also receive exclusive ownership rights, which means there is only one owner at a time. In addition, every NFT has unique data, making it easy to verify ownership for transferring tokens between owners.

The creator or owner can store specific information inside NFTs. For example, artists can sign their artwork and include it in the NFTs metadata.

How Popular are NFTs?

NFTs and blockchain technology offer content creators and artists profitable monetization opportunities. For instance, artists won’t have to depend on auction houses and galleries for selling their art. Instead, musicians and artists can sell their work directly to consumers as NFTs to earn maximum profits.

Artists can also receive a percentage of sales or royalties whenever someone buys their artwork. That’s why NFTs appeal to artists for receiving future proceeds after selling their artwork.

However, art is not the only way to earn royalties or earnings through NFTs. Prominent brands including Taco Bell and Charmin also sold off themed NFT art for raising charity funds. NFT art by Taco Bell was sold within minutes, and Charmin labeled its offering as NFTP or non-fungible toilet paper.

A GIF from 2011, Nyan Cat, sold for approximately $600,000. In addition, a video clip of LeBron James was sold for more than $200,000. Renowned celebrities like Lindsay Lohan and Snoop Dogg also jumped on the NFT bandwagon. They released unique artwork and memories as securitized NFTs.

NFTs may also reshape the trading and luxury goods markets for accessories like shoes, handbags, wines, etc. Much like how secondary markets like The RealReal and Poshmark are accelerating luxury goods trading, these digital assets can promote the next era of innovation in luxury trading by reducing the cost of transactions.

How to Purchase NFTs

People who want to build their NFT collection must acquire a few essential items.

You must have a digital wallet to store cryptocurrencies and NFTs. If you want to buy NFTs, you may need to buy some cryptocurrency like Ether. The type of currency you choose depends on the currencies an NFT provider accepts.

Buyers can use a credit card on platforms like Kraken, Coinbase, and eToro. But you can also use Robinhood and PayPal. You can then move it from the exchange to your desired wallet.

When researching options, remember to keep factors like fees in mind. For example, many exchanges charge a percentage of each transaction when purchasing crypto.

What are the Most Popular NFT Marketplaces?

The recent pandemic played a critical role in the NFT surge. The total value of NFT sales escalated to $250 million in 2020. But in 2021, the NFT trading volume totaled $24.9 billion. That’s because the stay-at-home restrictions resulted in more people spending more time on the internet.

Once you set up and fund your wallet, you can explore the many NFT sites to buy these items.

Here is a roundup of some of the largest NFT marketplaces.


Artists need to receive an invitation from fellow creators or ‘upvotes’ for posting their art. Each artist has to buy ‘gas’ to mint NFTs, guaranteeing high-quality artwork. Chris Torres, the Nyan Cat creator, sold the NFT on this platform.

The peer-to-peer platform dubs itself a source of rare collectibles and digital items. If you want to explore this marketplace, you need to set up an account to browse NFT collections. Then, find new artists by sorting through sales volume.


Much like OpenSea, Rarible is an open marketplace that gives creators and artists a platform for selling NFTs. The platform issues RARI tokens that allow holders to weigh in on community rules and other features like fees.

These platforms are home to thousands of NFT collectors and creators. However, make sure you research all options before choosing one for buying NFTs. It is common for artists to become victims to impersonators who list and sell their work without approval.

Furthermore, some of the verification procedures for NFT listings and creators can be more stringent than others. However, there is no owner verification required for Rarible and OpenSea.

Should You Invest in NFTs?

Many people wonder if investing in NFTs is profitable. Unfortunately, the honest answer to this question is that it depends.

NFTs can be risky because of the uncertainty of their future. Since we don’t yet have a history to evaluate the performance of these assets, we don’t know for sure if they will be of the same value in the future.

Perhaps, the best thing to do is invest in small amounts, so you don’t have to bear any huge losses later. Remember that investing in NFTs is your personal decision, and nobody should influence you to spend a fortune purchasing these assets.

Most people buy specific images, videos, or clips because they hold a special meaning. For example, you would want to buy a video clip of your favorite NBA player or artwork from a renowned artist.

Note that the value of an NFT is based on what the buyer is willing to pay for it. That’s why demand helps decide the price rather than economic or technical indicators.

That also means that an NFT may not resell if nobody other than you want to buy it.

The IRS is yet to issue any NFT specific tax guide.

But like other assets, NFTs are controlled by capital gains taxes. Since they’re collectibles, they are not taxed at the preferential long-term capital gains rates like stocks. As a result, you may need to pay an increased collectibles tax rate for NFTs.

In addition, the cryptocurrencies you use for purchasing these assets may also be taxed if there is an increase in their value since you purchased them, which means it’s best to recruit a tax professional before investing in NFTs.

Take a similar approach as you would when making any investment. Conduct background research, evaluate the risks, and bear any losses.

Benefits of NFTs

Now that you know about the risks involved in trading NFTs, let’s look at some of the benefits of NFTs for both buyers and sellers.

Access to Global Audience

NFTs offers one of the easiest ways to access a global market. Specific regulatory issues may prevent you from marketing your work to all jurisdictions in the world. However, NFTs give you quick and easy access to art, music, and collectibles. Thanks to the digital world, the world of NFTs is open for everyone, regardless of their location.


Are you a struggling artist who doesn’t want to leave his day job because of the paycheck you get every month? NFTs could allow you to earn lifelong royalties through your art, music, or work.

If you are an artist looking for long-term earnings, you can automatically get 10% to 20% of all future sales of your work. So, for example, if your original artwork sells for $10k in the traditional market, it can sell for $100k in the digital market with 10% royalty.

You can quickly achieve this by programming royalty into the NFT. Then, with each sale, you get more money in your pocket.


Another great thing about the NFT world, for both artists and buyers, is the convenience it offers. Digital files are much easier to create, distribute, and sell.


Since the blockchains are decentralized, you can be sure about the security of NFTs. Furthermore, the decentralized nature of blockchains means that data is stored in different nodes around the globe. Therefore, there will always be a data record somewhere, even when the network is down.

Hence, the NFT technology assures that the nodes will always run regardless of the blockchain itself.

A New Economy

Non-fungible tokens may lead to an entirely new creator economy that would help content creators have complete ownership of their creations.

With NFTs, all funds go directly to content creators when they sell their work. If new owners sell their work, they will receive royalties through intelligent contracts while developing NFTs. Since the NFT metadata has the creator’s address, the original creator receives royalties for each re-sale of the token.

Bottom Line

Without a doubt, the NFT blockchain technology offers numerous benefits, which makes it highly profitable. The best part is that these benefits are for creators and buyers. Therefore, the NFT industry holds a lot of potential to become an essential part of our future.

Although the benefits of non-fungible tokens predict a better future for content creators and collectors, it is crucial to be mindful of their limitations. The NFT industry is still developing. If you want to participate in the blockchain movement and become the proud owner of NFTs, do it responsibly. Avoid investing huge funds, or you could land yourself into financial trouble.

About The Author
Amber Alvi

Amber Alvi

Amber is a seasoned content marketer who is enthusiastic about technology, web design, mobile apps, and everything digital. With over 15 years of experience in the content creation business, Amber loves exploring ideas from different niches, especially technology and online marketing.

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