What are NFTs and why are they trending?
In short, NFT stands for non-fungible token. More specifically, it is a unique digital asset secured by blockchain technology and stored in a digital wallet. It has unique metadata (think: an image or a description), and it cannot be copied or substituted. NFTs are used to certify authenticity and immutable proof of ownership. NFT projects can gain or lose value independent of the currency, just like a popular trading card or piece of art. As awareness around NFT art grows, NFT projects are evolving towards projects with more and more utility: longterm uses in the metaverse and in the real world. There are many use-cases for NFTs, including video games, avatars, digital artworks and more. Importantly, given that NFTs are simply just an ownership record, it's rarely the NFT itself that holds value, but rather its work of art, the communities it unlocks, or the rewards that can be earned through owning it.
At first predominantly popular on the Ethereum blockchain (ETH) with the ERC-721 token standard, and NFT marketplaces such as OpenSea, Rarible, and Grimes's choice, Nifty Gateway, these digital assets have become ubiquitous in Web3, spreading to other blockchain networks like Solana, Tezos, Polygon, BSC, and Bitcoin via Stacks, with its leading NFT marketplace Gamma.io and lower transaction fees than the ETH blockchain.
Beeple became the first artist to inspire auction house Christie's to facilitate NFT sales. With his "Everydays --- The First 5000 Days" coming to a close for $69 million, NFTs could no longer be ignored and creators were more and more inspired to start their own NFT collections. Popular NFT collections include Cryptopunks, Cryptokitties, Megapont, Bored Ape Yacht Club, and countless others. Even popular brands and sports teams are exploring NFTs, with some examples including NBA Top Shot, Tiffany's, and Adidas.
With the ecosystem growing tremendously over the past few years and more and more dApps and DeFi apps surfacing, blockchain technology has become well-known, and NFT trading has become hugely popular. NFTs have no fixed value, and their value is based on demand. These digital assets can be traded like a cryptocurrency, a stock or a commodity, meaning you can buy them at a low price and sell them to someone else at a higher price. NFT trading offers people a chance to make money and also allows digital artists to make money on secondary sales thanks to royalties.
What are the steps to NFT trading?
First, you'll need a digital wallet and cryptocurrencies. Some NFT marketplaces accept debit and credit cards payments, but the majority will require a cryptocurrency wallet. A crypto wallet is where you store your cryptocurrencies and digital assets. Popular wallets include Metamask and Coinbase.
Once you've acquired cryptocurrencies, you'll need to go to an NFT marketplace. An NFT marketplace is an online marketplace allowing you to buy and sell NFTs. The NFT market is rapidly evolving and more and more NFT marketplaces are burgeoning on a number of blockchains. Some of the best NFT marketplaces include OpenSea and Rarible on the ETH blockchain, Gamma.io on the Stacks blockchain and many more.
Note that different wallets enable access to different NFT marketplaces and smart contracts, therefore different NFT collections. As an example, a Metamask wallet or a Coinbase wallet allows you to access ETH dApps, a Temple wallet allows you to access Tezos dApps and a Hiro wallet allows you to engage with Bitcoin dApps built with Stacks, via the Gamma NFT marketplace, which specialises in digital art. Gamma is the largest NFT marketplaces on Stacks, a settlement layer built on Bitcoin that enables smart contracts secured by Bitcoin, the most trusted blockchain.
As NFTs are digital assets, there's a chance that the value of your NFT could either fall or rise, which is why doing your research is important before spending any amount of money. We also recommend considering the NFT floor price and rankings as well as reading this helpful guide in learning some of the ways you can protect yourself as a user, screen for high quality projects and avoid scams.