Put simply, NFTs, or non-fungible tokens, are digital collectibles that are stored on a blockchain. NFTs can represent art, in-game items, virtual real estate, or an actual physical object and can be worth millions of dollars. But before we get into more details of how NFTs work and how you can make money off them, let’s deconstruct the term first, so we’re good with the basics.
What is an NFT?
Here are the key concepts to understanding non-fungible tokens (NFTs):
- “Token” – a unit of cryptocurrency.
- “Fungible” – stands for goods you can easily trade for others of the same type and value.
So, by extension, a non-fungible token (NFT) is a unique crypto asset that can’t be traded or exchanged, and this is precisely what makes NFTs so special (and different from cryptocurrency). Non-fungible tokens are also either one of a kind or belong to a limited collection.
Here’s an example of an NFT:
It’s the first tweet ever by Jack Dorsey, Twitter’s CEO. Dorsey sold it for nearly $2.9 million as an NFT in 2021.
But wait, can’t I just right click on this image and save it to my computer?
Yes, you can—but you won’t save the NFT itself, just a printscreen.
It’d be like googling “Mona Lisa”, printing out the first best result, and hanging it on your wall. Even if you buy an exact frame for it as in the Louvre, tourists won’t start flocking to your living room for selfies.
If you want to own the actual Dorsey’s tweet, you will have to buy it from its current owner Sina Estavi, an Iranian crypto entrepreneur. He actually tried to unsuccessfully resell this NFT with $10,000 as the highest bid back in April. However, Estavi said that he wouldn’t go lower than $50M, and, who knows, he might get lucky.
How do we know if an NFT is authentic?
But how do we know that Estavi didn’t just pay almost 3M dollars for a printscreen of Dorsey's tweet?
What many people fail to understand is that NFTs are not the actual images, videos, or tweets themselves. NFTs are digital certificates of authenticity and ownership issued by their creators and stored on the blockchain.
And since blockchain technology is a decentralized system of computers, accessible to anyone to participate in, you can’t fake having an NFT there.
Each NFT is a unique string of letters and numbers (a cryptographic “hash”) and has proof of ownership in this public ledger. Think of NFT as an event ticket with your seat number listed, the difference being that the person who owns an NFT doesn’t necessarily need to reveal their name; people can use pseudonyms if they want.
So, in Dorsey’s case, he minted a static image of his first tweet on the blockchain, created an NFT, and placed an offer for it on Valuables by Cent, the Tweet exchange platform.
This infamous NFT is now listed on Open Sea, one of the NFT marketplaces where cryptocurrency enthusiasts can sell and trade their digital assets. You can check its price history, author ID, and other NFT properties.
How do non-fungible tokens (NFTs) work?
The whole point of NFTs is to enable digital creators to verify the authenticity of their work and create scarcity with tokenization. Turning a digital file into a crypto asset is called “minting.” You can mint images, GIFs, videos, songs—pretty much anything digital—for a small amount of cryptocurrency.
Once your NFT is published on a blockchain (usually the Ethereum network), you can sell it on one of the NFT marketplaces.
But don’t forget that, as we established above, NFTs are not the actual digital collectibles but certificates of their ownership. This means you’ll be selling (and buying) tokens, not the actual digital items.
What’s really cool about NFTs is that you can increase your earnings by setting royalty amounts on your tokens—a percentage you’ll make from every other sale of your NFT on the secondary market.
However, keep in mind that buying an NFT won’t necessarily grant you the copyright or licensing rights—it depends on each case individually.
Why would somebody buy an NFT?
People purchase NFTs as collectibles like they would buy physical items. Since each non-fungible token is unique, there’s an element of scarcity, just like with traditional art pieces. Some NFT collectors hope their NFTs will increase in price in the future, and others simply enjoy owning something one-of-a-kind. And while it may seem a bit odd to invest money in something that can be a JPEG, in our increasingly virtual world, NFTs offer a convenient way to store value and might be here to stay.
7 most popular types of NFTs
NFTs are not an entirely novel idea. Gamers have long been familiar with buying or selling in-game items, such as gun skins for CS:GO. However, unlike with NFTs, you don’t truly own your game inventory. If the game vanishes, so do your in-game items, whereas NFTs in crypto games such as Wizardia are valuable outside the game’s realm, too.
Here are some of the most popular types of NFTs.
1. PFP NFTs (Avatars)
PFP NFT is an abbreviation for profile picture non-fungible tokens, also known simply as avatars. PFP NFTs became a thing when cryptocurrency enthusiasts began using their NFTs as their social media profile pictures.
You’ve probably seen one of the anthropomorphic apes like the one below somewhere around Twitter:
This Bored Ape #4988 belongs to Madonna. The Material Girl bought it on March 14th, 2022 for 180 ETH, which equaled to over $500,000 at that time.
This rather confused Ape belongs to one of the most famous NFT collections on the Ethereum blockchain—The Bored Ape Yacht Club (BAYC). It’s a limited NFT collection of 10,000 Bored Ape NFTs, launched in April 2021 and the most successful among PFP NFTs so far.
Since these BAYC NFTs are enormously expensive (think hundreds of thousands of dollars), they’re usually bought by celebrities and richer cryptocurrency enthusiasts.
BAYC NFTs work as membership cards and grant access to special parties and benefits but are also widely used as avatars on social media as a form of online flexing. And, once again, you can’t just copy and paste Madonna’s Ape and pretend that it’s yours. Twitter can verify whether people own the NFTs displayed on their profile pictures by displaying a special hexagonal border around their profile picture.
2. Crypto Game NFTs
Play-to-earn (P2E) blockchain games such as The Sandbox or Axie Infinity let players own in-game assets that can be sold or traded inside or outside the games. Gamers can own various NFTs ranging from weapons and accessories to characters or even virtual plots of land in the metaverse.
With some NFT-driven games, you don’t even need to participate in the actual gameplay to make money. You can earn passive income by becoming an investor. Let’s take Wizardia as an example.
If you buy Arena Genesis NFTs before the Arena’s launch (only a few last rounds are left at the moment of writing this article), you will have the chance to stake your tokens and make money from all later NFT sales rounds. And, once Wizardia is fully launched, your tokens will start to generate royalties from transactions conducted within the Arena.
Have a look at Wizardia’s projection calculator to see how much you could earn once the battles start. And if gaming is your thing, check our article on 7 best NFT games to make money in 2022 to learn how to turn your gaming hours into an investment.
3. Digital Art NFTs
Digital artwork NFTs are at the forefront of the non-fungible token revolution.
Just a year back, digital art would usually draw likes and shares on social media channels but wouldn’t help pay the bills since it was so easily available. Now, creators can make money from their artwork easier than ever, thanks to digital tokens tied to their works.
With NFTs, there’s finally an element of scarcity, and art collectors who want the authentic digital piece can truly own it. Most importantly, digital artists are finally getting the financial appreciation they deserve.
Digital artwork NFTs include many forms of NFTs, from drawings to photographs or videos.
The most expensive piece of NFT art sold so far is called "EVERYDAY'S: THE FIRST 5000 DAYS". Created by Mike Winkelmann, also known as Beeple, it was sold for an impressive $69 million. It’s a digital art piece made up of 5,000 images—one for each day since May 2007.
Here’s a zoomed-in example of one of those 5000 images:
$69 million. Judging from Beeple’s smile, it does pay off to be consistent for 13 years in a row.
Image source: medium.com
Check our article on the 14 most expensive NFTs ever sold for more crazy deals.
4. Music NFTs
Blockchain technology also enables musicians and DJs to turn their music into NFTs and sell their work. Music NFT is usually a tokenized version of a song or album, but it can also be a music video clip.
Why would artists sell their music as NFTs? There are two main reasons.
For one, unlike with streaming platforms or record label deals, selling music as NFTs allows the artists to keep almost all of the earnings to themselves, making music NFTs especially appealing.
But it’s not just about money. Selling music as non-fungible tokens also allows musicians to keep their creative control. Artists can decide what songs will be included in their album, when it will be released, and what their lyrics will look like. They rarely have such freedom when it comes to working with record labels.
Plus, fans who hold music NFTs can also be rewarded when their favorite artists succeed, empowering not just musicians. For example, music NFT holders can access unreleased music, be awarded royalty percentages, receive merch, and so on.
5. Memes and viral videos
Such NFT, much wow.
Doge
Yes, the famous Doge meme, which emerged in 2013, is a non-fungible token today. And the author of the image, Atsuko Sato, sold it for a whopping $4 million in 2021!
It’s not the only meme to be turned into an NFT. Other famous memes such as Disaster Girl and Bad Luck Brian face have also been sold for hundreds of thousands.
Tokenization of viral content has helped creators to get rightful compensation for their impact on the internet culture. For instance, the creator of one of the most viral YouTube videos of the 2000s—”David After Dentist,” told Insider that the earnings from the NFT sale would help finish paying off his two sons' college tuition.
Turning famous memes into NFTs also helps their creators to feel in control of their content again. "Being able to sell it just shows us that we do have some sort of control, some sort of agency in the whole process," as “Disaster Girl” Zoe Roth told the Raleigh News and Observer.
Disaster Girl
6. Virtual Fashion NFTs
With the metaverse revolution at our doorstep, digital clothing lines are already a thing. Even Mark Zuckerberg's Meta is launching a virtual clothing store! Meta users will be able to buy digital outfits for their avatars from big fashion names like Prada. Luckily, these designer outfits would cost much less than their real-life counterparts—between $2.99 and $8.99.
But you don’t need to be Zuckerberg to sell virtual clothing—there are at least a few good platforms where you can design your own digital fashion items and mint them as NFTs. You can create anything from sneakers and hoodies to sunglasses and other accessories to complete someone’s virtual look.
For example, The Fabricant Studio allows you to co-create digital fashion items with other designers or brands. Once you’re done with the design, you can mint and trade your fashion pieces in The Fabricant Studio’s NFT marketplace. The royalties from it are split between you and your co-creators.
7. NFT Collectibles
NFT collectibles are similar to their real-world counterparts—they can differ in rarity and value. The NBA Top Shot project is probably the most significant NFT collectibles project so far.
Image source: nbatopshot.com
NBA Top Shot is a virtual trading card platform built using blockchain technology. The project’s creators take NBA highlights, turn them into digital art, and mint them as NFTs. Each NFT has a unique digital serial number as proof of authenticity.
Some of the most common types of non-fungible token collectibles are usually related to sports but also include contemporary art and other miscellaneous tokens. In a way, you could say that all NFTs are collectibles.
Final words
The metaverse is still the wild, wild west. Remember, Jack Dorsey sold his tweet for $2.9 million, but now no one would bid on it even for a much lower price. But that only means that there can be lots of unexpected opportunities to make money out there.
Look at the creatives like Beeple—more and more people are making millions of dollars in NFT marketplaces with their digital art turned into non-fungible tokens. And you don’t even need to create the NFTs yourself to make money off them—you can simply buy and resell them for profit.
FAQs
What is a non-fungible token (NFT) in simple terms?
A non-fungible token (NFT) is a proof of ownership that shows who owns a specific digital asset such as a meme, image, or video. NFT stands not for the actual digital file but for a unique ID that consists of numbers and letters. They are bought and sold on NFT marketplaces and are stored in a blockchain where anyone can verify that it’s real.
Is it worth buying an NFT?
In short, yes. Buying an NFT is the same as purchasing a physical collectible. There’s always some risk involved whether your asset will go up or down in price with time. However, many crypto enthusiasts are already making thousands of dollars—some even millions— from buying and selling NFTs, especially in the digital art world, so investing in NFTs is a great idea.
Can NFT become real money?
Yes, you can make real money with NFTs. However, since NFTs and cryptocurrencies are created and stored using blockchain technology, people usually sell NFTs for crypto like bitcoin or ethereum.
How does selling NFT work?
While some NFT marketplaces accept credit cards, most of them will ask you to use cryptocurrency. So, if you want to mint and sell an NFT, you’ll first need to 1) have a crypto wallet and 2) buy some crypto to pay the fees for using the NFT trading platform’s services. Once you’ve got this covered, create an NFT, mint it, upload it to a marketplace of your choice (OpenSea is one of the biggest ones), and start an auction of your NFT.
Julija Paškevičienė
Julija is a freelance content marketer. Specialized in content writing, social media, and finding the best dog memes, she helps businesses get their message across and create content that sells.
Further reading
All articles
Are NFTs Bad for the Environment?
NFTs are a hot commodity right now. Between 2020 and 2021, the market for NFTs increased by over 20x, with the most expensive NFT sold to da...
Are NFTs Worth It?
With Beeple's Everydays: The First 500 Days selling at the staggering rate of $69 million, along with other major headlining million-d...
Why Do People Buy NFTs?
In mid-2017, a collection of 10,000 NFTs called CryptoPunks was released on the Ethereum blockchain. Bitcoin was around $5,000 at the time a...