From SNL to Christie’s to Grimes to, even, my Favorite Barista at Starbucks… Everyone Seems to Be Talking About NFTs!
Non-fungible tokens or NFTs are the new hot topic that everyone is talking about! You may have tried to avoid the topic but just can’t any longer! Or you may have tried to enter into the conversation about it without really knowing what you were talking about. Prior to doing my due diligence, I was one of those people…
In this article I am going to explain what an NFT is and its implications. I will then talk about two of my favorite NFT platforms and why I feel that they are superior.
What does NFT stand for?
What does Non-Fungible mean?
Essentially, it means unique and not mutually interchangeable.
What is an NFT?
An NFT is a verifiable cryptographic asset that is on the blockchain. In simpler terms, it is a digital item that can be bought or sold and is stored on the blockchain, which is a digital ledger of transactions.
Huh? I’m still not following… Give me an example!
Ok, picture this: you have a special Pokemon card. Your one-of-a-kind collectable Pokemon card is now not a physical card anymore, but rather is in a digital format. Your card can be easily bought and sold online (via the blockchain) but it is all now digitized.
Give me a famous example…
This spring, a blockchain firm decided to take famous artwork and turn it into an NFT. The firm bought a Banksy piece of art, worth $95,000, and burned it in a live video. The firm then resold the artwork as an NFT on OpenSea platform for $380,000. The firm noted that by burning the physical piece, they were removing and shifting the value from the physical piece to the NFT digital art. If an NFT and the physical Bansky artwork existed, then the value would be primarily in the physical piece. By removing the physical piece from existence and having the NFT, ensured that the NFT, due to the smart contract capability of the blockchain, is unalterable and is truly the original piece.
Ok, I get it; but, how does it actually work?
This may bore you; so, if you understand the basics and are not looking to learn about the nerdy tech side of NFTs then I suggest you skip this section. For anyone who is interested, commence reading!
As mentioned, an NFT runs on blockchain technology. NFTs are unique digital assets that can not be changed or destroyed due to the blockchain technology that supports it. The blockchain is a decentralized digital ledger that records ownership and transactions on a peer-to-peer network. The blockchain ensures verification of authenticity, as each NFT is coded with a unique identification and other metadata. NFT data is stored on the blockchain via smart contracts that is a self-executing contract with all terms of the agreement written in code and governs aspects including the transferability and verification of ownership. When a person makes, or “mints,” an NFT, one is writing the underlying smart contract code that governs the characteristics of the NFT. For example, a smart contract could be drafted to automatically appropriate a share of the amounts paid for any subsequent sales of the NFT back to the original proprietor; the owner would be able to capitalize on the sales initiated in the secondary marketplace. Depending upon the blockchain technology used, one can manage the properties of the NFT. Some NFT marketplaces only function with particular blockchains; the choice of the blockchain for an NFT (i.e. Ethereum with its ERC-721 and ERC-1155 smart contracts) can have certain commercial significance for the merchant.
Explain the relationship between blockchain and NFTs in simple terms
Blockchain is a technology that records and tracks ownership. For example, when a person gets a signed autograph from a famous athlete, to verify the autograph is legitimate the item will come with a certificate of authenticity. Analogously, the blockchain technology of an NFT is equivalent to the physical certificate of authenticity of the autograph.
Why are NFTs so popular?
NFTs allow gamers, collectors, and others to become immutable proprietors of these unique assets. For many, NFTs allow creators to generate a revenue stream and share their work. NFTs have many use cases, including for collectibles, music, and artwork, among others. NFTs are attractive for many artists, for example, as it allows them to control and monetize their work. Furthermore, artists are able to capitalize on future sales of their work, contrary to their current scenario where they get paid on the initial sale and not the appreciation of their work post initial sale. For new artists, it allows them to release their artwork to a network where they can gain potential exposure that was never attainable before. On the buyer’s end, purchasing an NFT allows the owner to have some basic usage rights and profit if he or she were to sell after the potential appreciation of the NFT. Due to the blockchain technology behind NFTs, buyers and sellers alike are able to see each time a transaction takes place; the transparency of NFTs and security allow for the mutual confidence in the technology and bullish perspective of its further future potential.
Where can I buy and sell NFTs?
There are many NFT marketplaces, including OpenSea, Mintable, Nifty Gateway, Rarible, Circle, SuperRare, Foundation, Atomic Market, among others, where buyers and sellers can transact.
There are so many NFT marketplaces… How do I choose?
The most important piece of advice I can give to you in choosing which marketplace to use is to thoroughly research the NFT platform and do your due diligence. Understand the fees associated with each NFT platform (i.e. gas fees, conversion fees, etc.) and all other details including timing, risk of loss, auction process, and NFT management. If you are unsure or confused about any aspects of the platform, I highly recommend you contact the associated customer support. I did this for a platform I was looking to understand more about and it was helpful to me. Additionally, I would recommend joining the platform’s Telegram group chat as a way to get the inside scoop and further information from the following community.
What NFT marketplaces do you think are superior or interesting?
The two NFT platforms I will discuss below are two of my favorites for various reasons. The first platform is called OpenSea. OpenSea prides itself on being the first truly-free NFT maker that eliminates the need for creators to pay a gas fee. Compared to other NFT platforms that have an average gas fee of $2 to $32 to mint an NFT, OpenSea is superior. OpenSea claims to be the largest NFT marketplace and has over 200 categories and 4 million items.
OpenSea was founded in New York City by Devin Finzer and Alex Atallah in 2017. The platform has raised millions of dollars from investors to continue to push its vision and potential across boundaries. At its core, the platform vows to be the next Amazon of the digital content sector. OpenSea is a decentralized marketplace where trades occur via smart contracts. On the platform, it is very easy to buy, sell, or invest in NFTs. You need a wallet to get started on OpenSea and you have the ability to change the currency type you use; currently, there are over 240 payment options. Once you have a crypto wallet (ie. Coinbase), the sign-up process for OpenSea is a breeze; you sign in with your wallet and then personalize your account thereafter. Creating an NFT is easy and OpenSea offers free minting. The platform does take a percentage fee of 2.5% of the sales; however, this commission percentage is lower than other NFT marketplaces. For step-by-step instructions on how to create and sell NFTs on OpenSea please visit the link here: https://opensea.io/blog/announcements/introducing-the-collection-manager/
Another NFT marketplace that I find interesting and superior in some ways is a platform called Circle. I think that the most interesting aspect of Circle is that it has an NFT payment platform that accepts credit card and crypto payments.
“For the marketplaces selling the NFTs, they’re missing out on a huge opportunity to bring more users onto their platforms. Circle’s payments and treasury infrastructure allows NFT marketplaces to accept credit card payments and bank transfers in addition to cryptocurrency, which means a better user experience and a bigger addressable market for the platform.”- Hannah Post, product marketing manager at Circle.
Despite rising interest in cryptocurrency and NFTs, a major hurdle to mass adoption is the payment infrastructure of NFTs. Almost all NFT marketplaces require payment in cryptocurrency, which serves as a major deterrent for many. As a result of this absence of a streamlined payment system where buyers and sellers can use different payment methods, Fintech firm Circle launched its NFT platform. The platform accepts traditional credit card payments in addition to crypto payments in an effort to advance mainstream adoption.
“We believe that an open internet of value exchange can transform and integrate the world more deeply, eventually eliminating artificial economic borders and enabling a more efficient and inclusive global marketplace that connects every person on the planet. The future of the global economy is open, shared, inclusive, far more evenly distributed, and powerful not only for a few chosen gatekeepers, but for all who will connect.This vision relies upon an open standards model for fiat money on the internet, which is emerging now with broad industry support behind USDC. The potential is immense, and we are excited to be part of this next step.”- Jeremy Allaire, CEO
Circle has received over $270 million in venture backing from several investors and has chosen Signature Bank as the leading financial institution to manage billions of United States dollar reserves to ensure the full backing of USDC, according to CEO Jeremy Allaire. The creation of a Circle account is completely free and there are no charges associated with it. After approval of your Circle account you will be enabled the following core functions, including the tokenization of USD to USDC, redemption of USDC to USD, and transfer of USDC in or out from or to the external wallet. According to Circle’s customer service team, the best way to familiarize yourself with the platform is to set up an account.
The Wrap Up
There is immense potential in the NFT marketplace for creators, users, and the community. This is just the beginning. To The Moon!
Jordana Cohen, Writer and Associate, Alpha Sigma Capital
Jordana joined Alpha Sigma Capital in November 2020 as writer and associate. Jordana graduated magna cum laude from Tulane University with a business major in finance and a minor in Spanish. In addition to her academic accomplishments, she has substantive experience in management and marketing endeavors through her establishment of several start-up events to fundraise for pediatric cancer research. Alpha Sigma Capital is a pioneering digital asset fund that invests in growth companies, private and public equity, mergers and acquisitions, and special situations. Alpha Sigma Capital believes in a fundamental research approach for investing and supporting the blockchain economy; and, it is rigorous in determining the value of such organizations.