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NFT FAQs answered

By CNBCTV18.com March 15, 2022, 5:07:48 PM IST (Updated)

NFTs and the metaverse have seen a rapid rise in popularity in the last few months. And when something becomes so popular so fast, it’s bound to leave general audiences with several doubts and questions.

Many are left wondering what these concepts are, where they came from and what warrants the ridiculous price tags attached to some of these digital assets.

If you have similar questions, worry not because we will try and put some of these doubts to rest. Tag along as we answer some of the most frequently asked questions around NFTs and the metaverse.

What is an NFT?

Regular money is fungible. This means that a Rs 10 note can be replaced by another Rs 10 note without any loss of value. The same applies to one bitcoin. However, NFTs are digital assets such as artwork, songs or collectables. They are unique and cannot be replaced by other NFTs. This makes them non-fungible. Hence, the name NFT (non-fungible token).

Also Read: A look at nine most expensive NFT deals so far

Tokenised versions of these artworks have their ownership details hard-coded into their metadata. These details cannot be forged and are updated every time an asset changes hand.

What is the metaverse?

The metaverse refers to a virtual space where users can interact with other users in a computer-generated environment. These interactions are facilitated through the use of Virtual Reality, Augmented Reality, and other related technology. A user can strap on a VR device, enter the metaverse and go shopping for virtual clothes (which can be NFTs) or meet friends for a cup of virtual coffee, right from the comfort of their home.

What is the origin of NFTs and the metaverse?

While both the concepts have only just risen to popularity, they both have been around for a while now.

The first NFT – Quantum - was minted in May 2014. Created by artist Kevin McCoy,  it is a pixelated octagon in a hypnotic cycle of changing colours and patterns. Quantum was sold in Nov 2021 for $1.4 million.

Also Read: How Ekta blockchain’s fractional real estate NFT aims to tokenise real world properties

On the other hand, the metaverse, as a concept, has been borrowed from the novel Snow Crash by Neal Stephenson. It dates back to 1992 but has come into existence only recently. In the times of COVID-19, the human need to replace physical contact with virtual interactions grew. As ways of working evolved through the last two years, so did the need for technology to make it all conducive. Enter metaverse – a virtual world where one can explore the space as an avatar and even interact with other users.

How to become an NFT artist?

To mint and sell NFTs, the first thing you need is a crypto wallet to facilitate the asset exchange. It’s best to look for a wallet that works on Ethereum as this blockchain powers most of the NFT marketplaces.

The next step is to pick a marketplace. There are multiple options, and while some are invite-only, others allow complete access after user verification. These are known as open marketplaces. Some marketplaces charge a small percentage of the sales value as fees, and the value fluctuates as the demand for the underlying blockchain changes. Marketplaces like OpenSea even allow the “lazy minting” option, wherein the fees are charged only after the sale is completed.

You are now ready to commence your journey as an artist, and you should pick a niche that you wish to cover. You should also pick the right editing software based on your NFT – it could be a photo, a video, a GIF and so on. Finally, you will need to use the appropriate file format, as given below:



















CATEGORYFILE FORMAT
AudioMP3, WAV
ImageGIF, JPG, PNG, WEBP
VideoMP4

Once your artwork is created, you simply visit the marketplace of your choice and put it up for sale as an NFT.

How do NFT marketplaces work?

NFT marketplaces are blockchain-based platforms that allow creators and designers to showcase their works of art. Enthusiasts can bid on these NFTs in a time frame specified by the seller, with the artwork going to the highest bidder.

Also Read: Dutch artist creates NFTs for every person in the world as an experiment

In making the sale, the platform charges the seller a small fee known as gas fees/energy costs and the blockchain may charge the buyer a minimal transaction fee. Once the payment is made in the native cryptocurrency of the platform’s blockchain, the owner gets an NFT token with their ownership details coded into it.

The NFT can be used to trace the artwork all the way to its first owner and even the creator. It keeps updating as the owner of the NFT changes.

Some of the best known NFT marketplaces are:























NFT MarketplaceFeatures
OpenSea.ioBeginner-friendly, one-stop-shop for NFTs
Rarible.comEasy to mint tokens
NiftyGateway.comPremier Marketplace, users must apply to be featured as artists before they can deposit Nifties from collections launched on Nifty Gateway
SuperRare.coFeatures high-end work, must apply to be an artist

How to ascertain the value of an NFT?

There is no set way to determine the exact value of an NFT. Usually, the last bidder’s offered value indicates how it is perceived. Nonetheless, there are some factors that should be considered when trying to determine the value of an NFT:

  1. Rarity – The rarer an NFT, the dearer it could be. E.g., Everyday’s The First 5000 Days by Beeple

  2. Utility – Represents what the NFT is tokenising. E.g., NFT land plots on Decentraland

  3. Interoperability – Usually applicable to in-game items. If a weapon from one game can be used on another, it is of higher value.

  4. Liquidity – Buyers prefer NFT categories that have high trading volume as it helps them profit from a trade more easily.


What are the top NFT staking platforms?

NFT staking allows art owners to reap benefits from owning a valued digital asset. Users pledge their NFT to the network as their ‘stake’ in its development and are rewarded in return for providing their valuable resources. Here are some of the best NFT staking platforms:

  1. Splinterlands

  2. NFTX

  3. BAND NFTs

  4. Doge Capital

  5. Polychain Monsters