What are NFTs? The handbook for making money from NFT investments you need to know

NFT is one of the forms of money-making investment that is receiving a lot of attention today. However, many people still do not know what NFT is and what interesting features it brings to an investment portfolio. Join us to find out what NFT is and how to invest in NFT in 2024!

What are NFTs?

NFT stands for Non-Fungible Token – meaning the Tokens are unique and cannot be replaced.

For example, you can replace one 100,000 VND bill with another 100,000 VND bill, but you cannot replace a piece of music because no two pieces of music are exactly the same.

Each NFT acts as a certificate of authenticity and ownership in the digital realm.

NFTs are bringing investment potential to many people

NFTs are stored using Blockchain technology, in which each unit of data will be encrypted for storage to represent a certain asset. They can be virtual assets but can also be considered a tokenized version of a real-world asset.

To put it simply, usually with Fungible Tokens, we can easily exchange them with others because of their equivalent value. But with NFT, each picture, each cartoon character will be unique and irreplaceable. It creates uniqueness for this asset class.

History of NFTs

NFTs have existed for quite a long time before becoming a hot trend recently. The first NFT sold was called “Quantum”, designed and coded by Kevin McKoy in 2014 on a blockchain platform (Namecoin), then minted (converted to NFT) on Ethereum and sold in 2014. 2021.

To function, NFTs rely on a standard called ERC-721. This standard regulates how ownership of NFTs is transferred, how transactions are confirmed, and how applications handle secure transfers (among other requirements). Another standard is ERC-1155, approved 6 months after ERC-721, which improves upon ERC-721 by bundling multiple non-fungible NFTs into a single contract, reducing transaction costs.

NFT trading increased 21,000% in 2021 to a value of $17 billion. Currently, it is being traded and used by creators to make money. In the future, it can be applied in the fields of games, movies, digital art as well as fashion.

NFTs are still in beta. It may just expand with more meaningful applications or it may disappear in a few years. In games, NFTs will be actively used for game-related purchases. As for the art sector, many artists will be able to showcase their creative skills by creating NFTs. It will also help establish ownership in the real estate sector, where property owners can be identified through NFTs.

Types of NFTs

Here are the different types of NFTs:

Art: Artists who create and sell digital art as NFTs are fetching high prices on the NFT marketplace.
Music: NFTs are also traded in the music industry. Artists sell music as NFT tokens,
Memes: Memes are also traded on the NFT market. Some famous memes sold for high prices as NFTs include Doge meme, Bad Luck Brian, and Nyan Cat.
In-game content: Gaming companies have delved into this space by selling in-game content in the form of NFTs such as characters, costumes, weapons, outfits, etc.
Domain Names: Domain names are also being traded on the NFT marketplace. Traders register several domain names and then they trade these names on the NFT market.
Movies: Filmmakers are also trading on the NFT market. These people use movie-related scenes, artwork, and music as NFTs.
Fashion: Nowadays the fashion industry is also getting involved in NFTs. Fashion companies are auctioning off their high-end fashion as NFTs.
Online content: People also trade miscellaneous online content as NFTs. This can include social media statuses, stories, tweets, and TikToks.

Blockchains that support NFTs

The following are popular blockchains that support NFTs and their transactions:

Solana: This blockchain also supports non-fungible tokens.
Tezos: This blockchain supports the sale of NFT art.
Bitcoin Cash: Supports NFTs and also supports the NFT marketplace
Juungle GoChain: Supports Zeromint NFT marketplace as well as VeVe app.
Cardano: It introduced tokens that allow NFT creation without smart contracts in its March 2021 update. Its markets include Theos and CNFT.
Flow: CryptoKitties plans to migrate to Flow from Ethereum in the coming future.

Minting NFTs

Created through a process called “minting”. During this process, information about digital assets is encrypted and recorded on the blockchain. Simply put, minting an NFT is like adding a new page to the general ledger (blockchain), the NFT information is confirmed by a “validator” and that new page is closed. The minting process typically involves the use of “smart contracts” to assign ownership and manage the transfer of NFTs.

Each minted NFT will have a unique identifier, directly linked to a blockchain wallet address. Each NFT also has an owner, and that ownership information (the wallet address containing the NFT) is publicly visible. Even if there are 5,000 identical NFTs minted (like movie tickets), each NFT still has a unique code and cannot be confused with other NFTs.

Many blockchain platforms can create NFTs, but their names may vary. For example, on the Bitcoin blockchain, they are called Ordinals. Like NFTs on Ethereum, Ordinals on Bitcoin can also be bought, sold, and traded. The difference is that Ethereum creates its own tokens for digital assets, while Ordinals uses serial numbers (identifiers) assigned to the smallest Bitcoin units (called satoshis).

Characteristics of NFTs

NFT has 5 outstanding characteristics that can be mentioned as follows:

Uniqueness: Each NFT is always unique and distinguishable from other NFTs even if it has copies.
Permanence: NFT will always exist forever with information related to its release and the sounds and images that accompany it.
Can be programmed: NFT is a line of code stored on the Blockchain platform. That’s why we can verify the author and information of that NFT.
Ownership: NFT owners have complete freedom to decide how to use and own it.

NFTs are unique

Advantages and disadvantages of NFTs

Benefits of NFTs for artists and creators:

Clear Ownership: NFTs give artists ownership of their digital works. When a content creator creates a piece of digital art, an NFT acts as a certificate of authenticity and their rights to that work.
Unique and collectible: NFTs represent one-of-a-kind, irreplaceable, and collectible works. Like traditional works of art, NFTs provide collectors with valuable digital items.
Verify legitimacy: NFTs help verify the legitimacy of collectible digital content. By storing information on the blockchain, NFT helps prevent copying and fraud, ensuring the authenticity of the work.
Immutable: The irreplaceable nature of NFTs ensures that the digital record of ownership and transaction history of the work is always protected and cannot be altered or removed.
Passive Income: Smart contracts integrated with NFTs allow artists to receive royalties every time their work is resold. This creates a passive income stream for artists and encourages content creation.

Despite its many advantages, NFTs also have some disadvantages to keep in mind:

New and speculative market: NFT is an emerging market, their true value still needs time to be researched and verified. Therefore, investing in NFTs has many potential risks.
Copy digital assets: Digital assets can be easily copied. This means that an NFT can have many identical copies. An NFT is just a “certificate” that authenticates the original, but cannot prevent copying.
Environmental impact: Blockchain is the technological foundation behind NFTs, which requires high-powered computing to maintain operations. This causes environmental problems due to significant carbon emissions.
Cybersecurity risks: NFTs can be stolen through security vulnerabilities. Like cryptocurrencies, NFTs are also assets stored on a digital platform, so security measures need to be kept in mind.
Intellectual property rights: NFT is proof of ownership of a digital asset, but does not mean ownership of copyright (Intellectual Property – IP) on that asset. The buyer of the NFT may not receive rights to copy, modify, or distribute the work, and the seller may still create additional NFT copies of the same work.
Money laundering: NFTs have the potential to be exploited for money laundering. By creating many different e-wallets for the same individual, crooks can conduct virtual NFT buying and selling transactions (wash trading) to create “virtual” sales and sell them to third parties.

Application of NFT in various fields

With its special properties, NFT has been applied in many areas of life such as games, sports, arts, etc.

Art: Works of art can be converted into digital assets and attached to Tokens on the Blockchain platform. This will help make buying and selling activities easy and reliable. It also helps effectively protect copyright for authors – something that has always caused many headaches in the real world.
Gaming: NFTs are also used in video games. It helps players own items and characters in the game. At the same time, trading can also take place safely and with less risk. To own items, players will deposit money to buy them. With Blockchain-based games that use NDT applications, the player’s items are attached to a data code and the exchange and collection of money takes place easily.

NFTs are highly applicable in video games

Digitization of real assets: NFT is expected to be widely applied in all areas of life to help tokenize assets as well as intellectual property rights.
Digital content development: Digital content is currently booming. NFT application will help encode music products, icons, memes,… to increase the value of these digital assets through ownership authentication.

Latest ways to make money with NFTs 2024

Unlike cryptocurrencies like Bitcoin or Ethereum, NFTs are not interchangeable and hold value based on their uniqueness and rarity. Combined with the recent popularity and craze, NFTs become attractive assets for investors as well. Learn some ways to make money with NFTs.

1. Create and sell NFTs

The most direct way to make money with NFTs is to create and sell them. As an artist or content creator, you can tokenize your work, turning it into a unique, tradable asset on the blockchain.

Create NFTs for profit and here’s how you can get started:

Choose a topic.

NFTs include many types of digital media, including images, videos, music, 3D models, and even virtual reality experiences. Choose the one you like best and do it best.

Create your assets

Spend time fine-tuning your digital work, making it unique and visually appealing — something collectors or investors will appreciate.

Choose an NFT marketplace

There are many NFT marketplaces where you can mint and list your artwork, such as OpenSea, Rarible, and Foundation. Research each platform’s fees, user base, and supported blockchains before making a decision.

Mint your NFT

Once you’ve chosen a marketplace, follow their guidelines for minting NFTs, uploading your digital artwork and generating tokens to represent it on the blockchain.

List NFTs for sale

Set a price for your NFT and list it on the marketplace, either at a fixed price or as an auction.

License your NFTs

Celebrities can earn ongoing revenue through licensing agreements or royalties every time their NFTs are resold. This can provide a continuous stream of income beyond the initial sale.

To generate interest and increase the value of your NFTs, consider collaborating with KOLs, leveraging social media marketing, or even creating limited edition collections.

2. Invest in NFTs

If you don’t want to create an NFT, there’s another way you can make money with NFTs: invest in digital art and collectibles. This involves purchasing NFTs, with the goal of selling them later at a higher price. Some popular NFT collections include CryptoPunks, Bored Ape Yacht Club, and World of Women.

Set up e-wallet

Currently, NFT exchanges almost all use the Ethereum network to conduct transactions. This means that buyers need to have Ether (cryptocurrency), Ethereum’s native token, to buy NFTs. If the buyer does not yet have Ether, they can open an account on a cryptocurrency exchange to purchase Ether.

Buyers will also need to set up an Ethereum-compatible cryptocurrency wallet.

Set up an e-wallet to earn money from NFTs

A cryptocurrency wallet is understood as a digital address – a place where you can store purchased cryptocurrencies. And buyers can choose platforms that provide wallets for open signing. Once opened, the buyer needs to send the purchased ether to the wallet address.

Some popular wallets for NFTs are: MetaMask, Coinbase Wallet, Trust Wallet, Binance Wallet.

Choose an exchange

The next step you will need to choose an exchange to buy NFTs.

Some NFT exchanges include: OpenSea; Rarible; Foundation; SuperRare.

After choosing the exchange, you will connect the wallet to the exchange.

Search and select NFTs

Investors can search for NFTs on the toolbar. Then, based on factors such as: price, rarity, potential,… to make a buying decision.

Buy NFTs

After completing the above steps, buyers can browse the exchange to select the NFT they want to purchase. Through the auction system, buyers will need to bid to buy the NFT they want. After successful order payment, the NFT will be transferred to your wallet.

3. Play NFT games

NFT gaming can be more than just entertainment, it can also be a lucrative opportunity that can earn valuable NFTs. These games often reward players with digital items, which can range from in-game assets like characters or gear to exclusive NFTs.

Steps to make money from NFT games

Identify valuable NFTs in games: When playing games, keep an eye out for rare or highly sought-after items. These can range from limited edition characters to in-game items. The rarer the item, the more potentially valuable it is on the market.

Evaluate and collect undervalued NFTs: Occasionally, you may come across undervalued NFTs in games. Buy these NFTs and sell them at a higher price, this is a smart way to make profits. However, finding undervalued NFTs requires an understanding of the game and what other players are willing to pay.

Transfer your NFTs to the compatible marketplace: Once you have acquired in-game NFTs, the next step is to transfer them to the NFT marketplace. The marketplace supports the blockchain your NFT is built on. Popular platforms for selling NFTs include OpenSea, Rarible, and Foundation.

List NFTs for sale: Once you’ve transferred your NFTs, list them for sale on the marketplace. Bid or auction your NFT depending on how attractive your NFT is.

Engage with the gaming community to stay informed about which NFTs are in high demand. Building a network and reputation can also help you spot opportunities to buy undervalued NFTs and sell them for a profit.

4. Trade NFTs on the secondary market

Trading NFTs on the secondary market can be a way to make money with NFTs. The secondary market is a platform where users can buy and sell previously owned NFTs, often at fluctuating prices based on demand and rarity. Examples of secondary market platforms include OpenSea and Nifty Gateway.

5. Generate passive income through Staking NFT

Staking NFTs is an emerging method that allows NFT holders to earn passive income by “staking” their NFTs into a liquidity pool. When participating in NFT staking, you will lock your NFT for a certain period of time and receive rewards in the form of cryptocurrency or other NFTs.

6. Invest in virtual land and Metaverse assets

The booming Metaverse has created new opportunities to make money with NFTs by investing in land and virtual assets. Virtual land is a digital space in the metaverse platform that can be bought, sold and developed. Examples of metaverse platforms include Decentraland, Sandbox, and Somnium Space.

Earning money from NFTs can be a fun business. You can create, invest, and trade NFTs for potential profits. As with any investment, remember to do your research, evaluate the risks, and never invest more than you can afford to lose. With the right approach, investors can take advantage of the countless opportunities that the NFT craze offers.

The NFT market is a market that is considered to have many prospects for investment. Although there are many fluctuations and can have many potential risks, if you research carefully and know how to invest proactively, NFT can be an investment portfolio that creates good potential for you.

Note:

Virtual currency – electronic money is not a legal payment method in Vietnam.
State agencies, press and media in Vietnam have warned about the risks of participating in virtual currency transactions and the NFT market.
This article does not contain any recommendations, it is for reference only.