Estimated reading: 5 mins

What Do People Do With NFTs After Buying Them?

Digital Artist Chris Torres got lucky in 2021 by selling the crypto art that he created, 'Nyan Cat,' for a whopping $600,000. Similarly, Twitter CEO Jack Dorsey was able to sell off his first tweet in an auction for an unbelievable amount of $2.5 million.

Elon Musk shared a meme on Twitter as he always does. The creator of the meme listed it as an NFT (non-fungible token), and within two days, the value of the Non-Fungible token reached $20,000.

Digital Creator or Artist Mike Winkelmann could not sell his artwork for more than $100 until 2021. Everything changed beyond his imagination in 2021. He sold an NFT of one of his works for almost $69 million at Christie's. The auction house now considers him one of the top three living artists. What a strange twist of events?

How did Twitter CEO Jack Dorsey, artist Mike Winkelmann, Chris Torres, or Eva Beylin, creator of the meme shared by Elon Musk, do this? Are you confused and not sure how people are making money this easily? And why is the whole world suddenly revolving around NFTs?

Many people are looking at investing in NFT tokens to earn money, and NFTs have become a buzzword rising in popularity these days. Becoming an NFT creator or an artist seems wise for many digital creators out there.

nyan cat
Nyan Cat

 

What Exactly Is Non-Fungible Token

In a nutshell, it’s a digital token. Before blockchain technology, it was easy to replicate digital assets and distribute them globally without knowing who created them. It was hard for creators to prove their ownership. But blockchain technology gives NFT creators total control of the digital assets they make.

They can prove their ownership with ease. Smart contracts enable NFTs, making it possible to verify ownership. You can say that the digital asset becomes a kind of trading card once you place it on the blockchain.

A digital asset can be anything such as a tweet, digital art, or a text you publish on a website. By creating an NFT, one can prove their ownership of a digital file using the unique code they get. Since this code is distinctive, it differentiates your file from the digital replicas circulating online.

The NFT market is quite lucrative, and everyone wants to get in to make some profit. Though NFTs have been present globally since 2014, they did not receive as much attention before.

 

Benefits of Buying and Owning NFTs

NFTs provide a decentralised certification that makes your digital asset unique. It allows people to have clear ownership of the digital objects they create.

The NFT value changes depending on what people desire to pay for that item. It is secure because the digital artwork or asset you publish has unique data linked with it.

Artists don’t have to depend on auction houses to sell the art they create. Both artists and content creators can now monetise the content they create by creating an NFT. Once listed on an NFT marketplace, anyone can trade, sell or buy NFTs.

Nowadays, some platforms even allow you to use NFTs for gambling and gaming. Others are a means of donating to certain charities such as Digital Charity Art working with marine conservation charities, or Shiba's Wife, involved with women's rights issues.

 

How People Make Money from NFT Investments

Like any other investment that people make, such as real estate, cryptocurrencies and fine arts, NFT holders buy a digital asset whose value may change over time.

If the item's popularity increases, the owner may sell it for a profit. Like any other investment, of course, there is a risk involved with non-fungible tokens.

Token holders may get stuck with the NFT artwork or a digital asset they bought if the item's desirability declines. Hence, only buying NFTs you’re interested in yourself might be a wise move should no one else wants to buy them from you.

The best part about an NFT is that the creator can get a royalty from the buyer of the NFT. They can claim a percentage of the sale money if the buyer sells the NFT to another person for a higher rate. Usually, artists do not receive anything after selling their product to a person in the real world.

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Copyright Owners and NFTs

NFT ownership is a complex subject. The underlying copyright of creative work does not necessarily transfer automatically to an NFT buyer when purchasing digital assets from the copyright owner.

The NFT owner may choose to retain the underlying copyright of the content even after the transaction. However, since an NFT can have only one owner, owners enjoy exclusive ownership rights.

 

How do People store NFTs After Buying Them?

What would you do if you possessed a physical asset like an artwork such as the Mona Lisa that's worth a fortune? You’d do everything you could to store it in a secure and foolproof place. The same principle applies when you own NFTs.

Reuters states the NFT market upsurged from $13.7 million to $2.5 billion during the last year. And this may only increase in years to come according to current trends. Currently, the popularity of NFTs is growing with each passing day.

Apart from investors, NFTs have also attracted hackers across the globe. They want to steal digital assets worth thousands of dollars or steal credit card information to purchase NFTs. Last year, hackers stole NFTs worth thousands from Nifty Gateway. The company blamed customers for not using two-factor authentication. Because of this, cyberpunks quickly identified users' credentials.

If you want to avoid theft of digital assets you own, it’s necessary to store them safely and use additional security measures such as two-factor authentication. If you are not prudent, you risk losing what you own in just a few seconds.

You must understand that, like cryptocurrency, you don’t store NFTs in your wallet. Instead, the wallet grants you access to the blockchain they’re stored on using your key pairs (which are stored in your wallet).

As long as you have digital assets online, there’s a risk of losing them, which is why you should research wallet options before picking the best fit for you.

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Love in The Time of Web3

Types of Storage Available

Just like cryptocurrencies, you need a secure place to store NFTs. Leaving them in a marketplace (hosted wallet) is not recommended as you expose yourself to hackers and other threats.

The best place to store your NFT is in a non-hosted wallet you retain the private keys to. And there are many options available, including mobile, desktop, hardware devices or browser-based wallets.

 

Hot Storage - Software and Browser-based Wallets

Metamask Wallet

Metamask is a secure software wallet that stores NFTs. Built as a Chrome application, you can encrypt Metamask wallet transactions secure them using a password and a 12 to 24-word backup phrase.

Enjin Wallet

Next in line is Enjin Wallet. Apart from storing crypto, you can also use it to create, distribute and integrate NFTs. Samsung smartphones plan to integrate it as their devices official NFT wallet app.

While software wallets are a good option, one must use them cautiously. Since these wallets are online, there is still scope for hackers to access them if you do not take proper precautions.

 

Cold Storage - Hardware Wallets

The safest storage option is offline; cold storage. By keeping your NFTs in a wallet not continuously connected to the internet, the risk of losing them becomes nearly impossible. You can keep keyloggers and hackers away from your possessions by using this option.

There’s no way someone can steal your NFTs unless they hold the physical device where you stored them or have your backup phrase. You should use 2FA to make your wallet extra secure.

Ledger and Trezor are two of the best hardware wallets in the market and the only two that BitPrime recommends.

bored ape yacht club
Bored Ape Yacht Club is a collection of 10,000 NFTs

 

In Conclusion

Investing in a non-fungible token is a personal decision and has potential risks associated with it. As with any investment, one must do their due diligence and consider all the aspects before purchasing NFTs.

Once you buy one, you must consider storing them in a digital wallet that is safe and secure to prevent hackers from stealing them from you.

It’s then up to you whether you choose to hold on to your new digital collectable or look at flipping it to make a profit from it, potentially.

 


About the author:

Jonas Gihone Akula

Disclaimer:

The above references an opinion and is for informational purposes only. Do not take this as personalised financial advice or investment advice. The views expressed by the author do not necessarily represent the opinion of BitPrime.

 

Last updated: 15/02/2022

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