Last updated on Mar 13, 2024

What are the benefits and challenges of creating and selling non-fungible tokens (NFTs)?

Non-fungible tokens (NFTs) are a new way of creating and selling digital art on the blockchain. They are unique, scarce, and verifiable, which makes them attractive for artists and collectors. But they also pose some challenges, such as environmental impact, legal issues, and market volatility. In this article, we will explore what NFTs are, how they work, and what are their benefits and drawbacks for digital art.

1 What are NFTs?

NFTs are digital tokens that represent a unique piece of digital content, such as an image, video, audio, or game item. Unlike fungible tokens, such as cryptocurrencies, NFTs cannot be exchanged for another of the same kind. They have their own identity and history, which can be traced and verified on the blockchain. NFTs can be created, bought, and sold on various platforms, such as OpenSea, Rarible, or SuperRare, using smart contracts and cryptocurrencies.

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Jamie Parmenter

CEO at RealNifty | Editor and Founder at Vinyl Chapters | Web3 | LinkedIn Top Voice
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NFTs, in some cases, can therefore create 'digital scarcity'. This is why you may see some people willing to pay more money for an NFT with rare traits for example. This may be able to be sold for a higher price on an NFT marketplace. This is just one small (and starting to be outdated) use case for NFTs, with many utilities and ideas for how they can be used continuously being added as the technology grows.

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2 How do NFTs work?

NFTs are based on a standard called ERC-721, which defines the rules and attributes of each token. Each NFT has a unique identifier, metadata, and ownership information, which are stored on the blockchain. The actual digital content, however, is usually stored off-chain, on a centralized or decentralized server, and linked to the token by a URL or a hash. When an NFT is created, it is minted on the blockchain and assigned to an address, which can be a wallet or a platform. When an NFT is transferred, it is burned on the original address and minted on the new one, updating the ownership record.

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Jamie Parmenter

CEO at RealNifty | Editor and Founder at Vinyl Chapters | Web3 | LinkedIn Top Voice
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The reason why digital content attached to an NFT is usually stored off-chain is due to the amount of data this may include - it would slow down the network, and could cost a lot of money to mint or transfer in gas fees. Platforms such as Arweave or Filecoin provide decentralized storage solutions at present.

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3 What are the benefits of NFTs for digital art?

NFTs offer several advantages for digital artists and collectors. First, they enable artists to create and sell unique and scarce digital works, without the risk of duplication or plagiarism. They also allow artists to retain the copyright and royalties of their works, and to set their own prices and terms. Second, they provide collectors with a way of owning and displaying digital art, with proof of authenticity and provenance. They also enable collectors to access a global and diverse market, and to trade and resell their NFTs on secondary platforms. Third, they create a new form of artistic expression and innovation, where digital art can be interactive, dynamic, or collaborative, and where new genres and styles can emerge.

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Aubrey Terrazas

Content Lead @ RARI Foundation | Marketing, Content & Communications Strategy | Web3 |
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NFTs offer artists a new revenue stream through royalties on the secondary market. While the total trading volume may fluctuate with market conditions, it remains a multi-billion dollar industry with new users joining Web3 communities daily.

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Jamie Parmenter

CEO at RealNifty | Editor and Founder at Vinyl Chapters | Web3 | LinkedIn Top Voice
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the digital art space is very exciting when linked to NFTs. Physical paintings can also be linked to NFTs and we are starting to see more artists in the traditional fine art space seeing how they can use NFTs to broaden and grow their audience. Real-life galleries are also keeping an eye on NFTs and looking into how they can turn their galleries into digital and physical places.

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4 What are the challenges of NFTs for digital art?

NFTs also face some challenges and limitations, both technical and ethical. First, they have a significant environmental impact, as they consume a lot of energy and generate a lot of emissions. This is because most NFTs are based on the Ethereum blockchain, which uses a proof-of-work consensus mechanism, which requires a lot of computing power and electricity. Some alternatives, such as proof-of-stake or layer-2 solutions, are being developed, but they are not widely adopted yet. Second, they raise some legal and regulatory issues, such as taxation, intellectual property, and consumer protection. For example, who owns the rights to the digital content, the token, or both? What happens if the content is deleted, modified, or stolen? How are NFTs taxed and reported? These questions are not fully answered yet, and may vary depending on the jurisdiction and the platform. Third, they are subject to market volatility and speculation, as the prices and demand of NFTs can fluctuate rapidly and unpredictably. This can create bubbles, scams, and frauds, as well as affect the artistic value and quality of the works.

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Jamie Parmenter

CEO at RealNifty | Editor and Founder at Vinyl Chapters | Web3 | LinkedIn Top Voice
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I think a few points in the above content are a little outdated - Ethereum is now proof of stake and many blockchains use proof of stake. Leaps and bounds have also been made in attaching IP rights to NFTs and this is going to be a big part of the future, especially in the art and music worlds. Regulation is going to be interesting as different countries see different ways of achieving this as mass adoption of the tech gets closer. It's gong to be interesting to see where this goes.

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Aubrey Terrazas

Content Lead @ RARI Foundation | Marketing, Content & Communications Strategy | Web3 |
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The energy consumption issue has been greatly resolved for many NFT projects, which often use L2s (now widely adopted) and even L3s. Technical solutions are now available for creators to mint their NFTs and manage revenue. Regulation still has work to be done, but advocates are pushing for clarity.

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5 How to create and sell NFTs?

If you are interested in creating and selling NFTs, you will need some basic tools and steps. First, you will need a digital wallet that supports ERC-721 tokens, such as MetaMask, Trust Wallet, or Coinbase Wallet. You will also need some cryptocurrency, such as Ether, to pay for the gas fees and the platform fees. Second, you will need to choose a platform that allows you to mint and list your NFTs, such as OpenSea, Rarible, or SuperRare. Each platform has its own features, fees, and community, so you should do some research and comparison before deciding. Third, you will need to upload your digital content, add some metadata, such as title, description, and tags, and set your price and royalties. You can choose to sell your NFTs at a fixed price, or as an auction, or as a collection. You can also choose to sell them individually, or as a bundle, or as a fractionalized ownership. Fourth, you will need to promote and market your NFTs, using social media, blogs, podcasts, or other channels. You can also join some online communities, such as Discord, Reddit, or Twitter, where you can network, collaborate, and learn from other artists and collectors.

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Jamie Parmenter

CEO at RealNifty | Editor and Founder at Vinyl Chapters | Web3 | LinkedIn Top Voice
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The process is still relatively complicated and full of frictions for those not in the web3 space. This will need to change to bring mass adoption. The technology is gradually being pushed into the background which is going to help, and UX/UI solutions are getting better. We are still in the early days of NFTs and to on-board more artists, clear messages, platforms and education will be needed.

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What are the benefits and challenges of creating and selling non-fungible tokens (NFTs)?

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1 What are NFTs?

2 How do NFTs work?

3 What are the benefits of NFTs for digital art?

4 What are the challenges of NFTs for digital art?

5 How to create and sell NFTs?

Blockchain

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What are the benefits and challenges of creating and selling non-fungible tokens (NFTs)?

1

2

3

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1 What are NFTs?

2 How do NFTs work?

3 What are the benefits of NFTs for digital art?

4 What are the challenges of NFTs for digital art?

5 How to create and sell NFTs?

Blockchain

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