This article will discuss non-fungible tokens, understand how they function, their role in Africa, and the views of Africans who have already invested in non-fungible tokens.
Understanding non-fungible tokens
We are all familiar with cryptocurrencies such as Bitcoin, Ethereum, etc. All these coins are called fungible, which means that a single token of either Bitcoin or Ethereum is equal to a single token held by another individual.
Therefore, each of these tokens' value is always equal to each other irrespective of that currency holder. With this said, a non-fungible token is an opposite of a fungible token, meaning that the value of one unit of that token is not valued equally as another NFT held by a different individual.
For instance, individual A holds an NFT worth $1500, and individual B holds another NFT but has a value of $2000. Therefore, their values do not complement each other. A possible reason for the disparity in values is that individual B holds a replica from which the NFT of individual A was derived.
With the above description, NFTs can be given a definitive meaning to be a group of crypto assets available on blockchain technology. Each has a unique set of codes that creates a distinction between each token.
How do NFTs function
Being assets created on a blockchain and also requiring additional features, NFTs are not compatible with some of the created to be compatible with certain blockchains like the ethereum's 721, 1155 which allows the uniqueness of each token to be encoded as metadata as well as also information about the creator of each token and also ownership of the token.
- Such specifications are not compatible with the traditional ERC20 network.
- There are also other standards or blockchain which can support the trade of NFTs, such as,
- The tezos blockchain and flow blockchain.
As stated above, special lines of codes are built into a token which sets it apart from an identical token or replica. Therefore, the value of the replica will not equal that of the original NFT.
To learn more about how NFTs function, read this post by Remitano .
The rise of NFT
Before understanding NFT as a space for crypto investing, it is expected that you know a bit about the history of NFTs and the developments that have occurred in this space.
The first record of the use of NFTs was on a platform that was built unto the Bitcoin blockchain, known as Counterparty, which facilitated the development and trade of memes and game cards.
During the years, Ethereum was released and kept gaining recognition. With it came the release of the first two Non-fungible tokens, cryptopunks (allowing the trade of special cartoon figures) and Crypto Kitties (which facilitated the adoption of virtual kitties). Although being relatively new, these NFTs became viral, with a single Cryptokitty NFT costing as high as $100,000.
Due to the several benefits made available by NFTs, such as uniqueness, safeguarding authenticity, and retaining the ownership rights of the creator, the NFT niche has grown into one reliable crypto investing option.
Now that we understand what this crypto investing Niche entails, let us discuss this asset class's application today.
Real-time application of NFT crypto investing
This asset class's introduction led to innovative ways individuals can profit in crypto investing either as an investor (buyer) or sellers of an NFT. Some sectors have already adopted and begun the utilization of NFTs. Notable sectors that can easily adopt the utilization of this asset class include;
Creation of art: the utilization of NFTs in the sale of artworks is one of the earliest applications of this Niche. Artists can create and sell NFTs of their artwork while maintaining ownership and uniqueness on the blockchain. An example of such an application is in the sale of an artwork by Beeple for $69.3 million.
Sale of sports NFTs and other collectibles: for collectors of various items such as sports cards, celebrity collectibles, etc., NFTs can be created to represent these collections. An example is the Lebron James slam dunk card, which was made into an NFT and sold for about $208,000. Other influencers, such as Logan Paul, have also released NFTs.
Music: NFTs provide musicians with the opportunity to create tokens representing their works. Adoption is already in motion as musicians such as Leon and Lil pump's kings have already created their own NFTs, with the former making about $2 million on its sale.
Gaming: also an early adopter of NFTs. The gaming industry utilizes this asset class as a representative of in-game assets. These assets can be lands, buildings contained within the game.
Social media: these days, tweets are turned into NFTs and sold. An instance is in the case of Oyindamola, whose tweet was converted to an NFT.
Although the above-listed sectors are quickly adopting NFTs, other areas exist that are beginning to utilize NFTs, including the film industry, pornography, fashion, etc.
What makes NFTs different?
The internet provides room for several assets to be duplicated, and due to this, the value of the duplicated asset is lost.
NFTs, due to their unique coding, confers protection to the value of an asset. As earlier stated, each NFT has a unique code and helps prove that asset's authentic ownership. Therefore, protecting a buyer from purchasing an asset of no value.
From the sellers' perspective, NFTs provide a means through which artists and sellers can earn royalties even after the sale of an NFT.
The above statement is also attributed to the coding of an NFT, which allows the original owner of an NFT to earn profits every time that token is traded.
Therefore, this is of more benefit to artists and musicians,
These two perspectives portray NFTs as an asset class of major importance by creating both opportunity and security for investors and creators.
Who can invest in NFTs? Who does it profit most?
Crypto investing requires a firm understanding of the respective market.
The NFT market is still in its early days. However, it has seen a massive increase in its value since 2017, which was about $40 million to a valuation of about $300 million at the end of 2020; this depicts interest of about 700% in 3 years and is expected to surpass such figures in the following years.
And this is evidenced by the amount of money realized from the trading of about 150,000 NFTs in the first few months of 2021, amounting to $310 million.
As earlier mentioned, several sectors acknowledge the utility of these tokens. Therefore, with NFTs being still in their infancy, expectations of impressive gains and widespread adoption are well within reach.
NFTs in Africa
Let's create some exposure to Africans about NFTs. Several Africans have adopted NFTs either as a creator or seller, or investor, therefore, we will discuss some Africans' experiences in the NFT space, either as an investor or a seller of an NFT.
what some investors/sellers in Africa think of NFTs
In Africa, Nigeria's crypto market is currently in the lead, despite the federal government's ban imposed on financial institutions.
With several Niches' introduction, new opportunities are searched for in the African space, with NFTs not being excluded.
The most adoption of NFTs in Africa is seen in the area of art; Nigeria not excluded has seen the adoption of this means for the sale of digital art.
The perspective of a seller
1. Jacon Osinachi
Jacon is a 29-year-old artist known as one of the top creators of digital artwork in Nigeria. With art created using Microsoft Word, he converts these images into a pdf format and then to Png or any other suitable format.
Artworks created by Osinachi are among the top gainers, with his artwork titled "Mirror mirror" sold at 9 ETH on the NFT site called Super rare and his highest-earning artwork being sold at 20 ETH.
As earlier mentioned, the blockchain protects the artwork by providing it with a unique identity and contract, allowing Osinachi to earn whenever his art is traded between individuals other than himself.
2. Oyindamola Oyekemi Oyewumi
A Nigerian artist by the name of Oyindamola Oyekemi Oyewumi tweeted an artwork of the Cofounder of Ethereum, Charles Hoskinson. On coming across the artwork, Charles created an NFT to represent the artwork, and he sold it for $6000.
Charles Hoskinson also introduced the artist to NFTs, which led her to mint and sell her unique tokens.
Oyindamola also expressed concerns over the entry of new individuals into space, stating that the successful sale of an NFT depends on the artist's fanbase.
Therefore, an established artist with a large fanbase will profit more than an artist with a much lesser fanbase.
3. Eliud Kipchoge
image
He is a well-known athlete that hails from Kenya and is known as the first individual to run 42 kilometers and 195 meters in under two hours.
With the NFT crypto investing trend rising in Africa, he announced via his Twitter handle the release of his NFT, representing key points in his success story.
Upon release, 17 ETH was raised, with 14 ETH coming from his Vienna run and 3 ETH from his Berlin marathon.
The perspective of an investor
1. Micheal Ugwu
Micheal Ugwu is an NFT artwork collector with over 40 different artworks; in his perspective, he purchases artworks with a business mindset. Also, artworks that appeal to him are from an artist with an established fanbase or enough global presence and create a much easier and higher resale value, Therefore, tallying with the concern expressed by Oyindamola.
Mr. Ugwu also expressed some challenges that could be experienced by NFT artists in Africa, especially Nigeria, and this challenge stems from the gas fees of the ethereum platform, which can be as high as $100 ( NGN 48,000)
From the above individuals, we can deduce that the NFT market is gaining momentum in Africa, with Micheal Ugwu and Osinachi partnering, increasing awareness of this space.
Who does NFT crypto investing profit the most?
Reading through this article creates an idea that these articles' creators make the most gains/ in NFTs. However, this is not likely as NFTs are also profitable to investors through the resale and auction of purchased NFTs.
Creators have more means through which they can earn funds, and they include;
- Creation and sale of original NFTs.p
- Earnings through the resale of their NFTs by investors.
It is expected that with the increasing adoption of NFTs, more channels by which investors can benefit from this asset class.
Breaking into the NFT market
Although many risks are seen in the crypto market, there are also several opportunities present to individuals, either investors or buyers.
Therefore, before choosing to partake in this market, adequate information about NFTs is needed, and several factors are to be taken into consideration.
Factors peculiar to creators and sellers
- Creating your own NFTs (minting).
- Increasing the sales and reach of your NFTs.
- Choosing an item, you intend to sell or choosing a unique item is.
- Choosing the right platform to sell your NFts.
- Appropriately pricing your NFTs to avoid undervaluing your token.
Factors peculiar to buyers and investors
Crypto Investing requires extensive research into the market and the item they wish to purchase.
Other factors to consider include;
- The pricing of the NFT.
- The intent for the purchase (for personal use or to make a profit).
- The authenticity and creator of the item.
Conclusion
Several sectors, such as fashion and entertainment, are widely adopting the NFT market.
This market space is recommended for intending investors and business holders due to its early stage and numerous potential. However, adequate research is required.
To learn more about NFTs in crypto investing, read this post by Remitano .
