Non-fungible tokens (NFTs) are everywhere in 2022. Major international brands are getting involved and innovators in the space are constantly evolving the NFT experience.
However, there are still a lot of questions around the basics of NFTs. These are the most searched NFT questions on Google.
Zhong Yang Chan, Head of Research at CoinGecko, provides the definitive answer to each of these key NFT questions:
1. What is an NFT?
This is the most Googled NFT question with internet users searching this about 948,000 times every month around the world.
NFTs are unique, non-fungible tokens on the blockchain. These can be used as digital representations of assets such as art, collectibles, music, video game items, and real-world assets such as property deeds, luxury items, diamonds, and more.
2. How do you create an NFT?
NFTs can be generated through the deployment of smart contracts. NFT marketplaces such as OpenSea, x2y2 and Magic Eden makes the NFT creation process more user-friendly. Users can upload files and mint them as NFTs on the blockchain.
3. Where can you buy/sell NFTs?
NFTs can be traded on a variety of marketplaces across different blockchain networks such as OpenSea, Magic Eden, LooksRare, and even on some centralized exchanges such as Binance or FTX.
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4. What’s the most expensive NFT?
While most attention on NFTs are focused on profile picture collections like the ‘Bored Ape Yacht Club (BAYC)’ or ‘CryptoPunks’, the most expensive individual NFT is Beeple’s ‘The First 5000 Days’. This is a collage of art created daily for over 13 years, which sold for $69 million.
The most expensive collection ever sold on the primary market was The Merge by Pak, which raked in $92 million.
5. Why are NFTs valuable?
As with physical art and other collectibles, an NFT becomes valuable if others perceive that it has value. The creator, the community surrounding the NFT, along with other factors, all influence the inherent value of the NFT. In the case of game NFTs, it could represent game asset ownership within the game or metaverse, and the game development or metaverse roadmap can drive the NFT value up or down.
6. Are NFTs bad for the environment?
Environmental concerns surrounding NFTs are because NFTs are minted on the blockchain. However, the most popular chains for NFTs such as Ethereum (post-Merge), Solana and Polygon are all now based on the Proof-of-Stake consensus mechanism, which are energy-efficient. Users can opt for more energy-friendly networks to mint NFTs.
7. What does minting mean?
Minting is the act of generating a record of an item, like an image or audio file onto the blockchain as an NFT. Typically, the record consists of a path to retrieve the item from a database, as well as valuable metadata – for instance, the original creator, time stamp of when it was created, traits and more.
8. Why can NFTs be so expensive?
Select NFTs have fetched soaring prices because of their exclusivity – through the blockchain, an NFT holder can verify that they are the sole owner of an item. In the case of NFT collections, NFTs with popular or rare traits are typically more sought after, and would fetch higher prices, due to its higher demand. Some NFTs also confer special privileges or rights, such as access to an exclusive club or community, which can be attractive to some.
9. Are NFT’s a better investment than crypto?
NFTs are neither better nor worse than crypto as an investment. Just like traditional art, luxury goods, stocks, derivative products and so on, NFTs are merely one of the many asset classes available. Similar to crypto, NFT prices can be extremely volatile in nature, and we advise everyone to do your own research (DYOR) before investing.
This study and the answers given were provided by CoinGecko, the world’s largest independent cryptocurrency aggregator.