What is an NFT, you ask?
An NFT, a cryptographic token, is a digital asset that can be used to prove ownership. It is used to verify digital artwork, videos, and GIFs as well as collectibles. NFTs are not considered a currency because they use the same blockchain technology as cryptocurrency. However, NFTs can function in a similar way to currency. They are sometimes called JPGs, as they are graphic images. However, they can be much more than a JPG file.
NFTs have been the subject of a lot of buzz in the art and tech sectors for many years. But after Christie’s auction sold one NFT collage by Beeple for an astonishing $69.3 million this March NFTs are now mainstream news. Several other NFT sales that have been big money have also made headlines since then. This includes Jack Dorsey, Twitter’s co-founder, selling for $2.9M; a clip of LeBron James’s slam-dunk for more than $200,000; and Nyan Cat’s GIF (a flying cat with Pop-Tart as a body), which went for $600,000.
You might wonder why someone would pay so much for digital images you can get from the Internet. We’ll help you answer this question by explaining the basics of NFTs. This includes how they work, what they are worth, where they can be found, and how you can ensure that your estate plan protects them if you own one.
What is the Difference between Cryptocurrency & NFTs?
Cryptocurrencies, NFTs, such as Ethereum and Bitcoin, are all part of the Crypto verse. However, cryptocurrency can be traded or exchanged for another unit of the same value. One Bitcoin can be interchanged for another bitcoin, and so on. NFTs can be “non-fungible”, meaning that each NFT is unique and cannot be used in conjunction with others. no two NFTs can be identical and cannot be reproduced. It’s like traditional artwork. Anyone can buy a Mona Lisa print but only one can own the original.
How did NFTs get started?
While primitive NFTs such as Colored Coins have been around since 2012, Crypto Kitties were the first to become very popular. Crypto Kitties was launched in 2017 and allows users to trade, adopt, raise, or trade virtual cats using the Ethereum blockchain. Each Crypto Kitty is unique and can reproduce to produce new offspring with different attributes and valuations than their parents. Crypto Kitties quickly became extremely popular. Within a matter of weeks, 20 million worth of Ethereum (Ethereum tokens) had been spent on the game. Some virtual cats were even selling for more than $100,000.
What are NFTs?
A blockchain ledger keeps track of each NFT’s ownership, just like cryptocurrency. While the majority of NFTs are on Ethereum, other blockchains such as Bitcoin Cash or FLOW support them. Once a new NFT transaction has been verified, it is added to the blockchain. It cannot be altered, duplicated, or forgeries.
NFTs may include information specific to the asset and its creator in the embedded code. An artist could sign digital artworks by adding their signature to the NFT’s metadata. A smart contract is the storage of unique information about an NFT. This is one of NFT’s most powerful and unique features.
Smart contracts are digital contracts in which the terms are written in code. Smart contracts applied can be programmed to perform a particular action when certain conditions are met. A smart contract could be programmed to pay royalty payments to NFT creators whenever digital art is sold to a buyer.
What is the Value of NFTs?
Paintings, for example, are rare and valuable because they are unique. However digital art can easily be duplicated infinitely. Digital art and other assets can also be tokenized with NFTs. This creates a digital certificate that the owner of the original item is legally entitled to it.
Both the rarity and collectability of an asset, along with its potential future sale, are what gives it value. Like any other speculative asset you purchase, NFTs can be sold for profit. Three reasons NFTs are valued more than others: 1) They belong to a club or community that is exclusive to you, 2) If they contain licensable and brandable content that could increase the value of the intellectual property, and 3) Because they can be used for status purposes (aka bragging right), they can be used “flexibly” to signal your status.
NFTs “tokenize” digital art, videos, and other collectibles, which makes them unique, verifiable assets that can be sold or traded or bought, on the Blockchain. NFTs work in the same way as any other collector’s item. However, instead of purchasing a physical item like a painting or vintage baseball trading card, you pay for a digital file. But it is the intellectual property (IP), aspect of NFTs, that makes them so interesting. You own the IP that represents the NFT once you purchase it. You can brand the NFT as the owner of the now licensable content or create a persona around it.
This is how it looks with NFT owners from the Bored Ape Yacht Club’s NFT Collection. Universal Music Group purchased 4 Bored Apes and began branding them as KINGSHIP, the new band that will promote this collection of digital apes. Other creators are now releasing sets of 10,000 NFTs to build on the success of BAYC’s NFTs (A collection of 107 Bored Apes was recently sold at Sotheby’s for $24.4M).
For What Other Uses Are NFTs Used?
The majority of the NFT market currently focuses on collectibles such as digital artworks, GIFs, and virtual trading cards. NFTs are catching the attention of large brands and we see a lot of companies taking advantage of this trend. Nike, for example, has patented its own NFT sneakers that use blockchain technology. It calls them Crypto Kicks. Marvel Comics released NFT collectibles that were inspired by Captain America and Spider-Man. Taco Bell is also on board with NFT, releasing a collection featuring GIFs and images based on tacos.
Disney’s Golden Moments NFT Collection was released in collaboration with Veve, the NFT marketplace. It features digital statues that are inspired by iconic characters and moments from Disney and Pixar, Marvel, and Star Wars. Hollywood joined the fray with the release of Zero contact, the first NFT-released feature-length movie.
NFT-based music, albums, and other music-related items have been released by musicians with great success. NFTs have been created by pop stars such as the Kings of Leon, Grimes, and Steve Aoki. Rolling Stone also reports that NFTs can revolutionize the way musicians market and connect with their fans. They include not only music and albums, but also videos and artwork. Wearable accessories and tickets are also included. This gives fans the opportunity to meet and greet the artist.
Where Can You Purchase an NFT?
You will need to have secure access to the right technology and load up on cryptocurrency in order to finance your purchase if you want to join the NFT Crypto verse. First, you will need a digital wallet to store your NFTs and crypto. Meta mask is a popular choice because it connects directly with marketplace platforms like Open Sea where you can purchase and display your NFTs.
To make the purchase you will need to buy cryptocurrency. Since Ethereum is the most widely used blockchain for NFTs, it is best to obtain their digital coins called ether (ETH). You can then visit the NFT marketplace to purchase NFTs. Open Sea is one of the most well-known NFT marketplaces, along with Minable, Nifty Gateway, and Axie Marketplace.
There are niche markets for specific NFTs as well, such as the NBA Top Shot, which showcases highlights of basketball games; Valuables auctions autographed tweets like Dorsey’s; and Autograph. This platform was launched by Tom Brady, an NFL star, and offers NFT collectibles from sports stars like Tiger Woods and Simone Biles, and Wayne Gretzky.
The high demand for NFTs means that tokens are frequently released in small batches. These are called “drops” and are similar to when concert tickets are released at certain times. Like any other event, there is a lot of demand for NFTs. You will need to register and ensure that you have enough crypto to purchase the most sought-after tokens.
What is the Future Potential for NFTs?
Although buying a virtual cat might seem like a trivial investment, NFTs have greater potential and can be used in many ways, including in finance and business. NFTs were used in a real estate transaction. A millennial from Silicon Valley bought an NFT which gave him ownership of a small apartment and art by Chizz. NFTs allow for digital representations of physical assets. This allows us to reimagine how we buy, trade, and consume any asset. NFTs offer the greatest benefit: the process of identifying IP and removing intermediaries. This creates new markets.
The digital representation of physical assets isn’t new. NFTs can be a powerful force for positive change when they are combined with the trustworthiness and tamper-proof nature of blockchain-powered smart contracts. Many people see NFTs only as a passing trend and expect the NFT bubble will burst anytime soon. However, many skeptics believe the exact same thing about Bitcoin. We remain optimistic about NFTs’ future, but only time will tell how the new technology performs in the future.
Protect Your Digital Assets
Like cryptocurrency, it is important to inform your family, trusted friends, and your lawyer that you have NFTs. These assets will go unclaimed if no one finds out. These assets can be documented by including your NFTs or cryptocurrency in your Family Wealth Inventory. This is a key component of the Life & Legacy Planning Process. It lists all your assets and liabilities.
You should include details about the assets you have, such as where they are located, how to access them, and the passcodes that will unlock your account. These instructions can be taken with your NFTs and crypto if they are not kept in a secure place. We will work with you as part of our Life & Legacy Planning Process to make sure that your crypto and NFTs are well documented and secure.
It is vital to adapt your estate planning strategies as technology advances and our lives become more digitalized. Our Attorney can help you update your estate plan so that it includes not only your traditional wealth but also all your digital assets. Get in touch with our Estate Planning Law Offices today for more information. Proper estate planning set up by a qualified lawyer will keep your family safe from conflict, the courts, and the public eye. Contact us if you are ready to make a comprehensive estate plan. We will review your existing plan and help you update it to prevent heartache for your loved ones. Book online now