How NFT trading is creating a new income stream
What are NFT’s
Nun-fungible Tokens, are cryptocurrency based tokens that are unique and cannot be exchanged into fiat or other cryptocurrencies. For the sake of clarity, if you own Bitcoin or Ether you can go to an exchange and exchange it to other cryptocurrencies. In retrospect, if you own an NFT, you cannot go to any exchange and swap/exchange it for another token, technically it will not be possible. Hence NFT’s are unique in nature as they are under the ownership of the buyer. The buyer can sell his/her NFT’s in the marketplace to another buyer by transferring the ownership wallet from Wallet A to Wallet B — B being the new buyer.
NFT is an application on the blockchain. Other applications on the blockchain are: cryptocurrencies, smart contracts, or blockchain records. The same way we say email is one type of an application on the internet, video streaming is another kind of an application on the internet. Gmail is one type of an email application on the internet. Video streaming and emails cannot work without the internet. Similarly, NFT’s, and cryptocurrency cannot work without the blockchain. Bitcoin is one type of a cryptocurrency application on the blockchain.
NFT’s work on the concept of rare value items — RVI for short. Any RVI item has value associated to it. The rating of the value depends on how rare and unique the item is. For example, a Picasso painting has very high value because of its uniqueness and rarity. A photo of Michael Jackson that was taken in the nineties and was never published has value. If the photo was actually signed by Michael Jackson then it would have even higher value. Any item associated to a celebrity obviously has high monetary value associated to it. The more famous the celebrity the higher the value of the item. If the celebrity passed away, the item would have even higher value.
“Any item associated to a celebrity obviously has high monetary value associated to it.”
Traditionally if you wanted to buy a Picasso painting you would have to go into a bidding war in the range of millions to be able to purchase it. This process is only reserved for the elite few who can make those kinds of bids. Plus you would have to be present in some upscale art gallery in Paris just to be accepted to bid for it. If you win the bid you would own the Picasso painting and you would be and celebrate it with your family or loved ones.
NFT’s changed the whole business model. In the example of a Michael Jackson photo, you can scan the photo and upload to an NFT marketplace such as OpenSea.io, and mint the NFT based on fractional shares of the photo. What happens technically, the image of Michael Jackson would be linked to shares as transactions on the blockchain (the backend technology of NFT) and each share would represent a percentage token price in Ether cryptocurrency. In other words, the same Michael Jackson photo would now have ten items of 10% share priced at 0.001 Ether for each 10% stake in the photo. The minted NFT is now placed on the OpenSea marketplace and you can set the price of each of the 10% stake in terms of Ether price point. Once the NFT is listed, anyone from across the world can come and buy the 10% share of them item, and that person’s wallet address would be listed as the owner of that specific 10% stake in the Michael Jackson photo.
Now people globally can buy into RVI — rate value items which was never possible before. Given that they dont own the entire item, so they cannot hold it in their hands, however they can own a virtual piece of it. Moreover they can sell that stake to anyone else for a higher price. Suddenly the buying pool of an RVI — rare value item — item is now global. This opens up an enormous monetary opportunity for a new market for creators.
How to double your income with NFT’s:
The success of the Bored Ape Yacht Club — BAYC images is due to the perceived value of the RVI of the item. The people behind the BAYC images released them on the marketplace not knowing what to expect. A few people purchased the stakes in them because of their uniqueness and they looked cool. Other people followed believing that they can flip them and that other people would buy it from them for a higher price — flipping.
The more rare and unique the item is, the higher the perceived value of the item and perceived value = potential demand. Nothing is certain of any RVI — essentially it is a gamble, you are making a bet that someone is going to buy your share of the BAYC — Bored Ape Yacht Club picture for a higher price.
If you think back to 2010, when Burj Khalifa was launched, the prices of the apartment units from the developer were low and reasonable. People knew this, and they knew that an apartment in the world’s tallest tower would eventually have much higher value in the long term, hence the perceived value is high — meaning potential demand would be very high. Similar to the concept of flipping properties in real estate. In the NFT world its all virtual.
Today celebrities globally are thinking how to combine their status with NFT’s to have new monetary gains. Paris Hilton jumped into the NFT craze along with a few other celebrities, you Can read about it here:
Paris Hilton jumps on the NFT’s craze
and here: https://www.finder.com/top-celebrity-nfts
How to Win in NFT’s
According to AirNFT.com article https://www.airnfts.com/post/how-to-flip-nfts-for-profit
There are many factors to determine the value of an NFT’s some of those factors are:
1. number of items: scarcity is a determinant of demand. Items with limited quantity are more likely to give you higher price points for the NFT item
2. Floor Price: this refers to the lowest price point you can purchase an item. Normally you want to consider items with lower price points and low supply.
3. Volume: always place your investments to be traded on platforms with high trading volumes.
The Bottom line
NFT’s created a brand new business model that was never there previously, thanks to blockchain technology. With NFT’s creators and artists now have an abundance of opportunities to generate income based on their creative talent. We are still discovering new opportunities in NFT’s as this space matures with innovative options. Based on the current success trend, NFT’s are definitely here to stay.
