NFTs are a form of non-fungible token that can be used across many blockchain games and apps. This means there’s a separate and distinct NFT for each digital asset (in this case, a digital picture of your dog).
NFTs are a legitimate form of cryptocurrency and blockchain technology. They aren’t a pyramid scheme, though they do resemble them superficially. NFTs are also similar to security tokens – but without the regulations that come with such an asset.
Buying and selling NFTs is, in essence, just like buying and selling cryptocurrency. You can either invest or speculate on future value or purchase them for their current utility, ease of transaction, and popularity.
And speaking of popularity, for example, you could have gotten lucky and been a part of the “free release” of Crypto Punk NFTs back in 2017. Today some of these NFTs are worth millions of dollars. Keep reading to see how NFTs have a bright future and are not a Pyramid Scheme, regardless of what the haters say.
What Is a Pyramid Scheme?
NFTs leave no room for recruiting other people who have not yet joined the NFT in question at all, unlike pyramid schemes that encourage this practice. As a result, NFTs can hardly be called pyramid schemes.
Pyramid schemes are illegal in many countries across the world. These schemes are fraudulent and deceptive business practices where “investors” donate money to an individual that promises significant returns on their investments.
Those who contribute early profits are typically paid off by later investors’ funds until eventually there aren’t enough people left to continue making payments. A pyramid scheme offers little to no value in goods or services in its purest form.
How Do NFTs Work Differently Than Pyramid Schemes?
NFTs are a form of cryptocurrency that is only slightly different from traditional tokens. They are decentralized, limited in number, and have an open ledger to record transactions on – including the time and date they occurred.
This makes NFTs much like any other cryptocurrency in its purpose and basics but without many of the regulations that come with such assets (like security tokens).
Buying and selling NFTs is done by interacting with the smart contract that runs the NFT. Smart contracts are self-fulfilling computer programs that can be programmed to transact assets between parties under certain conditions – all without the need of a third party.
Smart contracts can control price and future royalties that would be due to the creator, just to name a few basic functions.
Pyramid schemes often operate under a name other than “pyramid scheme” to avoid negative connotations. There are many differences between pyramid schemes and non-fungible tokens (NFTs).
Traditionally, a pyramid scheme is a form of investment in which new entrants must pay an entrance fee to join the group, with returns paid out to early entrants by later entrants.
Most NFT transactions are stored on Ethereum’s public ledger, making them transparent, publicly viewable, and fully accountable, making NFTs nothing like a pyramid scheme.
The hallmark of this system is that it is unsustainable when the number of new people entering into the investment system falls short of people exiting the system.
This can lead to major economic problems, such as inflationary price increases in response to demand for diminishing future value.
Sellers decide what they want to charge for their NFTs (known as an asking price) or place their NFTs in an auction. The selling price must be set within the range of integers between 0-255.
Sellers can list as many items on sale as they like, which means that there is always something on sale at any given time – this creates competition amongst buyers, which can increase demand as long as there isn’t oversaturation involved. Of course, the NFT needs to be desired as well, and the most valuable ones are from notable creators, have tremendous utility, or are backed by some sort of social status.
How Does Buying and Selling NFTs Work?
Buyers purchase NFTs by sending cryptocurrency (like Ether) directly to the smart contract address associated with it.
For example, if an NFT costs .012345 ETH that much digital currency is needed to buy that one individual asset – so if you have 0x12345 coins, then you would send .012345 Ether coins to complete your purchase.
Once this transaction has been confirmed by validating nodes on the Ethereum blockchain, the seller will receive their payment, and the buyer takes full ownership of the NFT.
It sounds kind of complicated at first, but it really isn’t. If you want to turn a digital picture of your dog into an NFT, all you really need is to get a crypto wallet, mint your photo, and list it for sale on a popular NFT platform. These articles will show you how:
- Minting Vs Buying an NFT: Are They The Same Thing?
- The 3 Cheapest Ways to Mint an NFT: Full Breakdown
Where Can I Buy and Sell NFTs?
There are a few different methods to buy and sell NFTs. One of the most common ways is through an online marketplace, such as OpenSea, which allows users to buy and sell in-game items, collectibles, or other NFTs using cryptocurrency.
Buying and selling NFTs is easy to do on OpenSea. The NFTs that are for sale on OpenSea can be purchased using a compatible Ethereum wallet like MetaMask. Out of all the wallets I have, I use the Metamask and Coinbase wallets the most. If you are curious about other wallets, check out Top 9 Crypto Wallets to Buy and Collect NFT Art.
Experienced sellers will usually set up their OpenSea account by transferring their NFTs from the decentralized exchange (DEX), where they were originally purchased from an initial seller. Alternatively, if a seller has created their own ERC721 token, then they may have already set up an OpenSea account through this method.
Other means of buying or selling NFTs are through decentralized exchanges. For example, the 0x protocol allows for the trading of NFTs with Ethereum based cryptocurrencies. Alternatively, users may also buy and sell directly from other users (i.e., peer-to-peer).
The easiest way to get your feet wet in the crypto and NFT game is by using a centralized exchange like Coinbase. There are many pros and cons to using a centralized exchange, but it is usually a lot easier for a newbie to get started.
You can transfer fiat currency (i.e., dollars) by way of a bank account to your Coinbase app and then exchange the fiat for crypto. Now you can use the crypto to buy NFTs, and if you eventually sell them, the sale proceeds go to your wallet and can be transferred to your Coinbase account, and from there, you could exchange crypto back to fiat.
How Much Does It Cost to Sell an NFT?
Individuals who wish to sell their NFT typically set a price they are willing to sell it at. The seller can choose either a fixed price or opt for a dynamic price (i.e., auction), where the buy now price is determined by an algorithm and starts out high and then decreases over time.
Because selecting the type of sale for each NFT is critical, assuming you want to maximize profits, I wrote this must-read article: NFT Auction Vs. Fixed Price: Which is the Better Option?
Fun stat, NFTs range in price between platforms. Average prices on Mintable are $900 per NFT, OpenSea around $500 per NFT, and Valuable for $150. The price of NFTs tends to be highly variable, depending on the specific asset, the artist, or the creator that minted them.
While there has been some development of blockchain-based non-fungible tokens, it currently does not appear as though any decentralized applications publicly list individual ownership information on the blockchains themselves. Buying and selling NFTs, no matter the price, is therefore restricted to centralized marketplaces. Chances are this may change in the future.
There are several options for buying and selling NFTs, with some platforms having more than others. To begin, there is the open-source and decentralized OpenSea exchange, which allows users to buy and sell thousands of different types of NFTs on the Ethereum blockchain.
While it does not charge its own fee for transactions, instead of taking a small cut from each sale on its platform, sellers always pay gas (fees) to get their NFT listed on OpenSea’s lists.
More recently, Mintable has also launched an NFT marketplace where users can browse through items by category or search specific names or titles. The site charges an 8 percent fee when creating listings; however, this fee can be reduced to 2 percent or less if users make use of promotional codes.
While some exchanges only sell certain items, Rare Bits, a newer platform, is one of the most versatile marketplaces, offering a wide variety of new and unique digital assets for purchase.
The platform charges sellers a 12.5 percent fee when creating listings on its site; however that number can decrease depending on how many items are listed at once.
Rare Bits also offers its own app in both iOS and Android stores which allows users to view NFTs on their mobile devices while they are away from a computer.
Conclusion
NFTs are a newer form of blockchain technology. They are not pyramid schemes, though they resemble them superficially. With the hype around cryptocurrencies and ICOs, it’s easy to get caught up in the idea that every investment is going to be profitable – but that isn’t always true.
In fact, selling NFTs is a massive challenge, as witnessed in this article, Just How Hard is it to Sell an NFT? 3 Facts Explained. NFT buying and selling has the potential to be profitable, but investors need to do their homework before they buy into any project.
Unlike pyramid schemes, NFT s are not necessarily a scam (although some hackers and scammers have caused plenty of financial damage and are one of the reasons NFTs get a bad wrap at times.)
As is the case with any investment, they carry the potential to make money along with an equal or higher risk of losing it all.
NFTs can be purchased from decentralized exchanges or from online marketplaces where they are listed as collectibles. If you are still not sure about the future of NFTs, then you have to read these articles: When Will NFTs Crash? 3 Possible Scenarios and 10 Reasons Why NFTs Will Change the World.