NFT for dummies: 6 things you need to know to get started

NFT stands for Non-Fungible Token. It is essentially certified ownership of using cryptocurrency such as Bitcoin to purchase unique collectibles (art, music, tweets, video clip moments etc.) digitally. The concept was first brought to the surface in the early 2010s but has been making headlines since 2021 after the purchase of a digital artwork by Beeple, which was auctioned off for $70 million. People can trade for or buy NFT the same way as physical collectibles; the artwork can be viewed, downloaded or even screenshot online freely, but the NFT buyer gets a verifiable receipt of ownership. 

  1. How does it work? 

When an NFT is created or “minted”, the blockchain creates a smart contract. The contract is recorded as a unique identification displaying the current certified owner. The ownership of an NFT can only be by a single person.

As NFT gets traded that unique identification also changes and is reflected and acknowledged on the blockchain which is later traceable and for others to view the asset’s ownership through a blockchain.

  1. How to buy an NFT?

First, buy cryptocurrency. Second, set up a cryptocurrency wallet – preferably a non-custodial wallet (e.g. Metamask). Next, transfer your cryptocurrency to your cryptocurrency wallet. Then join an NFT marketplace and synchronize it with your digital wallet. Follow creators on the NFT marketplace and social media platforms – keep track of any latest updates such as live auctions, new releases etc. Finally, check for gas fees (or platform fees) before the purchase of an NFT.

  1. How to create an NFT?

Creating an NFT requires one to first pick a blockchain such as Ethereum (the widely used one) or Solana. The blockchain network you choose will determine the interoperation of exchanges and crypto wallets with your NFT. Platforms including OpenSea, Rarible, Magic Eden and Solsea, to name a few, connect your crypto wallet and digital artwork (upon upload). Your NFT is then signed to your wallet and can be listed from then after. Bear in mind to make money on these sites you would need to pay a listing and minting fee to digitize your art.

  1. How to value an NFT project?

Fame – Influential creators of a project with limited supply may increase the value of a project. Sometimes the project may have close connections with prominent figures or companies and sell within minutes, the secondary transaction of those projects appreciates steadily. The increase in value does, however, lie within their fan base and perceived value.

Utility – Purchase of the NFT doesn’t limit it only to ownership, but can sometimes be tied to real-world perks such as exclusive in-person events, clubs, or memberships. This adds an extra layer of exclusivity which isn’t accessible within the public realm of downloading NFTs.

Uniqueness – Some NFTs can have a range of unique qualities within them, from having a leopard skin to 2022 shades, and there’s a way to measure that as well. But does it come attached with a utility, or qualities like if the artwork was hand-drawn. These tiny details can go into determining the worth of that NFT.

  1. How about Hong Kong’s scene?

Szabotage is a Hong Kong-based NFT artist and the first in the city to be on OpenSea back in 2020. With a sold out of the first collection, he still has one remaining art piece available from his second collection that is available on Refinable.

Bunny warriors is another famous Hong Kong NFT available on Magic Eden. The Bunny warriors fan base have been growing steadily since December 2021 with local utilities such as parties, raffle tickets, Metaverse party, hoodie and mask merchandise and a lot more perks enlisted on their website.

Monk mafia is also designed by a Hong Kong artist listed on Magic Eden and Solsea. With over 5,555 Monk Mafia NFTs placed on the Solana blockchain, a purchase would reward the verified owner with an access card to holder-only utility: NFTs, money, travel trips, and proceedings go to anti-racism and anti-violence campaigns.

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  1. How to protect your NFT?

There is currently no NFT-specific law available in Hong Kong; the trading and selling of NFTs are not currently prohibited. Hong Kong’s project Monkey Kingdom fell victim to this gray area as hackers stole over 7,000 Solana during the kickoff of a new sale through phishing on Discord. 

However, it is worth noting that the Securities and Futures Commission recognises Security Token Offerings as “specific offerings which are structured to have features of traditional securities offerings and involve Security Tokens which are digital representations of ownership of assets (eg, gold or real estate) or economic rights (eg, a share of profits or revenue) utilizing blockchain technology. Security Tokens are normally offered to professional investors only,” and anyone distributing Security Tokens are “securities”, not unless otherwise exempted. 

Also, the Hong Kong government is proposing to introduce a licensing regime for digital asset services providers under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”). This would mean that virtual asset exchanges would be licensed upon operations in Hong Kong and confined to professional investors. In the meantime, NFT enthusiasts can protect their tokens using a trustworthy digital vault to securely store your virtual assets, and a reliable wallet to prevent accounts from being drained.

(Feature image: shykhman on Pixabay)

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