Should you hit an NFT? A look at this hot crypto sector
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Although the volume of non-fungible token (NFT) trading has declined since its peak at the start of the year, this new generation of digital assets is already having a significant impact. From Beeple’s record $ 69 million NFT artwork, NFT game items, real-world asset depictions, event tickets and more, NFTs are just starting to make an impact on the world. society at large.
Non-fungible tokens are unique verifiable tokens that cannot be freely traded with other tokens. Unlike Bitcoin, Ethereum, and other cryptocurrencieswhere each unit is worth the same as any other (one Bitcoin is always worth the same as any other Bitcoin) NFTs have distinct values that vary from each other.
Even though two NFTs feature the exact same artwork from the same artist’s print, if it’s a print of 10, the first can be considered more valuable to collectors than the third, by combining individual singular values at each token.
NFTs started taking off in 2017 with the launch of the ERC721 token standard and the introduction of the CryptoKitties NFT game, which has only grown since their inception.
What is worth turning into an NFT?
The NFT token standard was originally only available on Ethereum, but with the rise of competing smart contract networks, so does the introduction of new NFT standards. Now, users can create NFTs on a variety of networks, such as Ethereum, Wax, Flow, Binance Smart Chain, Avalanche, Solana and more. Ethereum recently saw gas chargestransaction fees necessary to perform an operation on the network hit record highs, sometimes eclipsing over $ 100 each, prompting many to look for other platform options. These gas fees didn’t stop traditional and sought-after artists from creating, but for occasional artists, collectors, and fans, these gas fees were a big problem.
With NFTs only available on Ethereum, this may have been a problem for the average creator, but with Layer 2 scaling solutions and competing networks available, users may be looking for the best option.
For example, using Polygon or Binance Smart Chain, it only costs a few cents (or less) to create an NFT, making it economically possible for anyone to create an NFT of any type. Even if they don’t end up selling it or realizing its value, the barrier to entry is nominal. With the introduction and push towards cross-chain technology, users will also soon be able to transfer their NFTs across different native blockchains, making NFTs even more exploitable and efficient. With these options, NFTs are available to everyone, not just high-end artists and designers.
What are NFTs worth (and other vital questions)
With such a new asset class and medium of artistic expression, it can sometimes be difficult to quantify the value of an NFT if a real-world asset doesn’t back it up. The easiestbut maybe unsatisfactory description is that an NFT is worth what the free market is willing to pay.
For an artist like Beeple or a collaboration with a famous celebrity, that can translate into hundreds of thousands.if not millions of dollars. However, while not all of these designer pieces sell for the same prices, it’s safe to say that they will retain some level of value due to their desirability and collector base.
For new creators, it can be much more difficult to assess an NFT. A lot depends on the artistic creation itself, or what the NFT represents to the buyer. For example, if it is an NFT representing a rare game item, it might be priced very high and sell out almost instantly, while a more common variant of the same item might sell for next to nothing. With NFTs, the value is still highly speculative and is primarily determined by market demand, scarcity, designer brand awareness and usability, along with many other influential characteristics.
Regarding taxes, for the most part, NFTs will be considered regular assets. This means that your tax authority may impose short or long term gains on you depending on how long you own the NFT before you sell it. This also applies to the creation of an NFT. You will be taxed on the “profit” generated by the trade, even if it means trading for another NFT. If you own an NFT that you bought for $ 100 and you exchange it for a new one worth $ 150, you have to pay taxes on any $ 50 winnings you made on the trade. You would then start with a new NFT tax base of $ 150. With clearly defined property rights in the NFTs, determining the tax burden is relatively straightforward and can be handled by any qualified accountant.
Can DTVs have an impact on businesses?
Like artists and content creators, businesses can also use NFTs to connect with their audiences. From digital collectibles, in-game items, coupons, vouchers, redemptions and more, NFTs offer businesses a way to reinvent interactions and rewards with customers. NFTs have already seen popularity among a variety of chains, and this is expected to continue to grow over time as NFTs become more prevalent and the available use cases reach new heights.
Overall, while we may have experienced the first cycle of NFT boom and bust, the hype and capacity around NFTs is just beginning. They are more and more accepted and accessible by the day, and users of all typesfrom artists and regular players to celebrities, athletes and companies get on board. NFTs present a new way to digitally package and verify a single asset with the token owner retaining full sovereignty something previously impossible on the Internet. With NFTs, the world is starting to realize what unique digital assets represent.
Ori Levi, CEO of NFTrade, Bitcoiner and cryptocurrency enthusiast since 2012
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Disclaimer: Opinions expressed on The Daily Hodl do not constitute investment advice. Investors should do their due diligence before making high risk investments in Bitcoin, cryptocurrency, or digital assets. Please note that your transfers and transactions are at your own risk and that any loss you may suffer is your responsibility. The Daily Hodl does not recommend buying or selling cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in Affiliate Marketing.
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