What are NFTs? Here’s what you need to know about non-fungible tokens
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Where do people buy NFTs?
Digital works of art can be purchased from online marketplaces like Opensea.io, Niftygateway.com, and Superrare.com.
Traditional auction houses have also entered the space: In a recent Christie’s sale, a digital artwork was valued at $ 69 million. Meanwhile, Sotheby’s announced this month the launch of its own NFT marketplace.
âWe are in a unique position at Sotheby’s to apply our expertise and curation to the burgeoning art world for the digital native generation,â said Sebastian Fahey, Managing Director of the auction house.
What is the size of the NFT market?
What is the price of NFTs?
âAt the end of the day, that’s what you can get by with,â Schachter said.
That being said, the artist’s reputation, including her gallery exposure and size, are important factors, he added.
How are they taxed?
NFTs are typically taxed at the IRS collectibles rate, explained Shehan Chandrasekera, CPA and head of tax strategy at crypto-tax software company Cointracker.io.
This means that the capital gain on a digital artwork held for less than a year will be taxed up to 37%, and those held for longer will be levied at a maximum rate of 28%.
An important thing to note, Chandrasekera said, is that if someone uses cryptocurrencies to purchase an NFT, they will also be subject to capital gains taxes on profits made on their digital coins.
âA lot of people don’t realize it,â he said. âThey think, ‘I just used my crypto. I did not withdraw. “People have to be very careful with this.”
Why do people often buy NFTs with cryptocurrencies?
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There is simply a huge overlap between those interested in digital coins and those interested in NFTs, Schachter said. “These are digital natives who live on the Internet.”
And many people who have seen the value of their cryptos skyrocket until now have had little means to spend it. It is not as easy, for example, to buy a house or a car with bitcoin or ethereum.
âThere was this crazy demand, and now all of a sudden there is something to buy,â Schachter said.
What are the reviews?
Much of the criticism of NFTs comes from the traditional art world because it is afraid of disruption, Schachter explained.
“The first order of attack is to simply equate it with a currency,” Schachter said. “‘It’s just money.’ Well, what is more money than art stored in a free port that has never been seen? “
Other opponents argue that art should be seen in museums and in person, not on screens. âBut there is already dedicated hardware for watching NFTs on your desktop,â Schachter said. “It’s a stand-alone device that plays your NFTs over and over.”
Yet skeptics abound.
Anil Dash, an entrepreneur who writes about NFTs, said the space is dominated by people disguising their desire to earn money as a passion for art.
âThese are a lot of the same people who buy meme stocks,â Dash said. “They don’t think GameStop is suddenly going to get really good at selling video games, any more than they think this ugly monkey drawing has any real monetary value.”
What are the risks ?
Schachter said buyers need to be extra careful when storing their digital artwork online, but he said it was no different from how their online bank accounts should be treated.
He said counterfeits were another problem: âAnytime there is money on the table, there will be crime. “
The main danger, however, is that you lose all your money because a digital work of art loses its value.
Is it really art?
There have already been NFT exhibitions in several major cities, including London and Cologne.
Meanwhile, a museum dedicated to NFTs will soon arrive in Midtown Manhattan.
âThe genie is out of the bottle, and it’s just going to grow,â Schachter said.
Rather than replacing older art forms like sculpture and painting, he said, technology will coexist with them.
âThere will be 3D hologram projections of sculptures where you just flip a switch and he’ll be sitting in your room,â he said.