NFT has been catching a lot of waves lately and it’s normal for you to wonder what it is and if it’s something you should be jumping on and cashing in as well.
In the simplest form, NFT (non-fungible token) is a piece of art that can be bought and sold online often with cryptocurrency. NFT are non-fungible meaning they are unique, there’s only one of them. You can’t exchange one NFT for another like you could when you exchange a $10 bill with another $10 bill.
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Table of Contents
What Does Non-fungible Mean?
To understand fungibility further, take for instance a $100 dollar bill. You can exchange that $100 for 5 $20 bills and everyone will be happy. No one loses anything. Cash in essence is fungible.
How about gold? Well, I can exchange my 50g gold for another piece of 50g gold and it’ll still be worth the same intended value so everyone is happy. Gold is fungible.
Anything that cannot be substituted for another and still maintain its intended value is non-fungible.
Anything that can be substituted for another and still maintain its intended value is fungible.
Say you want to trade your car for mine. It’s the same make and model. Is the car fungible? No. Cars are non-fungible. Your seat may have a bit more tear than mine and my break may have a bit more wear than yours. You may have to spend a bit more money than me to fix up the car if we do the exchange. The gas in our cars would be fungible however since 1L of gasoline is equal to 1L of gasoline either they were taken from my car or yours.
Something that is non-fungible could be real estate or even a piece of historical art. There’s only one of them painted by the original painter. Every piece of art isn’t entirely identical to another piece of art. Sure you can exchange your historical painting for another of the same price but they aren’t the same. The strokes are different, the amount of paint smeared on is different, the cracks on the canvas cracks differently, etc, and those small differences make the art possess an inherently different worth that perhaps money can’t quantify, therefore this asset is non-fungible. You simply can’t exchange it for another in a fair way.
Recently, NFT is added to the list of non-fungibles. You can verify that you own the NFT. There’s only one original NFT and you are the owner.
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Why do people buy NFT?
You might wonder why people can’t just screenshot a piece of art they see online. Why do they have to buy an NFT if anyone else can just screenshot it and stored it on their phone?
Well, people buy an NFT because:
- They can verify that they own it. You can tell the world that you own the NFT with a digital certificate that is next to impossible to fake. The digital certificate technology is the same one behind cryptocurrency and is widely accepted and trusted. You can’t produce your own certificate to tell the world that you own your house but an official paper from the government can. Your ownership of your NFT is undeniable.
- They want to add it to their collection. The same way someone would collect stamps or baseball cards. Certain
- It’s a social status. Why would people buy a Rolex if they can get any other $19 watch? Telling time isn’t expensive, you see. People buy Rolex because it’s a status symbol. Similarly, some people buy NFT for their social status. You may see people putting an NFT on their profile pictures for this reason.
- They want to sell it for profit. Some of us are just here in the NFT game to try and make money and that’s okay. Those who buy NFTs to flip quickly are called paper-hands and those who buy NFTs to hold for some period of time (could be weeks, months, or years) hoping it’ll rise in value are called diamond-hands
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How does NFT work?
There’s a digital certificate that is stored on a blockchain for all the NFTs out there. This digital certificate is stored the same way that a cryptocurrency is stored.
You can’t exchange an NFT for another NFT. You can’t exchange this piece of digital asset for another because each NFT is tied to its own digital certificate. It’s very hard to fake a digital certificate.
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Different forms of NFT
You can find several different types of digital arts being transformed to NFTs. Some of these are:
- GIFS
- Tweets
- Virtual trading cards
- Images of physical objects
- Video game skins
- Virtual real estate
- Somebody’s digital art
- Some 3D model someone designed
- A short video
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How to buy an NFT?
There are many NFT marketplaces on the internet. Some of the most popular ones now include:
- OpenSea
- Rarible
- Solsea
- MagicEden
Be careful of extra fees. Certain marketplaces may charge you “gas” fee. This gas fee is the energy it takes to complete the transaction on the blockchain.
You may also be charged a fee associated with transitioning dollars into ethereum. Ethereum is the currency most used to buy an NFT. There might also be other closing costs such as artist royalties.
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How to sell an NFT?
You can sell an NFT by uploading the content and turning it into an NFT. Each platform has a different process to do this. You can include a description and a suggested price.
People can buy your NFT using ethereum or Solana and in some cases using tokens such as Flow or WAX. These types of tokens are called ERC20 tokens.
I wouldn’t recommend anyone to start your own NFT collection to sell if you can’t find artists with a record of success and achievements. Many NFT artists are established artists working at Pixar, Disney, or other major studios. They have their own following on social media already and people can see that they aren’t just some random person on the internet. You also need to have a legitimate website that looks good to attract people. It takes a lot of work to maintain the discord chatroom. Yes, you MUST have a discord for your NFT collection. For the not so techy of you, it may be hard to learn everything from the ground up by yourself.
There are normal folks who made a lot of money selling NFTs but they typically have a story to tell. What makes some art worth more than another? You can see that many NFTs that do well don’t look better than those that don’t do well. The difference could be the team, the number of following on discord and Twitter, the future direction of the NFT, etc. It could also be, I must stress this, the story behind it. Do you have a story that people can relate to? A story that makes your NFT unique. Perhaps, you’re a 9-year-old girl who is trying to raise money for her sick mother? Perhaps you’re a person who survived the Ukraine war and successfully escaped to America with nothing on your back and a reason to make your people’s story heard? Perhaps you’re a deaf artist who is also a twice amputee who wants the world to know what sounds look like to you?
The gas fee is something you should also note if you want to sell your NFT. You’ll spend at least 50 hours drawing up your NFTs, marketing them on social media, creating and maintaining Twitter and Discord, designing and programming your NFT website, etc. You’ll also spend $200+ in gas fees when you put your NFT up for sale.
Don’t jump into selling NFTs before you know what you’re doing. Otherwise, you may lose money.
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How to make an NFT?
There are many ways to make an NFT. If you are artsy. You can create them digitally by drawing them yourself. You’ll need a digital wallet, some Ethereum (or Solana), and you’ll have to sign up for a marketplace where you can turn your art into an NFT.
Typically, there would be a team of people to carry out an NFT project.
- You would need an artist with a good track record of success and experience
- You would need a UIUX designer to design the website
- You would also need developers to program the website and the discord chat
- Of course, you would also need people to market your NFT projects
Once the team has enough following on Twitter and Discord, they can allow people to mint their NFTs (mint means buy) on their own site if they are on the white list (white list are a list of people who gets to mint early for a cheaper price). Once those on the white list have minted the NFTs, it’ll be open for the public to purchase and sell.
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How to make money from NFTs
- Step 1: Find NFT projects that you think will do well
- Step 2: Go to their discord and find out how to get on the white list. Try to get on the whitelist
- Step 3: Mint NFT when it’s open to those on the whitelist. They typically allow those on the white list to mint on their own website
- Step 4: The NFT will be open for public sale at which point the NFTs will be sold on marketplaces like Solsea and OpenSea
- Step 5: Once the public sale is over, people will start selling on the marketplace during the secondary sale. The secondary sale happens when someone who bought it from the original owner sells it to you. If you already got the NFT from the whitelist, you want to sell about 1–3 hours after it hits secondary sale. After that price will drop sharply.
- There’s another scenario in step 5 in which the NFT collection has a reveal. A reveal tells you which NFT you got. You could have one with a rare trait that you can sell for more or you could have one with a common trait that you can’t sell for more. You want to sell right before the reveal. Maybe 10min — 1 hour before the reveal where the price is at its peak. After the reveal, the price will sharply decline.
- Step 6: Price will either pick up again or it’ll get to a baseline and eventually there wouldn’t be any activities on that specific NFT collection. No one is selling the NFT or buying it. It’d be hard to get it to sell for any price at that point. Sometimes you have to cut your losses and sell even if you’re selling at a loss.
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Expensive gas fee
If you’re buying eth NFTs (OpenSea is eth NFTs), the gas price can sometimes be thousands of dollars and you may not have time to look at the gas price before you hit confirm since many NFTs get sold very quickly. You may end up without any NFT (because the transaction failed) while losing thousands from the gas fee as well.
I always recommend newbies to start with Solana NFTs on MagicEden for this reason. The gas fee is much cheaper, it won’t ever get to thousands. The most you’ll be paying is a few cents.
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Final thought
Don’t jump into NFTs before you know what you’re doing. You must do your due research first. I hope this was a good introduction to the world of NFTs.
