NFTs hold value because there is only one-version of the assets created. It means that no other person is allowed to alter or mint the same NFT on the blockchain. This creates scarcity of the minted asset resulting in higher demand and almost no duplicated supply. Hence, the price of NFT gets very high.
In the rest article, we will delve more into NFTs- How these can be minted and what are the risks/benefits associated with the NFTs and are these right for you, etc.
How do NFTs Really work?
Like cryptocurrencies such as Bitcoin and Ethereum, NFTs are created on blockchain networks. Each blockchain is unique and the NFT created on the blockchain holds a unique address that provides the NFT-asset rarity and value. Blockchain technology prevents counterfeiting by publishing a public record of ownership.
This facilitates the digital / read-world assets including graphics, pics, sound recordings, videos, and other collectibles to be owned and traded in a way that is quite similar to the real-world trading. NFTs are generally sold in the open market through smart contracts so that only the original creator will be benefited from the sale of the published asset(s). One of the main benefits of selling NFTs through smart-contract is that whenever an NFT is sold from one hand to another, the original creator will receive a certain percentage on the sale as per the terms & conditions laid down in the underlying smart contract.
However, NFT can be inherently very risky. Being said, NFT can not be duplicated on the blockchain network but when it is out for sale then the NFT asset can be copied by anyone who has access to the internet, only by right-clicking and copying the image itself. This brings a question on their value. So, it becomes super necessary for creators to analyse their audience and the market.
To create, buy, or sell an NFT, you’ll need to use a special NFT marketplace that maintains them. Some of the popular marketplaces include OpenSea, Rarible, etc. Whenever a NFT is sold, the buyer will receive a certificate of ownership that’s publicly published on the blockchain.
NFTs- Its Benefits
Creators can created NFTs for the following benefits-
Unique Collectibles
NFTs act as unique collectibles as these are stored on the blockchain which are decentralised ledgers used for recording transactions. The algorithms behind the blockchain makes it almost impossible to be fully replicated. Although the value of an NFT is subjective, they can be sold for millions of dollars depending upon the demand & supply in the open market.
Ease in its authentication and verification
The underlying blockchain technology provides history of all transactions and proof of ownership. That’s why it is easy to authenticate and verify the NFT assets.
Royalties through Smart Contracts
As mentioned earlier, the original creator will get benefits through smart contracts whenever an NFT asset is resold. Smart contracts are digital contracts published on the Blockchain network that contain the seller & buyer information, commissions, terms & conditions and other stuff. Smart contracts are made when NFt is minted and becomes an immutable aspect of code.
Tradeable
NFTs are re-sellable. Owners can sell their NFTs to others, who are interested in the theme of the asset and its scarcity. Trading can be done limitlessly. There is no bar on trading. It can be sold to any number of buyers.
The Drawbacks of NFTs
Nothing in this universe comes without the risk. So does it with NFTs too. It is important for creators to understand the potential risks associated with NFTs-
Volatility
The NFT market is extremely volatile like any other market. The price of NFT is subjected to sudden changes. People can gain a lot of money or lose a hefty amount of money in this market quickly.
Takes Time to find the potential buyer
If you are an artist and creating NFT then there is no guarantee that it can be sold right away at the time of publishing it on the marketplace. It is easy to find headlines about selling an NFT for thousands / millions of dollars; but in reality it is millions times more difficult to find a potential buyer. Hence, the sale of NFT depends upon its perceived value and how well it is marketed.
Negative Environmental Impact
Minting of NFT is an energy intensive process that will result in a large carbon footprint. In simpler terms, creation and sale of NFT arts produces a significant amount of greenhouse gas emissions. So, there are some government regulations on the minting of NFTs too. It is another kind of risk that the NFT market is facing right now.
Risks of copying and theft
Although Blockchain technology does not permit others to publish the NFT on the network; but there is a risk of being copied / stolen from the marketplace on which these are published. Alone OpenSea, one of the largest NFT marketplaces, claimed that more than 70% of the NFTs are created using free minting tools and these NFTs are fake, spam and plagiarised.
How to create and sell NFTs assets
Non-Fungible Tokens can be created very easily and efficiently by just following the steps illustrated below-
1. Decide a Concept
Before jumping on the technology part, the creator must decide on the concept of art firstly. Research on the concept and its trends that fits your passion and idea. After finalising the concept, you can create your art in the following formats-
- PixelsArt
- Cartoons
- 3D Characters
- Freestyle pieces
- Vector art
- Realistic Art, etc.
One important thing here is that whatever you choose to create will affect what crypto wallet or NFT marketplace you use. For 3D arts, you must decide what NFT marketplace support the publishing of 3D art as NFT.
2. Choose Blockchain
This is important because customers are going to be impacted by this. Blockchains are responsible for the distribution of NFTs over a wide range of networks in the non-corruptible forms. Each transaction in blockchain technology is verified by each computer node present in the network which makes the whole process transparent and secure. There are many blockchain platforms available in this space; however, important things to consider when choosing blockchain are transaction speed, scalability, functionality. Security and transaction cost. few important ones are as follows-
- Bitcoin
- Ethereum
- Cardano
- Tezos
- Polygon
- Binance Smart Chain
- Polkadot
- Solana, and so on
It is advisable to do your own research that suits your concept.
3. Set up a digital Wallet
Digital wallet is like a bank account where you can deposit or get your payments in cryptocurrency after selling the digital asset(s). So, before you start creating NFTs. you’ll need to first set up the digital wallet. A digital/crypto-wallet stores your public and private key that are used to access your NFTs. There are two types of accounts to consider-
- Custodial wallets- these can be operated through third-party.
- Self-Custody Wallets- These are assumed to be the safest wallet account type and users have full-control over their private keys.
Let us look at the best crypto wallets for exchanging, storing NFTs and other assets.
- Math Wallet
- Metamask Wallet
- Coinbase wallet
- Enjin Wallet
- Trust Wallet
- Kukai Wallet
- Alpha Wallet
- Coinomi
4. Choose suitable NFT Marketplace
After creating the crypto-wallet, the next task is to choose an NFT marketplace for creating, issuing, and selling your NFTs. Before choosing an NFT marketplace, you should thoroughly study the terms and conditions because each marketplace has different rules and requirements.
There are few factors that need to be considered while researching around the marketplace are-
- Token standard used by the platform
- Verification process for users
- Price discovery feature
- Token Fractionalization
- Wallet Compatibility and other incentives
While minting a NFT, you can also create them with smart contracts. Smart contracts framing requires a detailed knowledge about the technical workarounds. Some of the most popular and widely used NFT marketplaces that caters to all your needs are as follows-
- Opensea
- Rarible
- Mintable
- Foundation
5. Promote your NFT
Before creating and uploading the NFTs on the marketplace, it’s time to promote it. There are a number of ways to do it. Some of them are stated below-
- Create a website
- Use Social Media
- Start a blog
- Collaborate with others
- Participate in online communities
- Hire help through an online community manager using some freelancing platform like upwork, fiverr
- Write a press release ( Newspapers, magazines, journals, website(s))
- Hold an auction (Nifty Gateway is one of the popular online auction platform)
- Join discord servers
6. Upload and mint token for the creation
Once you’ve selected a platform to publish and sell your NFT; now, you will need to mint your art token. Minting your art is very simple with the help of NFT marketplaces like Opensea. You just need to create an account and connect your wallet to it. You can publish your art work and mint tokens.
One important thing, when you mint a token then you need to pay a fee called “gas”. This gas is paid to the miners who process and confirm your transaction on the underlying blockchain. The gas fee is calculated based on the amount of data in your transaction. Gas price is set by the miners / miner’s community that fluctuate depending upon the network conditions.
7. List NFT for Sale
After NFT is minted and a token is created on the marketplace; Now, it is time to price your art tokens. While setting a price for listing, you should always keep the all costs involved till listing the NFT for sale that includes listing fees, commission fees of the marketplace, promotions fee, gas fee, transactional fee (if any) and other costs. Generally, it takes around $200 to create and list an NFT on the marketplace.
Selling your NFTs at a higher price requires an aggressive marketing strategy and pitching correct consumers at the right place(s).
If you have any questions/queries, please provide your valuable suggestion at the end of the article.
