Non-fungible tokens (NFT) have become one of the most popular parts of the crypto world. From 2020 to 2021, the NFT market skyrocketed; NFT sales totaled $24.9 in 2021, up from $95 million in 2020. And though the market cooled off in 2022, NFTs still play a significant role in the crypto market, the metaverse, and Web3.
Many famous artists and celebrities have created and sold NFTs and NFT collections. Digital artist Mike Winkelman, known as Beeple, recently sold an NFT for $69 million, and soccer great Lionel Messi launched his own NFT collection. But you don’t have to be famous to create or trade NFTs. Read on to learn more about the NFT market, and how you can create and use these digital assets.
Non-fungible tokens, commonly called NFTs, are collectible crypto assets intended to represent a unique digital item that can be bought, sold, or traded.
NFTs exist on blockchain technology and, unlike digital assets such as cryptocurrencies, each NFT is unique and cannot be replaced by another token. This is because NFTs are non-fungible. The term “fungible” refers to something that can be exchanged or traded for something else just like it. A dollar bill, for example, is fungible because all dollar bills are more or less the same. And one dollar bill represents $1.
An NFT acts as a representation and proof of ownership for either digital or physical items. Some of the most popular NFTs represent ownership of digital artwork, virtual real estate in a game, or collectibles, like basketball or Pokemon trading cards. These NFTs can then be sold and purchased.
The first NFT was created in 2014, and the market for NFTs has grown rapidly in recent years.
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How to Create NFT Art
For those more interested in creating NFT art, minting a piece of NFT artwork is relatively straightforward and does not require in-depth knowledge of the crypto industry. The following steps can help you create an NFT.
1. Create a Piece of Art
You first need to create a piece of art that you’ll want to turn into an NFT. You may decide to make a digital image, audio production, or video. Most marketplaces support NFTs that represent JPEG, MP3, MP4, TXT, and other digital files.
2. Choose a Blockchain
A creator must figure out which blockchain they want to issue their NFTs. Ethereum is the most popular blockchain service for this purpose at this time, but a variety of other blockchains are gaining in popularity, such as:
• Binance Smart Chain
Each blockchain has its unique NFT standards, marketplaces, and wallet services. If someone were to create NFT tokens on Binance Smart Chain, traders could only use those NFTs on platforms that support Binance Smart Chain assets. So, they couldn’t sell them on an NFT marketplace like OpenSea, which supports Ethereum, Klaytn, Polygon, and Solana blockchains.
3. Get a Wallet
You’ll need to set up a cryptocurrency wallet to pay a marketplace’s fees and receive payment once you sell your NFT.
Since Ethereum is the most commonly used NFT ecosystem, let’s look at what’s needed to create a new NFT on the Ethereum blockchain. First, an NFT creator would need an Ethereum wallet that supports ERC-721, Ethereum’s NFT token standard. Some wallets that qualify include Coinbase Wallet, MetaMask, Trust Wallet, Enjin, and D’Cent.
An NFT creator will also need to fund their wallet with a specific amount of Ether (ETH) tokens that eventually cover transaction fees. Those using the Coinbase wallet can buy ETH from Coinbase with U.S. dollars or another fiat currency. Other users will have to purchase ETH from a crypto exchange and send it to their digital wallet.
4. Find a Marketplace to Sell Your Art on
Before you create and sell your NFT art, you’ll need to choose the marketplace to list your NFT. There are now many NFT marketplaces from which to choose. Depending on your art and interests, you may choose a curated marketplace that specializes in specific kinds of art or a general open marketplace.
Also, you’ll want to keep in mind that marketplaces may charge users minting fees, and there may also be Ethereum gas fees and other costs for listing and transacting on the platform.
5. Minting an NFT
You’re now finally ready to mint your NFT. Most NFT marketplaces offer a step-by-step guide for uploading your digital file to their platform. That process will enable you to turn your digital art into a marketable NFT, known as minting an NFT.
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6. Sell Your NFT
Once you’ve minted your NFT, you can choose to sell it. There are generally three options to sell your NFT art:
• Fixed price: This allows you to set a price for the NFT and sell it instantly if a buyer is willing to buy the NFT at that price.
• Timed auction: A timed auction will give those interested in your NFT a time limit to submit bids.
• Unlimited auction: There is no set time limit with an unlimited auction. Instead, the seller can choose to end the auction whenever they want.
You also need to set a minimum price and determine the royalties you’ll be paid if the NFT is resold. NFT creators may earn royalties for their artwork when someone sells their tokens to a new person. Creators earn royalties automatically through smart contracts.
How to Buy NFTs
In some ways, buying and selling NFTs is similar to trading different types of crypto. But before learning how to buy NFT tokens, there are a few things worth considering, such as:
• What marketplace do you intend to use?
• Which cryptocurrency will be needed to fund your crypto wallet and make the purchase?
• Are the NFTs you’d like to buy only available at a certain time?
Some NFTs are only available on certain platforms or marketplaces. For example, someone who wants to buy an NBA Top Shot pack of virtual trading cards must open an account with NBA Top Shot and create a Dapper wallet. Other NFT marketplaces include OpenSea, Rarible, Foundation, and Nifty Gateway.
The buyer will then fund their cryptocurrency wallet with either cryptocurrency or fiat currency options. You’ll then have to connect your wallet to the NFT marketplace. After that, you can start browsing the marketplace’s offerings and make a purchase.
For NBA Top Shot, a buyer must wait for a card pack to drop and buy a pack before they sell out.
NFT drops have become a popular method of selling NFTs to eager buyers. Drops like these often require users to sign up and have their accounts funded before the drop so they don’t miss their chance to buy once the NFTs drop.
Drops can sell out in seconds, so being ready ahead of time can be crucial. Of course, other NFTs and NFT platforms don’t utilize drops.
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How to Sell NFTs
If you own an NFT, you’ll need to decide whether you want to HODL it or sell it. To sell an NFT, you must list the token on a marketplace. To do this, click on the NFT in your collection that you’d like to sell and locate the “sell” button. Clicking on “sell” will bring up a pricing page, allowing you to set the terms of the sale. As noted above, you can choose either a fixed price or an auction sale.
NFTs typically sell for ETH or ERC-20 tokens. However, some platforms only let you sell for the native token of their blockchain.
NFT Sale Fees
NFT sale fees are the charges associated with selling an NFT. These fees can vary depending on the platform used to sell the NFT. Anyone interested in making, buying, or selling an NFT need to consider the various costs associated with the market because they could eat into any potential profits.
Some fees associated with NFTs include gas, transaction, royalty, and minting fees.
Popular NFT Marketplaces
OpenSea is one of the most used NFT marketplaces. OpenSea offers all kinds of digital assets, from art to music to collectibles, which are free to browse. It also gives artists and creators an easy-to-use process to mint their NFTs.
The Rarible platform allows all kinds of art, videos, collectibles, and music to be bought, sold, or created. Rarible has its own token (RARI), which you’ll need to use to buy and sell on the Rarible marketplace.
Since Foundation’s launch in early 2021, more than $100 million of NFTs have been sold on the platform. To join the Foundation marketplace, users must get an invitation from a current artist on the platform.
Nifty Gateway has been the marketplace for the sale of some of the most popular digital artists, such as Beeple, Grimes, and Pak. It’s an art curation platform powered by the crypto exchange Gemini.
As its name suggests, the SuperRare marketplace is a highly selective platform focusing on art rather than meme and celebrity NFTs.
Pros and Cons of NFTs as an Investment
Pros and Cons of NFTs
|Ownership of NFT is secured by blockchain technology||NFTs are relatively new and are subject to greater volatility and risk|
|NFTs can be bought, sold, or created at any time, giving investors the ability to cash out their investment 24/7||NFTs generate no revenue, unlike dividend-paying stocks, bonds, and real estate|
|Investors can use NFTs to diversify a financial portfolio||NFTs are not regulated, which could pose a risk to investors|
Learning how to buy NFTs or create and sell them is not challenging. Developers have created graphic user interfaces that make the process as painless as possible. Of course, having previous experience using cryptocurrency wallets will be a big help.
If you’re ready to trade crypto, but not quite up for buying and selling NFTs, a great way to get started is by opening an online brokerage account with SoFi Invest®. You can use the platform to trade Bitcoin, Ethereum, Dogecoin, Cardano, Solana, and other cryptocurrencies directly from the SoFi app.
Can anyone make NFTs?
Yes, there is no centralized authority that controls the creation of NFTs. Anyone with an internet connection and the necessary technical skills can create an NFT.
Can NFTs be made completely for free?
You can create NFTs for free, but it depends on what blockchain and marketplace you use to mint your NFT. Usually, NFT creators will need to pay costs related to gas fees.
What are some places where you can buy NFTs?
You can buy and sell NFTs on various marketplaces, including OpenSea, Rarible, NBA Top Shot, SuperRare, and Foundation.
Photo credit: iStock/asbe
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