2021 was “the NFT year”, and for the first time in history, the search engine keyword “nft” surpasses the “crypto” keyword (source). This shows that people are now more interested in NFT than cryptocurrency.
It can be quite overwhelming with everything that is happening in the NFT world, especially if you’re new. Hence, I’m writing this concise article by answering some of the most commonly asked questions so that you can get started in the NFT world in no time.
Let’s get straight to the questions.
I’m sure there are plenty of NFT definitions out there on what a Non-fungible token is. As technical as it sounds, NFTs are simply “tokens” that can verify their owners. So what’s the big deal of this “verified ownership thingy”? Can’t we just screenshot an image and make it ours instantly?
Technically speaking, you can screenshot an NFT and save it on your device. However, that “copy” of NFT isn’t going to give you the ownership of the actual artwork and the exclusive privilege that comes with it.
For example, taking screenshots of Axie NFTs doesn’t make you the owner of these NFTs. And because you’re not the owner of these NFTs, you can’t breed, stake, flip, or profit from these screenshots (unless you’re a scammer).
There are two ways to make a profit from NFTs. You can generate income by selling NFTs as:
- a flipper, where you buy NFTs and resell them at a higher price, or
- a creator, where you create artworks and sell them as NFTs.
So, before you begin your journey in the world of NFT, you need to decide this — are you a flipper, creator, or both?
A good NFT project can help you easily flip an NFT in no time. However, there is no quick and easy way to spot a good NFT project instantly, even if the social media channel has more than 10,000 followers. Why? Because scammers are everywhere in the NFT world, unfortunately.
Thankfully, with some careful observations and assessments, most successful NFT projects bear these characteristics:
- Real Followers. A good NFT project will have many followers AND a large number of reactions from followers. This is a clear sign of having real and organic followers. This is important because many NFT projects out there have bought followers. As a result, they have many followers, but their social media interactions are minimal. You will typically see this in Twitter, where an account has more than 10,000 followers but can hardly get five retweets and likes from their community. For a quick Twitter followers analysis, you can also use tools such as FollowerAudit.
- Real Transactions. The perception of value changes when someone buys a resale NFT at a much higher price. However, this transaction can be faked because the seller can easily create another digital wallet to buy their own NFT to raise the floor price. Thankfully, you can inspect all transaction details, including the purchase history of a digital wallet. To check if the transaction is real, you can always check whether the same wallet has been used to buy the same NFT collection or whether the digital wallet has only one transaction.
- Real Deal. Is the NFT project another ripoff? Does it look too similar to another project? You can figure out by using no.1 and no.2, and you can also join their community group, such as Discord, to find out if it is a real NFT project. By joining an NFT’s Discord server, you should be able to interact with other buyers and even the creator to find out more details about the project.
- Real Rarity. You can also use free tools such as rarity.tools, NiftyRiver, and Trait Sniper to search for top-performing and upcoming NFT projects. With these tools, not only you can instantly find NFTs that are very rare with good flipping potential, but you can also narrow down your search further by indicating your budget.
There are two ways to purchase NFTs:
- Buying firsthand (minting). That means you will be the first owner of the NFT. This is the lowest price you can get for an NFT. If you’re early enough to spot a good project, you might even get whitelisted for presale minting, which means you get to purchase the NFTs at a lower price before its public sale.
- Buying from resales. Prices for resale NFTs would have been marked up because the previous owners also wanted to flip the NFT for profit. You can use rarity.tools to purchase good resale NFTs from various marketplaces.
To purchase an NFT, you need a digital wallet. There are many digital wallets out there, and I highly recommend using Metamask for its simplicity. It also works on both mobile and desktop platforms.
You can sell pretty much any kind of digital file. For instance, in OpenSea, you can upload various file types such as gif, jpg, png, svg, mp4, mp3, WebM, wav, glb, ogg, and gltf with a maximum size of 100MB.
Wait, mp3 and wav files? Yes, you read that right. You can also sell audio files as NFTs. This is one of the many reasons NFTs are so popular right now because of the wide range of file format support. The most popular one is image-based NFT(jpg, png, SVG), but you can also sell NFTs in 3D files such as glb and gltf. Some marketplace even supports voxel files.
Therefore, all you need is some creative tools to create artwork. Here are some of the tools you can use for creative works:
- Adobe Photoshop (Paid app for desktop and mobile)
- Procreate (Paid app for iPad)
- GIMP (Free app for desktop computers)
- Adobe After Effects (Paid app for desktop computers)
- Blender (Free app for desktop computers)
- Procreate (Paid app for iPad)
- Logic Pro X (Paid MacOS App)
- Fl Studios (Paid MacOs and Windows App)
- Ableton Live (Paid MacOs and Windows App)
- GarageBand (Free for iOS devices)
If you’re a traditional artist, you can also scan physical copies of your hand-drawn or hand-painted artwork. Some artists even ship the physical copies of the painting to NFT owners!
As a first-timer, I highly recommend using OpenSea for its simplicity. Once you have logged in with a digital wallet, you can start listing your artwork as NFTs.
To get started, you can click the “create” button to create an item. Upon completing your first item on OpenSea, you will have to pay a one-time gas fee for account initialization. Then, all subsequent creation in OpenSea is free.
When an item is created, you can click “sell” and configure how you want to sell it (Fixed Priced of Timed Auctions). Once you have completed the listing, your artwork will be visible in OpenSea for sale!
You can think of it as “transaction fees” that miners charge for verifying a blockchain transaction. In the context of NFT, a “transaction” occurs when someone buys or transfers NFT ownership to another person. It’s a “transaction” because it essentially makes a small change in a digital ledger known as the blockchain.
You can read the following article to find out more about blockchain technology:
The amount of gas fee per transaction is based on the supply and demand of miners and the person who initiates the transaction. For example, suppose there are too many people buying NFTs simultaneously. In that case, miners will set higher gas fees to compensate for the computational power required to process and validate transactions on the blockchain.
Therefore, if your transactions are not urgent, you can always wait for the gas fees to lower prices. If you’re using Ethereum, I’d say that a reasonable price for the gas fees is between 40 and 50 gwei.
You can also use ETH Gas.watch tools to monitor gas prices and receive notifications when gas prices drop.
A smart contract is not exactly a legal “contract” that we use in English. In essence, a smart contract consists of functions that buyer and seller can execute. It’s “smart” because the functions are stored as a program in the blockchain, and the execution of these functions are trackable and irreversible. It’s a “contract” because the execution of the functions acts as an agreement between the buyer and seller.
For example, here’s what happens when buyers purchase (also known as mint) your NFTs firsthand at the price of 0.1ETH:
- To mint a non-fungible token, buyers have to call the “mint” function in your smart contract.
- The “mint” function will create tokens that indicate the owner of the tokens, which is your respective buyers.
- Upon confirmation from buyers, they pay 0.1ETH to the smart contract and some gas fees to miners.
- Miners will attempt to verify and record this transaction.
- If the transaction is successful, the “mint” function of the smart contract will then put the newly created tokens into the blockchain.
In this case, the smart contract executes the minting function and the “agreement” between you, and the buyer is the token’s price, which is 0.1ETH. Also, the minting function is just one of the many functions written in a smart contract.
Yes and No.
If you upload your artwork directly to marketplaces such as OpenSea, then no, there is no need to worry about a smart contract because OpenSea creates and handles all smart contract transactions behind the scenes. Your buyers can mint directly from the OpenSea page.
However, if you want to sell a large NFT collection, such as 10,000 pieces of generative artwork, then yes, you need to use a smart contract. This is because a marketplace such as OpenSea doesn’t handle bulk upload of artworks, and it simply doesn’t make sense to upload one at a time.
In addition, if you use a smart contract for a large collection, you also need to build a website for buyers to mint your NFT. Hence, this process can be challenging if you do not have any programming experience.
Here are the key differences:
- Suitable for small collections, especially for 1 of 1 type of NFT, where each piece is unique and created from scratch.
- Simple and straightforward to set up. All you need is a digital wallet and some artwork.
- Affordable. Most marketplace such as OpenSea only requires a one-time gas fee if you’re uploading for the first time. Subsequent uploads are free.
- Buyers can select and buy NFTs that they like.
- Auctions. Instead of a fixed-price sale, some marketplace also allows timed auction sales.
- Suitable for a large collection, such as 10,000 NFTs. Most generative art projects with a large collection will use a smart contract.
- Complicated. If you don’t have any programming experience, writing a smart contract will be quite challenging. In addition, you also need to build a website that allows buyers to mint your NFTs.
- Expensive. If you’re deploying a smart contract for a 10,000 collection to the Ethereum Network, it will cost you around 0.15ETH when the gas fee is low (~40–50gwei). Having said that, some networks, such as Polygon, is much cheaper than Ethereum.
- The buyer doesn’t know which NFT will be minted. This is essentially like buying blind boxes. The artwork of the NFTs will be hidden until it is minted. If the buyer is lucky, they may get an ultra-rare NFT from the collection for the same price.
- NFTs will only appear in the marketplace after minting. In other words, if no one buys your NFT, none of your artworks will appear in your selected marketplace.
- Fully Customizable. With this method, you can create a presale event that only allows whitelisted digital wallet addresses to mint your NFTs at a discounted price before the public sale.
You can withdraw cash directly from a digital wallet such as Metamask directly to your bank account. To do so, you need a crypto exchange account such as Coinbase, Binance, Coinhako, and FTX. Before selecting a crypto exchange account, you also need to find out whether they allow withdrawals directly to your local bank account.
Once you have created a crypto exchange account, you can send cryptocurrency that you earned from NFTs to the exchange account. Then, you can use the exchange account to convert to a currency and send it to your bank account.
Yes, beware of scams. Unfortunately, there are a lot of scammers out there in the NFT world. If you’re not careful, scammers might even get access to your digital wallet. Here are a few tips to avoid being scammed:
- You should NEVER disclose your digital wallet’s secret phrase or recovery keys to any website. Scammers will send you a link asking you to “verify” your wallet for whatever reasons. You only need to use the secret phrase or recovery keys when you need to re-initialize your digital wallet.
- Be extra careful with Direct Messages (DM). Won some bitcoins? An invitation to mint NFTs? Earned a spot for whitelisting? These messages may appear harmless at first, but remember that many impersonation scams exist in the NFT community. Scammers will disguise themselves as some big-name NFT creators and send direct messages to you. Remember, most NFT creators and Discord Mods will NEVER communicate through DM unless it’s really necessary.
Google is your best friend here. However, if you wish to learn more from fellow NFT enthusiasts, join the official rNFT Community Discord Server. With more than 85,000 members, not only you can learn more about NFT, you can also make new friends with NFT creators, developers, collectors and educators.