There is a famous quote about art which says: “Art is certainly not a pursuit for anyone who wants to make money”. In the past, I remember everyone said there is no money in art or if you want to end up being poor, then go and become an artist! But today, thanks to NFTs, everyone wants to become an artist. The combination of art and cryptocurrency has created such a controversy in the world that even famous celebrities are looking to make their own NFTs.
On the contrary, the results show that over 66% of people have never heard of NFTs. So, now that plenty percent of people don’t know what exactly is NFT, you have to seize the opportunity and enrich your NFT knowledge so that you can be one step ahead of others.
That’s why we decided to write a complete article about NFTs, how they work, how to buy them, what they are used for, etc. to put you one step ahead of others.
What does NFT mean?
NFT or non-fungible token is a digital asset that obtains real-world objects like artwork, music, in-game items and characters, videos, etc. They are generally encoded using the same type of programming which is used for other cryptos. Technically, these digital assets are based on blockchain technology. But NFTs are not like other cryptos. In fact, there are some differences in between. First, we want to become familiar with the economic concept of fungibility.
What does fungible and non-fungible mean?
If you are familiar with the concept of fungibility in economics then you might easily understand what is the difference between fungible and non-fungible tokens. As a matter of fact, the only difference is that the fungibility of crypto tokens is expressed by a script code.
Fungible tokens or assets are divisible and non-unique. For example, fait currencies like the euro and dollar or cryptocurrencies like Bitcoin are fungible: you can exchange a $1 bill for another $1 bill, and you'll still have $1, although your new bill has a different serial number. In fact, these types of crypto assets can be exchanged or traded equivalently.
Non-fungible tokens, on the other hand, are non-divisible and unique. Which means that each token has unique identifying code and it can neither be replaced nor interchanged because the value of NFT tokens is not equal. This feature brings the exclusiveness of a cryptographic asset to its owner. For example, imagine buying a collection of digital artworks on the Internet that it can’t be another of the same kind and only you own it. This defines the meaning of uniqueness. NFTs are limited in supply and come with various identifying codes, since they do create some sort of digital scarcity, their price can go up very fast.
You might ask “why do people pay so much for these digital assets?”
Well in spite of the right of ownership which they give to their buyers, what really happens is that NFT collectors value these digital rights more than the item itself.
The difference between fungible and non-fungible tokens
The main difference between fungible assets and nonfungible assets is in the content they store. While fungible tokens like Bitcoin store value, nonfungible tokens store data like an academic title or a music composition.
The history of NFT’s creation
Contrary to what you imagine, the existence of NFTs dates back to 2012 when the concept of colored coins first emerged within the Bitcoin blockchain by Meni Rosenfield. The idea of colored coins was to describe several methods for representing and managing real-world assets on the blockchain so that owners can prove the authority of those assetsꓼ similar to regular Bitcoins, but with an added token element that making them segregated and unique. They’ve designed for issuance on Bitcoin since Ethereum had not yet been created. This concept was the evolution of NFT.
The first known NFT was minted on May 3, 2014, by digital artist Kevin McCoy. The NFT called Quantum and was minted on the namecoin blockchain and quietly ushered in a new era of digital art.
The Quantum NFT Created by Kevin McCoy
After the launch of the Ethereum blockchain, the NFT subject gained wider momentum to become more trend and viral. Because the blockchain protocols introduced an ERC-721 standard which promoted the issuance of NFTs on the Ethereum blockchain. In 2017, many new NFT projects were born. Cryptokitties was the most notable NFT project, which brought more attention to NFTs and NFT holders became more curious about new generation of digital assets. CryptoKitties is a blockchain game on Ethereum, created and developed by Canadian studio Dapper Labs that allows players to purchase, collect, breed and sell virtual cats.
Later, as the NFT technology was growing, some incorporation started with multiple metaverses and gaming industries. The first-ever known NFT game was Etheria, which was created in 2015. This game enabled users to buy digital lands as NFTs. After Etheria, CryptoKitties was launched as a second NFT game which took the NFT world and even the whole internet by storm because of implementing unique NFT elements into gaming format.
What is the difference between NFT and crypto?
You must know that although these two have lots in common they are actually worlds apart. As a matter of fact, NFTs cannot be considered as a cryptocurrency, however crypto can be considered as a token instead of a coin.
Now first, let’s talk about similarities between these two:
1. Both of them are digital assets.
2. They both are built on the same underlying software by using the same programming and encoding system.
3. They are both secured in digital wallets.
4. Although it was crypto which came first in the late 2010s, the public started hearing about both of them around the same time.
5. In fact, the NFTs world branched off from crypto culture.
And that’s where the similarity ends. Now let’s completely talk about differences in between.
The first difference between NFT and cryptocurrency, which is quite obvious, is the fungibility and non-fungibility. Cryptos like Bitcoin, as we said before, are fungible and interchangeable. But NFTs, as their name suggest, are non-fungible. One Bitcoin equals another Bitcoin, but one NFT cannot be equal with another NFT.
The other difference is in their use and features. Cryptocurrency is a form of virtual or digital currency and since the algorithm is based on cryptography; they are incredibly secure and impossible to counterfeit or double spend. Various cryptographic algorithms and encryption techniques are usually underpinning most cryptocurrencies and their purpose is to safeguard the networks from outside manipulation. You can buy or sell cryptocurrencies on exchanges or use specialized computing hardware to mine them. It is also possible to make real-world purchases using cryptocurrencies, just like current fiat currencies.
But with NFTs, there is a whole different situation. NFTs are not currency to use in trading and they cannot be extracted or mined. Based on their definition, they are called assets and belongings, which cannot be exchanged because of its value and uniqueness, so I guess with all things we’ve already said, you completely realized how different these two are and what exactly their differences are.
What Is NFT mining?
NFT mining is the process of creating a token or asset and uploading it on the Ethereum blockchain. This action confirms the ownership of an NFT, in such a way that if you bought an asset, it will be always in your digital wallet for life until you decided to change the ownership and give it to someone else. Plus, the asset is traceable and identifiable from the precise moment of its creation, while the owner can remain anonymous.
Creating and mining NFTs in Ethereum is somehow expensive, but there are other marketplaces which you can mine and sell your NFTs for free. One of those free NFT mining is Mintable. Mintable is a free web-based platform for creating and minting NFTs, which allows anyone to create and sell Ethereum-based NFTs, without getting involved with complex coding algorithms. Mintable is an amazing platform to enter the world of NFT, because anyone can upload an illustration, a gif or a video and publish it as a ERC-721 token in the Ethereum blockchain. All you need to do this is an internet connection and that’s all!
If you are interested in being a part of NFTs world, the most important thing you should pay attention to is that first of all, investigate and collect a lot of information about this subject, cause the world of NFTs is too big but also very profitable.
How do NFTs work?
Most NFTs are mined and stored on the Ethereum network, although other blockchain platforms (such as Flow and Tezos) also support NFTs. Since these blockchain platforms are open and accessible for everyone, ownership of NFTs can be easily verified and traced. Different types of digital objects, such as artworks, in-game characters and items, gifts and videos, can be "tokenized" on the blockchain platforms.
About the copyright or licensing rights of the asset; it depends on the NFT you bought, that it may or may not come with the purchase, but that’s not something to worry about. Like when you buy a limited-edition printed image, it doesn't necessarily grant you exclusive rights to the image. To briefly explain how NFTs are minted and sold, these graphical assets are minted through smart contracts that dedicate the ownership and manage the transferability of NFTs. In NFTs world, it doesn’t matter if you are under the legal age or not, you can buy, sell and store NFTs just like the others, and there is no limitation for you, because the blockchain technology created a free and public platform so that everyone can present their creativity.
How to create, sell and buy NFTs?
You can create your first NFT on an NFT marketplace or crypto exchange that supports NFT minting. In order to realize how to create your first NFT, follow the steps:
1. First of all, you have to figure out what you want to create. As you know, the NFT world revolves around digital art. It might be an image, a game character, music lyrics or audio production, short video. You need to employ all of your creativity and create a unique piece of art, which can attract NFT collector’s attention so that you can sell your NFT to them at a good price. Your artwork must originate from your own mind and creativity; that’s how it will become a creation which cannot be found anywhere else, because it only existed in your mind. It’s also especially important to ensure that you own the right of the digital artwork which you created.
2. In the second step, you have to choose a blockchain platform. There are several blockchains that can store your NFT. This blockchain will store a permanent record of your NFT, so it’s important to choose the platform that consists your requirements:
- Ethereum is the most popular NFT blockchain platform, which hosts thousands of NFT collections. Ethereum NFTs comply with ERC-721 standard, which stores the metadata of the NFT on Ethereum. This blockchain operates as a proof-of-work (PoW) blockchain, similar to cryptocurrency. Most NFT marketplaces support the creation of NFTs based on Ethereum, however transferring NFTs on the Ethereum blockchain may come with high gas fees.
- Tezos has become one of the most popular blockchains for NFTs in the world. According to the results, the environmental impact of NFTs and blockchain technology is becoming a serious concern and is significantly increasing day by day. Although Tezos stands as a greener alternative. As the NFT system has expanded, the Tezos NFT market substantially increased in popularity. Many blockchains have the lack of formal governance structures. In fact, decisions are often made by a small group and imposed on the whole system. But instead, Tezos has on-chain mechanisms for selecting, testing, and utilizing protocol.
- Solana is the nearest competitor to the Ethereum blockchain. This platform is designed as a faster and lower-cost alternative of Ethereum. Also, Solana offers a growing list of supported apps for NFTs and is based by both the proof-of-history (PoH) and PoS mechanisms. It also boasts much faster transaction speeds than Ethereum.
- Flow is another PoS-based blockchain which is designed for NFTs and decentralized gaming apps, which is the host of the popular NBA Top Shot NFT collection. This platform also enables fast and low-cost transactions, just like Solana. Flow and Solana are the nearest competitors to Ethereum, which their competition is getting tighter day by day.
3. Now for the third step, you must set up an NFT wallet. Once you choose your blockchain, you’re going to need a wallet which supports that blockchain to store your NFT. How are you going to create your wallet? First, you have to download a crypto wallet app, set a username and password and in case someday you might need backups, it’s better to store your private keys and recovery phrase offline. There are several popular wallet apps which support multiple blockchains:
- Metamask is a popular crypto wallet used by more than one million crypto enthusiasts across the world. The wallet supports a wide variety of cryptocurrencies; it connects easily with most crypto apps and NFT platforms. It’s also available either as a browser extension and mobile app, both on iOS and Android. Metamask also simplifies the process of purchasing crypto so you don't have to use other apps to buy coins.
- Coinbase Wallet is one of the largest cryptocurrency exchanges today that offers a digital wallet which is a great option for those new to the digital currency’s world. This wallet supports ERC-721 NFT tokens and Solana NFT collections. It’s available both as a browser extension and mobile app that you can easily install on iOS and Android.
- Ledger Nano X; if you’re looking for a secure wallet to store your NFTs in it, the Ledger Nano X can be a great option, which supports both Ethereum and Solana NFTs.
- Rainbow is a new wallet and it’s exclusively made for Ethereum assets. Which means that you cannot store bitcoins in it, but that won’t be necessarily the case for NFTs. It easily allows you to showcase your NFT collection and buying Ethereum with it is easier than you thought.
4. Your next step will be choosing an NFT platform to create, display and sell your NFTs, however not all NFT platforms offer full-service facilities. Only the best marketplaces represent full services to list your NFTs and sell them as well.
● Top NFT Marketplaces
1. OpenSea is the most popular NFT platform and it’s also among the largest NFT marketplaces. OpenSea launched in 2017 and since then it’s the top platform for Ethereum NFTs, with more than $20 billion in trading volume and more than 2 million NFT collections. OpenSea is ancient by NFT standards and you can find many popular NFTs such as artwork, music, photography and trading cards listed on this platform. Current cryptocurrencies that are being used on OpenSea are Ethereum, Solana, and USDC. OpenSea is very user-friendly and easy-to-work-with for beginners. You can set up an account for free and start browsing NFTs, and the most important part is that you can create your own NFTs on the platform. OpenSea just charges an amount for gas fee, which you must pay for completing NFT transactions with Ethereum. Gas fees are the transaction fees paid to miners.
2. Rarible is a marketplace which allows users to buy and sell artworks, video game assets and NFTs. You can either buy any digital or graphical asset and sell or trade on Rarible using Ethereum, Flow and Tezos. Rarible just like OpenSea, charges a flat 2.5% fee on any transaction, plus any gas fees. This platform has provided conditions so that transactions can be done using fiat currency. It means you can buy NFTs using your credit card. An of Rarible’s interesting aspects, is that this platform created its exclusive token called RARI. The holders of RARI get to vote on company decisions like company policy changes. If you want access to a large network with solid connections, Rarible could be an amazing choice.
3. Solanart is a Solana-based open NFT marketplace, which is created in 2021 and it’s the first of its kind on the Solana blockchain. Artists and digital art creators can create their Solanart NFTs, represent their collections and sell them directly on the platform. Being an open marketplace means that creators can mint on Solanart without the need of the platform’s authorization. But to avoid displaying and selling fake NFTs, solanart provides a process to certify NFT collections, just like most open platforms. For example, Solanart NFTs collections become certified after they have attained a certain number of transactions. Solanart hosts some of the popular Solana NFT collections and it has a simple mining process.
4. Binance is one of the largest cryptocurrency exchanges, which recently added an NFT marketplace to their platform. Binance NFT platform typically offers digital assets which are found on other major platforms, such as artwork, gaming items, and collectibles. The platform is user-friendly and easy-to-use. A notable advantage of Binance platform is that it charges very low fees. The amount of trading fee which platform deducts is 1% for any transaction.
5. NBA Top Shot is an athletic NFT marketplace and if you are an ardent basketball fan, this platform is made for you! Here, you can find NFTs of great moments in basketball history. You can buy video clips, play highlights and artworks for both the NBA and the WNBA. Despite of what you think, some of these NFTs aren’t cheap.in fact most of them are pretty expensive, especially those clips which involves important and memorable scenes of basketball matches. For example, the LeBron James slam dunk video fetched $208,000 in February 2021. The NBA itself built this platform and is managing it too, and they have exclusive rights to these video clips. Users of NBA Top Shot marketplace can purchase an iconic moment using credit card or pay it by cryptocurrencies (Bitcoin, Ethereum, Bitcoin Cash, DAI or USDC) available on their digital wallet.
Now that you have chosen your ideal NFT platform, you need to connect your wallet to the NFT platform. If you are a beginner and have never worked with an NFT platform, I suggest taking your first step using Rarible since it has the most straightforward setup and easiest platform to work with. In terms of connecting your wallet to Rarible, head over to the site then click the Connect button in the top right corner of the screen.
for the next step, select one of the WalletConnect or WalletLink option based on your wallet. If you’re using the Rainbow or Metamask wallets, you must select the WalletConnect option, and Click on WalletLink if you are using Coinbase Wallet. Many other wallets are also supported by these connection options
The next step is similar for any type of wallet that you’re using. After selecting your connection option, a QR code will appear on screen. Now all you need to do is using your wallet app to scan this code. Once you've scanned the code, confirm that you'd like to connect your wallet to Rarible.
After connecting a wallet, your Rarible account is instantly generated. You now have everything you need to create, mint, and sell your first NFT. It doesn’t matter if you are using Rarible or any of the other marketplaces which we’ve mentioned in the list above, the following steps for creating an NFT is mostly the same. For now, we are going to use OpenSea platform as an example to show you the guideline of creating an NFT:
First, click on the Create button on top of the screen, beside the profile icon. From the menu which will appear, click on My Collections to start a new list so that you can store NFTs to upload on the platform.
Once you have a collection created you are ready to create your NFT or add an already existing NFT for sale. In this tutorial, we’ll show you the process of creating a new NFT.
Then, upload your media (image, video, audio or 3D model) and name your NFT file. After that, supply a link to additional content so potential buyers can learn more about your product.
You need to add a detailed description and give some information for buyers. In addition, you can optionally add unique properties to your NFT, such as an invite to a private discord, discount codes to merchandise, artist name, ticker symbol, etc. add levels to your NFT. For example, this NFT has a 2 out of 10 strength level. Once you have filled in the details of your NFT, simply select “Create” button and now you’ve created your first NFT.
Now, the only thing that needs to be done is list your NFT. Listing process of an NFT is simple, and most NFT platforms allow you to do this for free. Once your NFT is created and available in your wallet, you can simply hit the “sell” button on the platform and set the price you’ve considered for your NFT and Schedule the listing for now or for the future, in fact how long you want the sale to last. Once the details of your sale are filled in, you can create the listing and make it public or private.
Now you need to pay for a few transactions through your wallet, which may include paying transaction fees on the blockchain that you chose. Solanart gas fees are very small, typically less than $1, while listing an NFT on the Ethereum blockchain can cost at least 100$.