With so much hype on using Non-fungible tokens (NFTs) for selling digital art – $65M for the ownership of a digital art and the famous: Elon Musk Tweet sells for $1.1M – I had to look into it, so I can understand it.
Fungible means that the “contracted good” can be replaced or exchanged with another identical one of the same value
First let me say that I am in the “believer’s camp” While many think (not me) that Bitcoin has been hyped and may collapse at some point, very few object to the underlying technology associated with it, called blockchain. I think blockchain has already changed the world, and it is a matter of time before it is everywhere and it radically affects many industries.
I am a Digital Artist, Is this for me?
ABSOLUTELLY! — Up until now, physical goods (paintings, sculptures, drawings, music sheet, autographs) were the only things that can be traded, auctioned sold and bought. You would put it the purchased item on your wall, bank safe, on a museum wall. Digital art (and artists) are no longer left out of the marketplace, and their art can now be traded with ease and security. What’s more, you could assign different types of rights (and values) to a digital piece depending on the owner’s desire. The possibilities that this opens are endless!
What is an NFT?
NFTs is a token tied to a unique digital asset (content or piece of content) that has been protected using crypto-based blockchain technologies. By using an NFT, a digital asset can be converted into one-of-a-kind, verifiable asset that are easy to trade.
Should be noted that this is not new. NFTs date back to 2012 and utilizes the established blockchain technology to track, verify transactions.
Decentralized Finance Model – DeFi?
DeFi is short for “decentralized finance,” an umbrella term for blockchain-based form of finance that does not rely on traditional central financial intermediaries ( brokerages, exchanges, or banks ) to offer traditional financial instruments. It instead utilizes smart contracts on blockchains, the most common being Ethereum.
Blockchain technology has been used for tracking blocks utilizing cryptography for both digital and physical ownership for a long time.
- A blockchain is a growing list of records called blocks which are interconnected by utilizing cryptography. Each block contains a cryptographic hash of the previous block, a time stamp, and exchange information. Utilizing blockchain [secure decentralized public record] we can safely store information over the shared system, where everybody can see but can’t do any alteration. Blockchain will track all information trade called ledger and it uses a distributed system to verify every exchange.
Source: Blockchain Technology Explained (With Infographic) – Tech4Fresher
2020 was the year for blockchain and with that comes the battle / competition for network ownership (there are billions in small transaction fees at stake!) . There are many blockchains available out there. Some VC-backed, corporate banked or neither, some are more popular than others within certain use-cases and industries. Lots going on in the market right now. It is fascinating to see.
You will need to select one, and the one I selected is Ethereum as it currently has the largest echo-system using the Ethereum blockchain.
Ethereum is a blockchain, and ETH is the currency used to make transactions on the Ethereum blockchain.
What Do I need ?
It is fairly simple (and it is getting simpler) to create and own NFTs. You will need the following basic things:
An account where you can buy cryptocurrency
This is where you will actually buy your crypto-currency.
I selected CoinBase.
Use my Referral link instead (I get a bit of credit if you sign up!)
and I now own BitCoin!
An Ethereum Wallet connected to your cryptocurrency.
The wallet is the place that will hold your credentials to your money and assets. It will also be able to authenticate your and manage the ledger process for you.
I selected MetaMask, as it was recommended by CoinBase (I found this strange as CoinBase also has a wallet!)
An NFT Marketplace connected to your Wallet
Think of these as a traditional art gallery. This is where you will create your NFT and have your store. I have created accounts on OpenSea and Mintable, and have original digital art listed in both platforms.
There are curated and open marketplaces.
Curated you have to apply and be accepted to post art. Anyone can post to open marketplaces
What are the costs / fees to create an NFTs?
Yes there are fees, and they vary depending on the marketplace you select
- Buying Digital Currency
Because most of the marketplaces are transacting in digital currency, you need to fund your wallet. This is done by getting an account in a Digital currency exchange Broker, and buying digital currency with money.
- I chose to go with CoinBase, and I bought USD$100 worth of Bitcoin.
- They charge me $2.99 fee. Basically you are exchanging currencies at this point.
- In addition, Coinbase charges a spread of about 0.5% for cryptocurrency sales and purchases.
- Funding your Wallet
- I chose to use MetaMask as my wallet, and they charge a service fee that ranges between 0.3% – 0.875% is automatically factored into each quote.
- Marketplace fee: This is things start to vary widely depending on the marketplace you choose.
- Enrollment fee: Some marketplaces require a one time fee to enroll into their marketplace.
- Listing Fee: this is the price marketplaces charge to list the item on their site. (If you are familiar with Etsy, then you are familiar with this fee, in that case is USD$.20 cents) . Currently most marketplaces are waving their listing fee. Some have said they will not have one.
- Gas Fee are payments made by users to compensate for the computing energy required to process and validate transactions on the Ethereum blockchain. These fees are based on supply/demand and can vary widely depending on the network usage at the time of the request.
Check out my next blog – My First NFT
- The beginners guide to creating & selling digital art NFTs – OpenSea blog
- Blockchain Technology Explained (With Infographic) – Tech4Fresher
- Gas (Ethereum) Definition (investopedia.com)
- What is Gas Fee (etherscan.com)
- What Are Gas Fees? | CoinMarketCap
- NFTs: How to Create, Buy and Sell Them – CoinDesk
- What is NFT? Non-fungible tokens explained – CNN
- Legal guide to launching an NFT marketplace | Secondary Sources | National | Westlaw Today
- NFT Guide – How to sell your first NFT the EASY WAY for Digital Artists
- OPENSEA.IO – Tutorial on how to set up opensea.io for your first NFT sale. Join the NFT Revolution! – YouTube
- How to install MetaMask and connect to Opensea (Beginner Walk-through) – YouTube
- Elon Musk said he’d sell his tweet as an NFT and the highest bid was over $1.1 million