The astronomical sale prices of some NFTs has garnered media attention worldwide and the term NFT is now a household name, but few truly understand the potential of this growing segment of the crypto market.
In our previous article we discussed what an NFT is.
The TLDR version is that NFTs are cryptographically unique digital tokens that can be linked to digital content or physical artifacts, proving ownership. Although they’ve predominantly been associated with artwork, they can be linked to any form of digital content.
While most blockchains deal with smart contracts that cater to tokens and coins that are interchangeable, or fungible, a new token standard had to be created to deal with the unique characteristics of non-fungible assets. Today, many standards exist and the NFT marketplace is flourishing. The ERC-721 standard on the Ethereum ecosystem started the trend but we are seeing an increasing number of purpose built NFT blockchains emerge. Regardless of the ecosystem being used however, the common theme for all of them is to provide a way for art to reach new markets by allowing blockchain technology to extract value, validate ownership, and prove authenticity of rare and collectible art.
The potential of NFTs will open up a new generation of artists who will now see that being an artist can be a viable and lucrative career path.
the ability of a good or asset to be interchanged with other individual goods or assets of the same type.
Buying Your First NFT
It’s simple really. All you need to do is make an account with an NFT marketplace like Rarible, OpenSea, or Foundation, connect your ERC-721 compatible wallet to the platform, edit your profile and then begin searching for art.
It’s important to think of any purchase from the perspective of an investor. The NFT you buy will take time to appreciate in value but don’t just ape into it and throw your ETH at anything. If you want the potential of rapid gains, it’s best to stick to pure crypto plays.
Take a look at some of the recent sales on the platform to give you a good sense of what’s on trend and then get to know some of the artists and their work. If you see an NFT you’d like to purchase click it’s time to do some research and find out as much as you can about the artist. Find out what other sales the artist has had, how popular they are on the different social media channels. Most of this info may be available to you with simple links on the artist bio page, if not, spend some time and Google it!
Like tradition forms of art before it, valuing an NFT is not easy, but we can probably agree on some important criteria.
- an artists exhibition history
- sales history
- level of fame
- vastness of artwork
- followers / awareness
- Uniqueness / scarcity of work
Clearly, some of the above criteria will have no reference when an artist crosses genres like when a pop musician mints a limited series of artwork. They may have zero sales history or past exhibits and yet the value of their art can still reach record prices due to their popularity as a musician and the scarcity of the art.
Understand exactly what you are buying. Checking the smart contract information is a smart way to be sure that you are buying the correct NFT. Reach out to the creator if you need clarity on the smart contract and token ID, and make sure it’s the same as what you see on the NFT page.
Click the details of the NFT to reveal important information, such as:
- Contract address of the collection.
- Token ID of the particular NFT.
- Blockchain the NFT resides on, eg: Ethereum, Polygon/Matic, Klatyn.
- Whether the NFT metadata is centralized or locked (frozen)
Depending on the platform and the NFT artwork you may be presented with an option to Buy Now in which case simply follow the prompts in your wallet once you click the button (always remember to have enough ETH to cover gas fees). Once the transaction is complete, the item will transfer to your wallet.
Alternatively, the NFT may be in on auction and you may need to place a bid and an expiration date of the bid. Take a look at the FAQ section and understand the requirements on making successful bids as some bids are required to be 5% higher than the previous bid. It’s also important to ensure that your bid is in the same currency as the previous bids.
NFT Marketplaces for Digital Art
The Ethereum ecosystem is currently the leading blockchain for NFTs and there are numerous marketplaces where creators can list their digital art for sale.
OpenSea – Ethereum blockchain
Rarible – Ethereum blockchain
SuperRare – Ethereum blockchain
Atomic Market – WAX blockchain
Foundation – Ethereum blockchain
NiftyGateway – Ethereum blockchain
MakersPlace – Ethereum blockchain
NFT Showroom – Hive blockchain
Decentraland – buy and sell land and property in the virtual world.
Flow – in game app purchases
Audius, Minty – Music
If the buyer decides to resell their NFT artwork, they can transfer it to a different marketplace if they are based on the same blockchain. Upon sale, they will also pay a royalty fee to the original artist
Flow – NBA Top Shot, UFC, Crypto Kitties, Cheese Wizards and more.
Wax – MLB, Godzilla, Collector cards from Topps and video games like Street Fighter, and more.
An NFT represents a digital creation that is a truly unique digital creation – it is authentic, signed and issued by the creator and is made possible by blockchain technology. Even if the digital creation is copied, it won’t be the authentic and originally signed version that can be verified on the blockchain.
There are many marketplaces to buy and sell NFTs. Depending on which marketplace you choose, you’ll be able to purchase different types of art or collectibles. A lot of these websites have secondary marketplaces with a variety of NFTs, but each platform operates slightly differently.
Choose your ecosystem and marketplace
Register and fund your account
Submit a bid for the NFT you wish to purchase
Some marketplaces operate more like an exchange, using highest bid and lowest ask for NFTs that have several prints.
A benefit of purchasing an NFT from the primary marketplace is the potential resale value directly after the product goes on sale. Some NFTs that are in high demand will sell for 5 to 10 times their initial price right after the release. The downside to buying NFTs on the primary marketplace is it’s hard to estimate the demand for the art. On the secondary marketplace, you can compare your purchase to previous sales.
Other NFTs “unlock” bonuses such as vinyl albums, front-row concert seats, or exclusive MP3s. Anything that exists
Canadian rock group Kings of Leon made history by releasing a new studio album on both traditional media and the blockchain as a non-fungible token (NFT). The NFT was only available for 2 weeks and gave diehard fans of the band special perks like additional album artwork and the chance to win front row concert tickets.
One unique aspect of NFT-based art that doesn’t really exist in the offline art world is the ability to profit from the secondary market. Offline, once you sell your artwork, it’s gone. You don’t really get anything from it if and when it resells for more.
In the crypto world, however, you can set up a fee (usually between 5 and 10 percent) that you get each time someone resells your work. That’s right — you get paid for each resell! So, if you sell your original work for a dollar and then someone resells it for $1 million in 10 years, you can still get $100,000 from it.
This feature alone is the single best reason why NFTs are great for content creators. It allows them to focus on making art without as much concern for its initial sale price. If their works become popular, they can start earning significant sums just from the secondary market in the future.