If 2020’s crypto community buzzword was Bitcoin, 2021’s was NFT. Non-Fungible Tokens, or NFTs, are unique and non-interchangeable units of data attributed to digital items, which are then logged on blockchain technology that establishes proof of ownership.
Let’s break this down..
The blockchain is basically a decentralised digital ledger where transactions made in various cryptocurrencies are publicly recorded in chronological order.
NFTs are sold and traded using cryptocurrency, which is a blockchain technology; some cryptocurrencies have their own blockchains.
And cryptocurrency is basically a digital peer-to-peer payment system that doesn’t rely on bank verification because it uses encryption to verify transactions.
People will be most familiar with visual type NFTs like artist Beeple’s ‘Everydays: the First 5000 Days’, which made headlines last year when it sold at a Christie’s auction for $69 million (note that Beeple was already a commercial success in the art world before his first minting).
But any digital asset, including audio, can be made into an NFT.
Investor gurus and celebrities alike can’t stop talking about them and they’re thought to become a cornerstone of Meta’s Metaverse, but why should they matter to women in digital?
Why NFTs matter
When NFTs first emerged many people questioned why you would spend large sums of money for digital ownership of things like artwork, gifs or videos when you could just take a screenshot or recording instead.
Over time we’ve seen that despite this argument the demand for NFTs continues to rise. NFTs have actually become a democratising force in the art world by lowering barriers to marketplace entry and artists have enjoyed the larger audiences found on NFT marketplaces when compared to traditional galleries.
NFTs are also more convenient for art collectors who benefit from their ease of use in comparison to physical assets. The royalties paid to NFT creators on all future resales of their work is a revolutionary model, the likes of which working artists haven’t seen before (around 10% of all future resales).
In the art space it’s easily said that NFTs offer creatives massive potential for growth and profit.
‘I had $10 in my bank account’: This 36-year-old went from living paycheck to paycheck to making over $109,000 selling NFTs https://t.co/AoDI9h6HDi
— CNBC Make It (@CNBCMakeIt) February 2, 2022
However, the biggest impact we’re seeing NFTs have is actually within the gaming community:
‘Though art NFTs receive so much attention, they only make up 10 percent of the market, with collectibles and games comprising more than 80 percent.’ – ARTnews
NFTs’ appeal in gaming for players and companies alike is the potential to turn limited-edition game items and other microtransactions into digital collectibles.
‘In some ways, it’s great. Take FIFA as an example. Right now, you can purchase certain kits from the in-game marketplace and they’re only available for a limited time. If somebody starts playing in March, they can’t get those kits. If those things were NFTs, people would be able to jump onto a marketplace and buy them from somebody who isn’t using them anymore. The same goes for limited-time Fortnite skins or Destiny emotes…
Many would be tempted if they were told they could use their skills to level up a character, build a team, or earn some sort of in-game reward, and then be able to sell it on for actual cash. Not only that, but as consumers, we should expect to be able to do something as simple as passing our in-game content on to a sibling or a friend when we’re done with a game. With NFTs, that would be entirely possible.’ – Ken Barnes, Game Journalist, for NintendoLife
This being said, game companies have received massive backlash from fans when they’ve tried to introduce blockchain into their gameplay. The backlash itself, though, makes it clear that big brands and businesses are starting to seriously pay attention to the potential of NFTs.
NFTs can make markets more efficient by streamlining transaction processes and hybrid NFTs with real-world bonuses are starting to emerge e.g. celebrity fashion designer Kim Shui released their first set of NFT jade keys on OpenSea preceding their FW22 show and each customer will receive a dress of their choice with the purchase.
The short of it is – NFTs matter because they’re a new financial tool with innovative capabilities that are here to stay as long as people invest in and find uses for them.
‘In 1996 I bought my first Apple computer, for like $3,200. […] But if I just bought Apple stock, instead, I would have never had to work a day in my life. In the new world [of NFTs], when you buy the ‘computer’ you’re owning a piece of the brand. So when it blows up, you’re still able to get a piece of that.’ – Bored Ape’s Jace Kay quoted by Creative Bloq
Okay, I’m interested in NFTs, how do I get started?
Set up a crypto wallet
The first step you need to take before buying or minting (the process by which you register your ownership on the blockchain) your first NFT, is setting up a cryptocurrency wallet.
Most NFTs are bought and sold using Ethereum. Reputable crypto wallets include Metamask, Coinbase Wallet and Fortmatic. These wallets allow you to store your NFTs and cryptocurrencies in one place and Coinbase is widely touted as the most beginner-friendly.
Different marketplaces are compatible with different wallets though, so it’s worth investigating where you want to start before setting one up. Most marketplaces offer a minting service for a fee.
Currently the exchange rate to Ethereum is 1 GBP to 0.00052 ETH. You’ll need to buy some Ethereum to get started, which you can do on Coinbase as it also functions as a cryptocurrency exchange.
Explore NFT marketplaces
Depending on the marketplace there may be certain barriers to buying and selling, like paying the minting fee upfront. Hidden fees on marketplaces can include the ‘gas fee’ which is the price for the energy it takes to complete the transaction (Ethereum alone has produced 96.2 million tons of carbon since its inception) and a fee to the marketplace for selling/buying on it, called a ‘smart contract’.
Rarible is an art-oriented beginner friendly NFT marketplace. You don’t have to get approved before creating an NFT and there is an option to mint for free where the cost is added to the buyer’s fee if the listing sells (this NFT would be sold as part of Rarible’s collection and not your own). Rarible supports Metamask, Coinbase and Fortmatic.
OpenSea is one of the largest NFT marketplaces, it lists sports collectibles, domain names, trading cards and virtual worlds alongside art. OpenSea also has an option to mint for free, where the cost of minting is taken off the end sale profit, this does bear the risk of selling at a loss for creators though. OpenSea also supports Metamask, Coinbase and Fortmatic.
Other beginner-friendly marketplaces worth exploring are SuperRare (if you’re interested in collecting high-end art NFTs, creators are invite-only), Axie Marketplace (an online game using NFT characters reminiscent of Tamagotchis) and Mintable (the ‘Etsy’ of NFT marketplaces, with its own Mintable University to help users get better at NFTs)
It’s important to note that even though minting your NFT gives you digital ownership, NFTs are not automatically subject to copyright. The original work the NFT is minted from is automatically subject to copyright under current UK law, but not the NFT itself.
A lot of NFT marketplaces don’t verify that the person minting an NFT is its creator, which has made many digital artists vulnerable to fraud that’s difficult to navigate and resolve.
Take steps to stay safe
Like any investment, you can lose money, and while many on the internet loudly proclaim they made it big with NFTs, like crypto before that and online gambling strategies before that, you shouldn’t invest more than you can afford to lose on creating or buying NFTs.
The most crucial step to staying safe is doing your research i.e. ask yourself, how much will this listing/purchase cost me and is it worth it? You may think the NFT you’ve bought or created is great but that doesn’t guarantee a sale.
NFT communities can be a fantastic place to learn about NFTs and strategies for making a profit, but there are also scams posing as communities and marketplaces to be wary of.
Start small with NFTs/collectibles you enjoy
Even though NFTs as a tool lower barriers to marketplace entry, for example in art, the barriers do still exist and only 10% of collectors are making large profits from trading. So it’s important to explore the world of NFTs from a place of fun and curiosity, so that you’re not too disappointed when you’re not an overnight NFT sensation.
Taking this approach to NFTs will also help you stay safe because you’re not gambling to win.
As an aspiring creator, list the pieces you’re most proud of and can afford. Making efforts to connect with communities of other NFT artists is a great way of building your audience and knowledge.
As an aspiring collector, buy the pieces that interest you the most and that you can afford. Researching and following collectors and collector communities you admire on social media is a good way to learn.