Want to get in on one of the most exciting markets in crypto?
An NFT is a unique digital asset secured by a blockchain. If you’re a complete beginner, this article might be one step ahead of you. But don’t worry! Check out our article on NFT basics, then come read this post for more information.
In our last post, we explained what Non-fungible Tokens (NFTs) are. We also talked about the difference between fungibility and non-fungibility, and how NFTs differ from cryptocurrencies. Remember that non-fungible means irreplaceable, or non-interchangeable. This is why NFTs are used to encode the metadata for visual art, videos, music, or other unique digital assets that one could own outright. These asset classes can be easily bought and sold as NFTs on marketplaces like OpenSea and are driving the NFT boom.
No doubt, the NFT boom is one of the hottest markets in crypto.
It’s also still one of the hottest markets today. According to the Dapp Industry Report, NFT trading volume has grown from under $100 million in January 2021 to more than $400 million in June.
Making up that overall growth are a number of famous NFT collections, each with its own market and hype cycle. Some of the most popular are Axie Infinity (a virtual world where users can own properties), CryptoPunks (pixelated character avatars), and NBA TopShot (virtual basketball cards and highlights).
Similar to art collectors, NFT enthusiasts are obsessed with getting their hands on new and rare pieces. That obsession drives the booming NFT market, which draws more people to the NFT community in turn. For that reason, NFTs have become one of the most popular collectibles on Earth.
When you purchase an NFT, you probably won’t get a physical version of this object. NFTs are an ownership mechanism for digital assets. Sometimes, your purchase can even be used by others on the web depending on the exact item you bought. (It’s nearly impossible to completely stop images from being shared around the Internet.) However, all the rights for this art will belong to you, which comes with plenty of monetization possibilities as well as resale rights, of course.
As a result, NFT represents full rights on something unique that can’t be copied. This drives collectors to “grab a piece” and support their favorite artists. You can turn anything digital into an NFT: visual art, GIFs, songs, and anything else you can think of. People are constantly coming up with imaginative new uses for NFTs.
Today, more and more NFTs come with programmable rights or exclusive access. This is one of the most exciting developments in the space. Owning NFTs from collections like Axie Infinity or Top Dog Beach Club lets you play in their digital metaverses. Influencer Gary Vaynerchuck launched VeeFriends. Purchasing a VeeCoin acts as your ticket to future conferences and allows you to participate in the community.
American DJ and prominent NFT fan 3LAU sold his album as 33 NFTs for $11 million. Other major musicians such as Kings of Leon, Shawn Mendes, and Ozuna have also released NFT projects. Established visual artists like Damien Hirst have also made NFTs of their work.
Let’s take a look at some of the most popular types of tokens. We’ve already mentioned Axie Infinity, CryptoPunks, Top Shot, and some music projects, but that’s only the surface of the vast NFT market.
The most popular type of NFTs is digital art. This category includes visual art, GIFs, paintings, or music. There are also well-known collectibles, such as CryptoPunks, Bored Apes, or Hashmasks. These types of collectibles are often used as profile pictures on social media and each has a strong fan community. You can even purchase the exclusive rights to a film, collect virtual sneakers from RTFKT, or construct your own NFT art gallery with Cryptovoxels.
Another popular type of NFTs is domain names, secured by the blockchain. NFT domains can be used to give websites the benefits of decentralization and security offered by blockchain. They can also be used to simplify a wallet address, the long, unruly string of digits used to process cryptocurrency transactions.
NFTs have also found interesting uses in the sports world beyond NBA Top Shot. Boxer Tyson Fury sold an NFT for $1 million. Mike Winkelman, aka Beeple, the highest-selling NFT artist ever, launched WENEW to sell sports memorabilia NFTs. Tom Brady, Derek Jeter, Tony Hawk, Tiger Woods, Naomi Osaka, and Wayne Gretzky launched Autograph, an NFT platform for celebrities. NBA player Spencer Dinwiddie even sold shares of his most recent contract on the blockchain!
NFT trading occurs on marketplaces, where one can shop for, buy, and resell NFTs. Some marketplaces are specialized for a certain type of asset (Axie Infinity, NBA Top Shot, CryptoPunks) while others offer all types of NFTs. Take a look at this chart of the top NFT marketplaces all-time by volume:
If you’re looking to buy digital art, your best bets are OpenSea, Rarible, SuperRare, or Foundation, or Nifty Gateway. Depending on the marketplace and item, the sale may be either an auction or buy-it-now sale. The item may be one-of-one, or minted in a limited number of editions. Head over to these sites and just start exploring. Remember, NFTs are art — everyone has different tastes!
When you get started with one of these marketplaces, you will be required to make an account and add a wallet. Many NFT marketplaces use Ethereum as their cryptocurrency of choice, so it’s a good idea to set up a wallet and purchase some in advance. But, make sure to check which wallets your marketplace of choice prefers, because they are not all interoperable. For more help on this, check out our article on DeFi tools. Typically, buying NFTs does not require you to verify your identity, though this is not the case for creating and selling.
NFTs are minted on and secured by a blockchain. While many different blockchains could be used, Ethereum was the original platform for creating non-fungible tokens. Ethereum is still the most popular blockchain for NFTs today.
To create an NFT, you can use different platforms and marketplaces. The process is relatively similar across platforms and fairly easy regardless of where you do it. Let’s break down the whole process step-by-step on Rarible:
To create NFTs, you’ll need to verify your identity with social media or other documents.
You also need to sign a smart contract containing all the relevant data about the art object, its price, and the rights held by the creator and purchaser. A smart contract is a simple piece of code which creates an IF/THEN condition; when certain conditions are met, an action is executed. This enables the sale of the NFT. Creative smart contracts can be a huge benefit to the artist. Beeple, the highest-selling NFT artist, uses smart contracts to earn 10% on every resale of his pieces, even after they’ve left his ownership.
You will also be prompted to connect your wallet. On Rarible, you can use Formatic, WalletConnect, WalletLink, and MyEtherWallet. Again, the list of acceptable wallets changes platform to platform.
After this, click the Create collectible button and describe what you are selling. It can be a one-of-one, or available in several editions. Select single or multiple depending on your project.
Then, upload your file and choose your smart contract. You can use an auto-completed smart contract (recommended for beginners) or create your own if you have the requisite coding skills. In addition, you must have funds to pay for “gas” (a usage fee on Ethereum), which is required to enable the smart contract. You can check out the current gas fees on a site like Pump My Gas, as they can get quite expensive at times.
And there, your NFT is minted! Sit back and watch as the bids (hopefully) roll in! Unless you’re already an established artist, you’ll need to market your work. NFT Twitter is full of up-and-coming artists showing off their creations.
The NFT space is already massive and growing exponentially. Facebook is launching a permissioned blockchain called Diem, which could cause the market to explode. Facebook already has 2.8 billion users; imagine the possibilities when that many people enter the crypto space, or start collecting NFTs.
Pontem is a perfect testnet and playground for Diem, so you can prepare for the next NFT boom. If you’re looking to build NFTs on Diem and tap into Facebook’s vast user base, you can use Pontem Network to experiment and start building your ideas. You can also use Pontem Blocks, our incredibly simple development tooling, to start creating NFT smart contracts for Diem. Pontem is the best stepping stone to integrating Facebook’s Diem blockchain with existing crypto infrastructure.