NFT trading is getting more popular. Although the adoption of NFTs is lagging behind cryptocurrency, investing in NFTs can also be very interesting as part of your investment portfolio. In this post, I will explain how you can create, acquire and trade NFTs
Types of NFTs
NFTs are digital tokens that represent the ownership of objects. Many people associate NFTs with bits and bytes but this is not always the case. In addition to the ownership of digital assets, you can also own physical assets through NFT tokens. Examples of this are art, music, in-game items, and videos.
If you purchase an NFT, ownership can entitle certain distribution or streaming rights in addition to owning the underlying token associated with the NFT. This is not always the case but it’s important to know that there are more ways to generate revenue from NFTs and royalties from streaming are just one example of the potential that NFTs have. Good examples of these kinds of NFTs are videos and mp3s.
NFTs can also represent ownership of unique digital items within a video game that is tracked using a blockchain. When in-game characters are turned into NFTs on a blockchain, a user can transact virtual goods and ownership of virtual items in a more efficient way, easy to be tracked and also provable. In addition to that, video game NFTs can also create a bridge between different games. This means that items and characters can be transferred to other games that use the same blockchain. With the expectation that the Metaverse will have different platforms in the future, it would be critical that users can easily move their unique avatars from one platform to the other in the Metaverse and NFTs can play a critical role in this.
NFT marketplaces
When NFTs are created or when an NFT collection is publicly sold, most of the time these NFTs are instantly sold out. This is why most people turn to secondary marketplaces where NFTs are exchanged in auctions. Secondary marketplaces are also great to get a better understanding of the NFTs you want. It can help you to get a better sense of the popularity of a collection and if a specific collection has gained or lost value over time. Most popular NFT marketplaces allow a user to track stats such as floor price (the lowest price), 24-hour price change, 7-day price change, number of owners, number of assets, and trading volume. Secondary marketplaces have all sorts of NFTs for different people with varying tastes.
In a previous post I already briefly mentioned a few NFT marketplaces but I will explain some of them now in more detail.
OpenSea
OpenSea is one of the biggest secondary marketplaces and is mainly focused on Ethereum (although they are also active on other blockchains). Users can buy, sell and trade image-based NFTs, music NFTs, video NFTs, audio NFTs, and ENS (Ethereum Name Service) domains. ENS is an internet naming protocol that runs on the Ethereum blockchain. ENS names are mostly used to simplify receiving payments in any cryptocurrency and for decentralized websites, though they can store any arbitrary information.
NFTs listed on OpenSea are either Ethereum ERC-721 or ERC-1155 tokens. Both tokens can verify and track ownership of a particular digital and/or physical item. You can find OpenSea on: https://opensea.io.
Nifty Gateway
Nifty Gateway facilitates NFT purchases for many of the most popular crypto games and applications. It allows users to purchase NFTs with their credit card which is a big advantage compared to most marketplaces that require the currency of the blockchain on which they are operating. Nifty Gateway resides exclusively on the Ethereum blockchain and you can find them on this site: https://niftygateway.com/about.
Rarible
Personally, this is exactly the marketplace to my liking. The reason for this is that Rarible is focusing on becoming a Decentralized Autonomous Organization (DAO) where its users will make key decisions for the platform. Being a decentralized fanboy, this is exactly my cup of tea. Anyone can buy, sell, trade, and create Ethereum-based NFTs on this platform. You can find Rarible here: https://rarible.com/rari.
Mintable
Mintable is an NFT marketplace where users can create, buy and sell ERC-721 NFTs. This also includes game items, ENS names, and templates. Mintable operates on the Ethereum blockchain but has an advantage over other marketplaces on Ethereum: Mintable removes “gas” fees that are associated with the creation of NFTs by absorbing the cost themselves. If you are interested in Mintable, you can find them here: https://mintable.app.
Singular
Singular separates itself from most other popular marketplaces by not operating on the Ethereum platform. Singular is the first NFT marketplace that is built on the Kusuma blockchain and is also included in the Polkadot ecosystem. Because of Kusama’s architecture, users only have to pay a few cents to create an NFT. In addition to that, a user has also the option to upgrade an NFT, and NFTs can also own other NFTs. These two concepts are mainly interesting for games. An in-game character can be upgraded and an in-game character can also own in-game items. Kusama also supports smart NFTs with multi-resource capability that enables them to be presented in more than one file format. NFTs on blockchains with architecture like Kusuma seems to be perfect solutions for ecosystems like computer games and the Metaverse.
Creating NFTs
The creation of NFTs is called “minting”. NFT Minting is the process in which NFTs become a part of a blockchain, for example, the Ethereum blockchain. You can compare an NFT minting process with the minting of metal coins. Metal coins are minted and put into circulation and NFTs (non-fungible tokens) are also “minted” and put into circulation after they are created, making them part of a blockchain.
The NFT minting process turns a file into a crypto asset that can be easily traded or bought with cryptocurrencies on a digital marketplace without an intermediary party. During the minting process, the creator of the NFT can schedule royalties from every subsequent sale, which will be a commission the creator can receive whenever the work is sold to another person or is traded on the secondary market. This is all done with the smart contract function on a blockchain. If a blockchain does not have the option to process smart contracts, it is not suitable for minting NFTs.
Turning your digital content into an NFT or uploading the file to an NFT marketplace and listing it for sale, is similar to the process of uploading video content on YouTube, music files on Spotify, and listing a digital item or product for sale on a physical e-commerce platform like Amazon.
All you need is to upload the file (PNG, JPG, GIF, MP3, or MP4), assign a title and subtitle, add a description, set up royalties, and list it for sale.
Minting an NFT costs money. The fee that is charged depends on the demand of the blockchain network and on the NFT platform you want to use. For instance, fees on most NFT platforms on the Ethereum network cost between €50 and €200.
In case you are a content creator, graphic designer, or digital artist you can easily turn your work, be it 3D models, text files (documents, PDFs, or tweets), videos, or music into a collectible crypto asset with real cash value.
The process to do this is very simple and there are programs available in a browser to support this. For instance, for the Google Chrome browser, you can install a plugin named Metamask. This is the default wallet of most NFT marketplaces and blockchain apps. However, make sure your wallet has the right cryptocurrency (depending on the blockchain) so you can pay the fees for the blockchain and the NFT platform you want to use. After that, you are ready to create your own NFTs!
Buying NFTs
Buying NFTs can be done the same way. For instance with Metamask. But you can also do this with other programs like Trust Wallet or Coinbase Wallet. Make sure your wallet has the right cryptocurrency so you can buy the NFTs on the NFT platform/blockchain of your choice.
Find the NFT you want, place your bid, win the auction, and the token will be transferred directly to your wallet! With any of these cryptocurrencies, you can bid on any NFTs available on the marketplace of your choice. This way you can buy the NFTs you want and keep, sell or exchange them according to your own taste.
Final thoughts
I hope these basics will give you a better understanding of how NFT trading works and how you can participate in NFT trading.
If you have any additional tips/advice on this subject please do so by contacting me. If you want to keep in the loop when I upload a new post, don’t forget to subscribe to receive a notification by e-mail.
