How can investors create NFTs?
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Crypto is talked about on an almost daily basis, with almost all investors having at least a passing familiarity with bitcoin and other high-profile cryptocurrencies. One type of asset that has recently caught the attention of investors, while also being a type of crypto, is very different from bitcoin, ether and other more established cryptocurrencies: non-fungible tokens (NFT).
A core feature that distinguishes NFTs from other cryptocurrencies is that each bitcoin is equal and worth the same as any other bitcoin; that is not the case for NFTs. Because each NFT is non-fungible, unique and differentiated, the chain of ownership and rights of each NFT can be traced along the blockchain that supports the NFT. Some of the implications of that are 1) ownership of digital property and content can be verified immediately and securely, and that 2) independent smaller artists or creators can be compensated fairly and in a timely manner, a use case that continues to attract attention and user interest.
With other use cases such as self-sovereign identity, real estate records, portable healthcare, immutable educational records and many others also leveraging NFTs, this market – albeit fleeting – clearly continues to attract attention. As the scum is removed from the crypto market at large, this is actually seen by some as an opportunity for NFTs to benefit individuals and content creators as opposed to just serving a volatile and speculative asset class.
So how can investors get in on this action and create their own NFTs?
Select the asset. Perhaps an obvious point, but choosing the asset that will be minted/tokenized is the first step in the NFT process, and can be any of a wide range of assets. Image or artwork NFTs are a relatively easy place to start, but investors must ensure that 1) they have the rights to auction and sell NFTs of this image, and 2) images or other artwork are not restricted by others legal labels such as open access or creative commons.
Create and connect a crypto wallet. If you already have a crypto wallet on an exchange or platform, most major NFT marketplaces allow investors to link existing wallets to the exchanges. If investors do not have an existing wallet account, exchanges allow new investors and users to create a wallet on the exchange. Wallets are how information about cryptoassets moves back and forth between buyers and sellers, and therefore must be created for investors who want to create and auction NFTs.
Create NFT. Once the asset is selected and the wallet is created and/or connected, investors can begin the process of listing the NFT on the exchange. Exchange specifications vary, but the following steps are common in most NFT marketplaces. Clicking the “create” button prompts the investor to upload the image (sticking to that example), and fill in fields asking for information such as 1) a description of the image, 2) links to external sites or more information, and 3) which blockchain the investor wants to connect the NFT to, for example Polygon
Have financing on hand. It may seem paradoxical to initial investors, but investors who want to sell and earn crypto must first deposit crypto into the market-connected wallet. This needs to happen in order to pay the transaction fees, commonly known as “gas fees” for transactions involving Ethereum, which also happens to be the most popular blockchain for NFT mining and trading. Investors can achieve this by 1) buying ether in a crypto trading app and depositing it into the exchange wallet, or 2) buying this crypto directly from the marketplace and funding the marketplace wallet that way.
Put NFT up for sale. Listing NFTs for sale, or available for purchase (depending on the marketplace), can usually be achieved with one click after completing the previous steps. Investors can either set a fixed price in a particular cryptocurrency, or set up a timed auction to take place at a future date. The marketplace will charge a fee to facilitate this transaction, with OpenSea (as an example) charging 2.5%. The final step is that the marketplace will calculate the gas fees associated with the transaction, integrate it into the sale price, and officially list the NFT for sale/auction.
NFTs quickly burst into the market, achieved valuations that collectively rocketed into the hundreds of billions, and have since returned back to earth. Even with lower prices overall, transaction volume and (more importantly) investor use cases continue to increase. NFTs are here to stay and will continue to create opportunities for investors, creators and entrepreneurs.
