If you’ve been anywhere on the internet in the last few weeks or months you’ve probably been hearing about NFTs. Like scores of others, you’ve probably been wondering just what an NFT is and if you should bother caring about them or not. Valid questions. I’d argue that you should, especially if you are involved in any kind of arts or creative work.
If you want to get a very detailed in depth understanding of the history, technology and cultural impact there are a number of long winded explainers and think pieces written for just that purpose. That is not the purpose of this article even though it is also long winded – I mostly just want to pass on what I think is most important. That said, if you want to take a half hour and read these few articles you will have a very solid grasp of the landscape:
• Cryptomedia, NFTs and the Next Internet – Bobby Hundreds
• What is an NFT? – Everything You Need to Know about Crypto Media and Tokens – Tim Stodz
• NFTs and a Thousand True Fans – Chris Dixon
• NFT Art Goes Viral and Heads to Auction — But What Is It? – Valentina Di Liscia
The Basics: NFT means Non-Fungible Token. Fungibility essentially means interchangeability and in economics that means that all dollars are basically the same. If I take $10 to my bank and deposit it, and then wire transfer it to you and you go to your bank and withdraw $10 you technically have a different $10 in your hand, but because “a dollar” is fungible that doesn’t matter, because $10 is $10. The “value” changed hands, even if the actual physical representation of it didn’t. Now lets say I drew a little sketch of my cat and wanted to give it to you but you live on the other side of the world. I can’t just give that sketch to someone who then tells someone else near you to draw a sketch of a cat and say it’s the same thing, because the sketch is non fungible. You need the actual sketch I drew for it to have value (financial or emotional). Now, if you think of digital items then they are basically all fungible. If I send you an email with a photo attached, you aren’t reading the exact thing I wrote or seeing the exact photo I sent, you are reading a copy of it. But what even is original in terms of digital? That’s where NFTs come in, using the blockchain (which is the technology behind things like Bitcoin) this is a way to ensure that a digital file is the original and not a copy.
One of the hesitations towards and criticisms of digital art has always been that it has no rarity, as anyone can make a copy of it as many times as they want and it’s no different than the original. The same argument is used to denigrate photography and video art, though usually there’s some physical element (a signed and numbered print for example) that specifies the uniqueness. That isn’t typically a concern with a painting or sculpture which is obviously one of a kind. Of course there are forgeries, but they take a lot of effort and experts can usually spot them quite easily. An NFT is a cryptographical way to create that rarity and uniqueness in a digital item and prove that something isn’t a copy.
An artist can “tokenize” a piece of work and then sell it, and the buyer can prove that what they just bought is the original thing sold by the artist. And because the blockchain is public, every time that artwork changes hands it’s recorded in a public ledger and at any point someone can verify the piece is legitimate and trace the chain of custody all the way back to the artist who originally released it. (Or the impersonator, as the case may be) Like an old library check out card, the blockchain records who owned it for how long, and if it was given to them or if they bought it, and if they did how much they paid. Which is a fascinating way to track value fluctuation (hopefully appreciation) over time. In this example of the library book, the stamped library card is the NFT – it’s something that accompanies digital file (often an image or a piece of media) to verify the provenance of that file.
I think this is one of the biggest and most important details – whoever originally creates the NFT is hard coded into the ledger and can specify a royalty that they should receive anytime the work is sold in the future. Traditionally secondary market sales happen like this: Andy makes a painting and asks Larry to sell it for him. Larry has a gallery and sells Andy’s painting to Kirk. Andy typically gets 50% of that sale. So if Kirk bought it for $1000, Andy just made $500. Larry did too, but that’s a different story. Anyway, say 10 years later Andy has become a much more popular artist and Kirk decides to sell that painting and asks Christie to sell it for him, Christie will take a 20% fee for doing that and 80% will go to Kirk. Andy gets nothing. So if Christie sells that painting for $1M, Kirk makes $799,500, Christie makes $200,000, but Andy gets nothing. He’s still only got that original $500 from Larry. However if that painting was an NFT, and Andy is the one who made it Andy could specify that anytime that work is ever sold in the future, he gets a % of that sale. (Make sure to read part 2 for important clarification of this point)
Artists! This is important. If a gallery or curator or someone has approached you about making NFTs of your work and hasn’t told you about this, chances are they are putting themselves in that royalty seat so they, not you, get paid off every sale.
Think of an NFT like your domain name or your email address. Some of you might know first hand the problems that can come from letting a business partner own or manage your domain or email. Or your bank account. This has the potential to be a million times worse, and it’s one of those problems that you won’t realize is a problem until it’s too late. Take steps to avoid it now by making and publishing your own NFTs. It’s really not that hard, and the effort is worth it.
One final thing: Like iPhones vs Androids, there are two common standards at play here though in this case they were both made by the same people. ERC-721 and ERC-1155. ERC-721 is the older standard used by everyone and is for absolutely positively one of a kind items. ERC-1155 is a newer standard (and thus still gaining adoption) and is more flexible as it allows you to make one of a kind items, or an edition (only 25 ever made). If you want to understand more on that, read this.
With that out of the way, let’s move on.
So how do you make (or “mint” as it’s called) an NFT? Actually how you mint, list, and sell an NFT are closely related. For the purpose of this I’m going to be talking about minting and selling on OpenSea which is the currently the largest marketplace for such things, and is the service I used to easily mint my first NFTs.
There are several sites that will help you make NFTs and also several sites where you can sell NFTs. As long as they are using ERC-721 or ERC-1155 standards the NFTs you create in one place can be transferred or sold in another place. But in the same way you can’t take one painting and sell it to 5 different art galleries at the same time, one of a kind items can only be sold on one marketplace at a time.
Some friends andI created a comprehensive spreadsheet comparing the top 30 platforms. Each site has different policies, practices, and fees. Some have strict curation and you have to apply and prove yourself worthy to sell things there, some require buyers use their own in house cryptocurrency rather than something more widely exchangeable and some have pretty high fees for that convenience so caveat emptor. Again, to keep things simple I’m only talking about OpenSea.
OpenSea also offers “free NFT minting” which is a little misleading in that you still have to pay to initiate your account (technical limitation that you have to pay anywhere) but while other sites will charge you a “gas” fee every time you mint a new NFT, OpenSea won’t. (Gas is an important thing to understand, I spend more time talking about it in part 2 )
You will also need a wallet to accept all the crypto you will be making from your sales. You might ask why you can’t just use paypal or something? Because paypal deals in FIAT currency not cryptocurrency which is central to this entire thing. On OpenSea most sales are done using Ethereum (which is the second most popular cryptocurrency next to Bitcoin) though you can choose to accept a different type of cryptocurrency if you want. Think of OpenSea like ebay, they handle the transaction but they don’t hold money for you because they aren’t a bank. And neither is OpenSea, which is why you need a wallet. Most people use MetaMask which is simple browser extension, others prefer Coinbase Wallet or Rainbow which is an app you install on your phone. There are other options which you’ll be prompted to choose from when you first go to OpenSea, but you need one to go any further. Any money you make on the site from sales will go directly to that wallet, and if you choose that wallet when you decide where future royalties are sent then will go there too. But keep in mind that isn’t something you can change later, so make sure to write down all your wallet recovery details. If you lose your wallet, you lose your wallet. Literally.
Once you’ve connected your wallet your account on OpenSea exists. Keep in mind the two are linked, so if you go to OpenSea and use a different wallet, you’ll end up with a new (different) account. The little circle icon in the upper left corer is your avatar, and that dropdown will allow you to set all the basic profile stuff you would set on any site. Next to it is CREATE and you guessed it, this is where you go to create NFTs. Choose “My Collections” on that dropdown and on the next page you’ll be given an option to create a new collection which you have to do first as your NFTs will be part of the collection. You’ll get a popup asking for a name, description and logo.
One thing I didn’t realize, the collection is independent from the user. I guess because you can invite other people to help you manage collections. But point being, the URL will be based on the collection, not the user. For example when I created a collection called “D5Kglitches” I assumed that would be nested under the user “seanbonner” but it’s not, and creating that collection resulted in a URL that looks like this:
And as you can see on this page showing one of the NFTs in the collection, the attribution is to D5Kglitches, not Sean Bonner. In this context that’s not a big deal, but it’s worth noting. I plan to make NFTs of some of my photography and I’ll be making a new collection properly named when I do. (Update: I did.)
Once you’ve made a collection you can click into it and “Add New Item” which is the option you’ll use to mint an NFT. Before that you should click the “edit” button though and you’ll have a chance fill in more information including any links or credits you want to add, as well as that royalty thing I mentioned earlier. All NFTs in this collection will conform to this, so decide what % of future sales you want and put in your wallet address.
Once you’ve saved that, go back and hit that “Add New Item” button. This is where you choose the digital file you want to tokenize. Files can be a JPG, PNG, GIF, SVG, MP4, WEBM, MP3, WAV, OGG, GLB, or GLTF. Max size is: 100 MB. Add a name, a link to any external information about it (like your website) and a description. You can also add “lockable content” which is basically things that are hidden until it’s bought. I’ve seen people sell a collection of 10 blank white squares, with the actual image being locked content, so people didn’t know what they were buying until after they bought it. I’ve also see people sell a visual object and provide audio as the locked. Of course there’s no requirement to do this, it’s just an option if you want it.
Next is “Supply” and at the moment this is greyed out and limited to 1. However, if you paste “?enable_supply=true” into the URL and reload the page you’ll be able to edit that. BUT, you’ll lose anything you already added on the page, so don’t do that yet. Just go ahead with 1 copy and remember that for next time.
The next step is “create” which is where you’ll need to initiate your account with a transaction if you haven’t already, and then you can set the price/type of sale. Options are for a fixed price, auction, or declining price. Most people will want to just start off with a fixed price. If you have a following who is waiting on baited breath for your NFTs to drop then you could choose auction and see how much they are willing to pay. Declining price took me a minute to understand but this is a tactic to use FOMO as a marketing tool. You set a high price and a time period, and over that time the price gradually decreases until someone buys it or the deadline is hit – the idea being people will watch it and buy it before it gets too cheap and someone else gets it before them. I don’t know how this works in practice, but in theory maybe someone who only wanted to pay $100 might buy it at $120 because they are scared someone else will buy it at $105? Sort of a reverse auction or something.
Click sell, and you are rolling. You can tell people about your NFTs and people can buy them if you send them the link. They won’t be able to find them on their own though because there is one final step where someone at OpenSea has to manually “verify” that the collection is real and works and legal, once they do that then you are in search results on the site too. They say if you sell things you get noticed, but also just tweeting to them and asking for verification seems to work really well too.
If you have any questions let me know and I’ll see if I can help.
Part 2 of this post can be found here.
If this was helpful and you want to buy one of my NFTs you can see what I have available here.