What is an NFT
NFTs (non-fungible tokens) are digital assets representing real-world objects linked to the blockchain. They cannot be replicated and are highly sought after by both digital art collectors and artists due to their exclusivity and popular utility attributes.
Although these assets are most popular amongst the art community, their unlimited uses have interested parties curious about creating and selling themselves.
Selling an NFT could prove financially profitable to anyone wishing to explore the platform. But there are a few points to consider and understand before diving in headfirst.
Should You Sell NFTs
The popularity of many creators making money by selling and creating NFTs have other artists, developers and creators wondering if they should take advantage of this phenomenon as well or if it’s just the luck of the draw.
If you have some digital art that you believe can sell, the plausible thing to do would be to turn it into an NFT and list it for sale. But, is it that simple?
The process of creating and minting an NFT is simple but to actually sell an NFT and make a profit will take a little bit of work.
One barrier that tends to stop creators in their tracks is understanding how they work and the communication that comes with it. It’s possible to stumble upon a gold mine like Crypto Punks or Bored Apes but realistically, effectively selling a product whether it be digital or physical, takes knowing the product inside and out.
How Do NFTs Work?
NFTs, offer up the ability to assign ownership to any unique piece of a digital asset. An NFT is minted as a representation of digital or non-digital assets.
An NFT can only have one owner at a time, which adds to the value of the NFT itself, and ownership is managed through the uniqueID and metadata that no other token can replicate. NFTs are minted through smart contracts that assign ownership and manage the transferability of the asset. When someone creates or mints an NFT, they execute code stored in smart contracts that explains the properties of the NFT. This information is added to the blockchain where the NFT is being managed.
One thing that adds to the enticement is the NFT’s special properties.
Each token minted has a unique identifier that is directly linked to one Ethereum address easily proving ownership.
They’re not directly interchangeable with other tokens making them non-fungible tokens.
They live on Ethereum and can be bought and exchanged for currency on any Ethereum-based NFT market.
You can sell NFTs repeatedly which could earn the original creator resale royalties. Or, you can hold it forever, resting comfortably knowing your asset is secured by your Ethereum wallet.
The creator of an NFT gets to decide the scarcity of their asset by choosing how many to sell. For instance, if there will be a collection or if the NFT will exist as a one of one.
NFT use cases are expanding daily as creators are becoming more aware of their innovativeness and reach. However many sub-categories of uses that are created, for now, we could possibly group them into one of the following types:
Whether it’s digital art or physical pieces, art itself is currently the most popular option for creating an NFT. NFT art has given artists control not only over their content but how its used, managed, and monetization through potential buyers.
Music is another sector that promises more asset control for the creator. Because they are decentralized, their monetary value is determined by a collective rather than a single entity. This proves beneficial to artists because their fan base could potentially determine the worth of their music minted as NFTs and with the option of a royalty percentage, they could receive profit each time one is sold. Since artists tend to only profit off of a percentage of their music, this will allow them to maintain not only 100% of the profit but ownership as well.
3. Video Games
Video game developers have decided to make an impact as well. Not in the sense of selling entire games as NFTs but they sell in-game content like skins, characters, and other items. Most have collaborated with other brands and creators to establish an entirely different market. Instead of millions of copies of assets being profited off to players, NFTs will be unique and exclusive to one buyer. Developers can sell regular DLC, but then sell a limited edition version of it on the NFT market. Players can profit as well by selling their NFT to other players and collecting royalties.
4. Trading Cards/Collectible Items
NFTs, in some circles, are already considered digital cards so transitioning into the collectible space was expected. Sports trading cards tend to sell for thousands of dollars, and the NFT market isn’t much different. People are able to buy and trade virtual versions of trading cards on platforms and keep them just like they would the real thing, creating the potential to make not just thousands, but millions of dollars.
The amazing thing about NFTs is that they don’t always have to represent a physical counterpart. In the way of sports, moments are being extracted as NFTs as well. Short clips of significant moments in sports history like dunks or one-of-a-kind interceptions are selling in the high thousands to sports aficionados. Leagues are also looking to develop other memorabilia in the form of NFTs such as tickets containing certain utilities and significant important factors to fans.
As the millenniums would have it, memes have become a form of communication via social media and text. Now you are able to buy and trade memes on the NFT market. What makes this even more exciting is that in some cases, the person in the meme is the actual seller. Some memes have acquired as much as $700,000. The most valuable meme to date is the Doge meme, which went for a staggering $4 million.
7. Domain Names
You can register a domain name and sell it on the NFT market, and that comes with a certain benefit. Usually, you need to pay a third-party company to manage your domain name. If you buy one on the NFT market, you will be able to claim exclusive ownership of the name, cutting out the middleman. Domain flipping has become a profitable trend for some, imagine adding the exclusivity and royalty factor to them through NFTs.
8. Virtual Fashion
The popularity of the Metaverse has created a space for Fashion in virtual reality. Your avatar is a virtual representation of you so it’s important to have fashion options that mimic your real-world style. Fashion NFTs allow you to dress up your online avatar with the most notable and sought-after brands like Nike and Gucci diving into the space.
9. Miscellaneous Online Items
Jack Dorsey sold a tweet as an NFT. This has opened up the possibility for people to sell anything on the NFT market that they can simply just think of. People may want to sell their own tweets, Facebook statuses, articles, Snapchat Stories, or TikToks. As long as other people are interested, the possibilities are truly endless.
10. Real World Items
Getting back to NFTs representing real-world items; they allow for easier transitions of contractual agreements. Assets such as deeds to cars and homes, legal documents for adoptions or divorces and even invoices are being tokenized. Because of the implementation of smart contracts, most documents will be easily and acceptingly turned into an NFT.
Are NFTs profitable?
The NFT market has exploded into one of the most profitable platforms in the crypto industry. In 2021, the total amount spent on purchasing NFTs surpassed $12.6 billion, up from $162.4 million at the start of the year.
Since the majority of NFTs are created, bought, and sold using Ethereum, high gas fees can make the process incredibly expensive; however, to make up for these costs, many creators are choosing secondary marketplaces such as OpenSea, which offers free minting.
There are a few ways to establish passive income from NFTs.
Rent out NFTs
One way to passively earn income from NFTs is to rent them out! This idea was made popular by gaming. Developers and gamers rent out NFT assets to boost chances of winning. The terms associated with the rentals are governed by smart contracts. This allows users to set the duration of the rental agreement and the lease rate.
The blockchain technology powering NFTs allows creators to set terms that impose royalty fees whenever they are resold on the secondary market. Meaning creators can continue to make passive income from their original NFTs even after it’s been sold. The percentages are set while minting the NFTs and smart contracts regulate the distribution of the royalties making the process fully automated.
You don’t necessarily be a creator to make a profit from NFTs. Collectors have been able to establish hefty returns by trading parts of their collections.
Selling an NFT in the secondary market, a transaction not involving the original creator, takes on the same process as the initial creation minus minting. You will simply transfer the NFT to the marketplace where you want to sell it then click on the “Sell” button from within the page of the NFT you want to sell. Gas fees and marketplace listing fees will apply and will reduce your final take-home amount, as will any royalties that the original creator has set.
Create an NFT
After heavy research and deciding that creating and selling NTFS is the best option for your digital art or content, the next step is to create the NFT. Before doing so, choosing the best NFT marketplace is critical to selling an NFT.
NFT marketplaces are platforms where NFTs can be stored, displayed, traded, and in some cases minted with the marketplace usually taking a percentage of the final NFT sale price. While there are many types of marketplaces, universal and art-oriented platforms are the most popular ones. Niche marketplaces list specific kinds of non-fungible assets such as in-game items, digital collectible cards, and virtual real estate.
Some of the most popular marketplaces are:
- OpenSea: The oldest and most established NFT marketplace. There are a wide variety of categories including artwork, sports collectibles, virtual worlds, trading cards and domain names.
- Rarible: This is an NFT marketplace owned by the community members holding its own token, RARI. Rarible focuses more on art, but there’s also a wide range of other NFT items here, too.
- Nifty Gateway – One of the largest marketplaces for NFTs; it’s known for highlighting artwork from well-known artists.
- Foundation: One of the newer marketplaces, Foundation has quickly become one of the most popular NFT marketplaces for creators, with the all-time trading volume already touching almost $48 million for niche digital items.
- NBA Top Shot: An NFT marketplace built on Flow where people buy and sell digital collectible cards featuring videos of memorable NBA “moments.”
- Axie Infinity: This platform hosts cartoon characters for the Axie Infinity game, where players breed, battle and trade digital pets called Axies. Some people even play it professionally for a living.
- Sorare: Here you can buy virtual cards representing football players and use them for Sorare, which is a global fantasy football game.
- Decentraland: This platform has its own in-house marketplace where users buy and sell virtual land or in-game items such as wearables.
- Valuables: This is a site where users can tokenize tweets and sell them as NFTs. The Twitter CEO himself, Jack Dorsey, sold his first-ever tweet for $2.9 million.
Once you decide on a marketplace you can begin to create your NFT using the steps below:
Set up a digital wallet
Wallets allow you to store your currency and assets. The top Wallets include Metamask, Math Wallet, AlphaWallet, Trust Wallet, and Coinbase Wallet.
Add cryptocurrency to your wallet
Once you set up your digital wallet, you’ll want to buy some cryptocurrency. Most NFT platforms accept ETH, the cryptocurrency of the Ethereum blockchain. If you own cryptocurrency elsewhere, make sure to connect it to your digital wallet so you can use it to create and sell your own NFTs.
Connect your wallet
From the marketplace’s homepage click on the wallet icon at the top-right corner; a list of supported wallets will show up. Select your wallet and your information.
Upload your file
Your chosen NFT marketplace should have a step-by-step process to upload your digital file to their platform. That process will enable you to turn your digital file (a PNG, GIF, MP3, or other file type) into a marketable NFT. Once you upload your file, you will fill in other options such as name, description etc.
List your NFT
The final stage in the minting process is to list. Depending on the platform, you should be able to list it at a fixed price which allows the first person willing to meet that price to purchase. Set a timed auction; this will give those interested in your listing a time limit to submit their final bid. As well as an unlimited auction. An unlimited auction doesn’t set a time limit. Instead, you have control to end the auction whenever you want.
You’ll need to determine the minimum price (if you set up an auction), set your royalties to continue receiving profit if it resells on the secondary market, and how long to hold an auction (if timed). Keep fees in mind when setting the minimum price because you could lose money on your NFT sale if you set the price too low.
Unfortunately, the fees to mint and sell an NFT can be costly and confusing. Depending on the platform and pricing, you could pay a listing fee, an NFT minting fee, a commission on the sale, and a transaction fee to transfer money from the buyer’s wallet to yours. Fees also can fluctuate due to the volatility in cryptocurrency pricing. Because of that, it’s important to take a close look at the costs you’ll have to pay to mint and sell your NFT to make sure they’re worthwhile.
When to Sell NFTs
Selling and NFT greatly depends on the purpose of the NFT itself and why it was created.
If you’re an artist or digital creator, minting and selling NFTs can be a profitable way to get paid for your work. In this aspect, selling will be determined by the demand for your art or creation and what buyers consider its value to be. Many artists who are aware of the interest of their community are able to maximize their selling price, but gas fees could seriously reduce your profit — or even cause you to sell at a loss if the purchase price isn’t high enough.
If you bought an NFT for a specific purpose and are no longer in need of it, or an NFT you bought has appreciated in value, selling might be a good idea. When calculating your possible profit or loss on the sale, remember to include gas fees, marketplace listing fees, and royalties paid to the original creator. As for gas fees, it’s possible to lower those with a little timing for your listing, such as avoiding days when the Ethereum blockchain network is congested.
Selling NFTs isn’t complicated and can be quite profitable if you take some time to understand the market. At times, selling and trading NFTs can be uncertain given the volatility in this not-so predictable movement. But, if you’re a creator looking for a new outlet to make money, selling NFTs is definitely worth exploring.