Looking to jump into the metaverse and cop NFTs? Here’s your guide to collecting NFTs and building an inventory worth investing in.
NFTs have been dominating the conversations around collectibles and alt investments. You can’t spend any time on social media without seeing news, images or even profile photos showcasing NFTs. But how does it work and why is it so popular? Here’s your guide to collecting NFTs.
What is it?
A non-fungible token (aka NFT) is a unique asset that was developed based on blockchain technology. Oftentimes, an NFT emulates real-world objects, like art, music, gif, videos, but remains purely in the digital space.
Blockchain is the technology that enables you to ‘own’ an item that doesn’t exist in the physical world. Essentially blockchain is a detailed ledger that tracks all the transactions that involve a specific NFT. It accounts for all sales, trades and purchases of an NFT while stating who owns it at any point in time. Most of the NFTs are on the Ethereum blockchain, which is a form of cryptocurrency.
This detailed and permanent ledger of transactions enabled certification of ownership as its entire history can be certified, tracked and authenticated on the blockchain. As such, collecting more NFTs is possible and trackable.
What makes it non-fungible?
Every NFT is unique to itself, unlike a physical coin or dogecoin which exists in large numbers. An NFT is designed with a unique trait or serial number, which helps differentiate them. This makes them irreplaceable, aka non-fungible.
Biggest marketplaces: Opensea, Axie Marketplace, Larva Labs/ CryptoPunks, NBA Top Shots Marketplace, Rarible, SuperRare, Foundation, Nifty Gateway, Mintable and Theta Drop.
How do I buy it?
1) Ensure you have fully set up your account, which includes connecting your crypto wallet, like Metamask, and setting up the security settings.
2) Find an NFT that catches your attention.
3) If it is a fixed price NFT, you check the price history of the NFT to have an idea of how its value will hold up. After you click the buy now button, check the details of the NFT to ensure it was produced by the original artist. Then you may check out when it is all good.
4) If it is a bid, first check to make sure the price history and details of the NFT are accurate. Depending on the platform, you may have to set a minimum bid of 5% above its current value. Set an expiration date for your bid and submit it. Then await the news surrounding your bid.
How do I sell it?
1) After you have completely set up your account, hit the button to sell an NFT.
2) Choose if you want to sell it at a fixed price or an auction. If you choose a fixed price, you can set the price for your sale. If you choose to sell through an auction, you set a starting price, price threshold and time expiration for the auction.
3) Note there are no fees for listing your NFT, but there may be some charges after the NFT is sold.
4) Once all details are confirmed, you can then post your listing to the marketplace.
5) Check your profile listing regularly to see the progress of your sale.
How does the valuation work?
The value of an NFT is dependant on multiple variables, which include a mix of utility, rarity, tangibility and pop culture relevance.
NFTs have the potential to offer real-world utility and depending on the artist, they can have a wide range of features. An NFT can gain value if the utility is deemed desirable. If it is made in very small batches and the utility is tangible, the value would skyrocket.
Above all, if the NFT is at the forefront of the discussion in pop culture, its value would be further increased. But this is more influx and is a lot more random as compared to the other variables.
Type of NFTs
NFTs, like any form of digital art, can come in many varying forms. This list is not comprehensive as the scene and medium is still continuing to evolve. But here are the kinds of NFTs you can find and invest in.
1) Profile Pictures (PFPs)
These NFTs are perfectly designed to be used as profile picture on your social media accounts. Artists often created simple layered artworks with many traits that can be randomly altered and generate many possible outcomes that are all unique.
But why pay so much for a profile image?
The logic behind a PFP is similar to owning a supercar. You don’t have to pay millions for a car, but you do it cause it is a symbol of your financial status. It mirrors the exclusivity, unattainable nature and visual flex of supercars.
2) 1-of-1 Art
This is the most traditional form of NFTs. Like gallery pieces, these are one-off artworks created by an artist and released at their marketplace of choice. Similarly, the artworks can be paintings, photos, landscapes, animations and any other form of digital media.
3) Algorithmically Generated Art
This is where codes can literally be works of art. Here, an artist writes up a specific code and, during the minting process, the art is generated by executing the code to create a unique work of art.
Unlike PFP, where features and elements are swopped out at random, Algorithmically Generated Art is created from scratch when the code is executed.
4) Digital Collectibles
Though not as common, digital collectibles are often based on items or events in the real world. The best examples at the moment are NBA Top Shots, which is captured basketball highlights, and Veve, which is comic books and other collectibles produced by Marvel, Disney and more collectible manufacturers.
Digital collectibles generally refer to traditional companies that are entering the NFT space to connect with their audience.
5) Digital Real Estate
With the announcement of Facebook’s metaverse, people are beginning to invest in digital real estate. Just like other forms of NFTs, each land plot is tied to the blockchain and is unique. This mirrors land ownership in the real world, where owners can monetize their properties. They can rent it out, build on it for others and eventually sell it as more enter the Metaverse.
6) Gaming NFTs
More recently, Nike has been actively working to partner with games like Roblox and RTFKT to create NFTs of their popular sneakers. This could spell major utility for gaming NFTs, which essentially allows you to carry in-game collectibles that you can carry across various platforms and games. This offers endless possibilities for Gaming NFTs and could change how we interact with games.
Are there any benefits?
Just like anything you put your money into, you need to know how collecting NFTs will benefit you. Most NFTs have some sort of claimed utility.
DeFi and NFTs
Instead of just holding on to an NFT, you can use it as collateral to give out Ethereum based loans with apps like NFTfi. This way, just like giving out a loan, you can earn money through interest. If the person fails to pay, the smart contract kicks in resolves the issue and gets back your investment.
Events and Ticketing
As pioneered by entrepreneur Gary Vaynerchuk, NFTs can be used as passes to events or special ticketing. Vaynerchuk released the Veefriends NFT which granted owners conference tickets to Veecons for three years.
The simple idea is to turn NFTs into special passes for events or concerts, whereby owners get access that the public can’t purchase.
Some people plan to use Metaverse spaces to showcase their NFT collection and create galleries where people can view them. Some even turn these Metaverse spaces into retail spaces, where viewers can shop their collections.
Music as NFTs
Musical artists have explored creating music NFTs, where they create blockchain-backed tracks and albums. This approach allows for artists to more closely interact with their fan base. An idea that has been explored is to enable fans to invest in their artists directly by buying a song’s NFT. In exchange, they will receive royalties each time the song is played.
By utilizing smart contracts, artists can cut out the mess of a label, enabling them to more directly interact with fans and get monetary investment.
The fantasy sports community has begun to tap into NFTs as both prizes and pawns of the game. On one end, platforms can use NFTs like NBA Top Shot Moments as prizes for the best fantasy teams for each season. Alternatively, some platforms require you to own NFTs of the players you intend to include in your fantasy league.
NFTs could replace sneaker collecting: Could a sneaker-free future be a possibility?
Which should I collect?
Instead of diving into a new space, look at your current interest and research how the community is adopting NFTs. If you like sports, check out fantasy sports forums while if sneakers are your top priority, follow news on how your favorite brands are collaborating with NFTs platforms.
Collecting NFTs, just like any form of collectible, is very sensitive to public perceptions. This means someday, they may not be as valuable as they are today. The best thing you can do is build start collecting NFTs that means something you sans the hype.