What do Nyan Cat, the first ever tweet, Grimes and NBA cards have in common? NFTs. Just as everyone got to grips with the blockchain hype, NFT trading has swooped in and added fuel to an already confusing fire. In this tutorial you will learn how to buy and sell NFTs and what the best NFT markets are.
NFTs come in many shapes and provide profitable opportunities for collectors and creators alike. You may be wondering how lucrative NFT trading could really be if that gif of a pop-tart cat from 10 years ago is worth a mention. About $70 million. That is how much a piece of Beeple digital art was sold for in early 2021. If that caught your attention, read the rest of the article to learn all about NFTs, how they work and how you can begin NFT trading.
What Is An NFT?
NFT is an acronym for non-fungible token, which is a token much like a cryptocurrency. However, where cryptos are fungible like physical currencies, in that one Bitcoin is directly replaceable with another, NFTs are non-fungible, like physical assets you could sell in a marketplace. For example, a £1 coin is, for all intents and purposes, the same as any other, but a rare baseball trading card differs from almost all others.
A lot of the NFT trading-related excitement lies with digital artwork, but they can be anything digital, like music or game characters.
Some of the most popular NFTs include sports trading cards, music, and CryptoKitties – a game that involves trading images of cats.
How NFTs Work
NFTs are digital tokens that are logged on a blockchain ledger and traded across the network, just like cryptocurrencies. NFT trading offers many benefits, such as transparency, security, and immutability. For more details on the advantages of blockchain, see here.
Are NFTs A Passing Fad?
Cynics often point out that owning an NFT is useless as digital artwork and assets can be downloaded by anyone for free. However, the same can be said for physical art, as anyone can go online and download a picture of the Mona Lisa or buy a print. Nonetheless, ownership of an NFT is more valuable than a copy, and its value is determined by market forces.
Pros Of NFT Trading
- Improved artist royalties
- Reduced third-party costs
Cons Of NFT Trading
- Environmental concerns
- Digital wallet required
- Young technology
How To Start NFT Trading
Trading NFTs Directly
The simplest and most obvious way to get involved with NFT trading is to simply buy and sell NFTs.
To find an NFT for sale, you need to visit a dedicated marketplace or app. There are many marketplaces available online, most with slightly different focuses or benefits.
To make the transaction, a digital wallet is also required, though not just any wallet. Not all wallets can support NFTs, so ensure you find one that does. Once set up, it needs to be filled with cryptocurrency. At that point, any NFT that you have the money for can be bought using the wallet. The sale will then be permanently logged on the blockchain and the NFT will appear in your wallet once the sale is verified.
Investing In The NFT Industry
If you don’t want to get involved directly with NFT trading, but wish to invest in the industry, then trading NFT marketplace tokens or cryptocurrencies is the way to go. As a marketplace grows, the value of the tokens used to make transactions rises. Some of the larger marketplaces, such as FLOW, can be traded on cryptocurrency exchanges.
Similarly, you could trade the cryptos used for NFT trading, like Ethereum. As ETH is used more for both NFTs and regular purchases, its value would rise and profit can be made from reselling tokens.
A slightly more obscure way to trade NFTs lies within the virtual reality world called Decentraland.
This is a digital platform that is similar to those seen in sci-fi films like Ready Player One.
The world is formed of parcels of land, each of which is an NFT that you can purchase, giving you ownership.
Parcels can be used to create anything you want, from a building to a game to an advertisement.These parcels can go up in price as the world gets more popular and land becomes more scarce or useful.Parcels can be sold on or rented out for other creators to place their content there, facilitating a range of NFT trading options.
Creating & Selling NFTs
Finally, money can be made by simply creating an NFT that people might want to buy, and then selling it.The creation of the digital asset itself requires no special knowledge; if you want to make a piece of digital art in Paint, then you can do that.However, transferring it into an NFT is a little harder.
Most NFT-supporting blockchains will have templates that can be used.For example, Ethereum has ERC-721, with which most NFTs are made.Semi-fungible tokens, like concert tickets or some game items, use the ERC-1155 standard.There is also a new standard, EIP-2309, which allows creators to mint as many NFTs as required in a single transaction.
Best NFT Platforms
There are multiple NFT trading platforms available online.See our list of the top NFT trading platforms in 2023.
OpenSea is a leading NFT trading platform offering the largest digital marketplace.Clients can trade a range of NFTs, from arts and collectables to domain names. 700+ projects are available and fees are competitive with a 2.5% seller transaction fee.
OpenSea accepts a decent range of payment methods, including Ethereum.
Overall, it’s a good option for investors new to NFT trading, offering a wide product range and a user-friendly interface.
Nifty Gateway is a centralised marketplace based on the US Dollar. You can buy and sell fine art and collectables called ‘Nifties’. The platform made the news when Canadian musician Grimes, raised $6 million after selling her virtual artwork on the platform. The company also partners with innovative brands to offer limited-edition collections available for a fixed period.
For individuals dealing in USD, in particular, Nifty Gateway is a good option.
Rarible is another popular NFT trading platform connecting buyers with sellers. Available on the user-friendly platform is an impressive portfolio of digital artwork and memes.
Rarible also offers its own digital currency, RARI, which along with Ethereum, is used to facilitate trading. One perk of owning RARI is that clients can vote on changes to the platform and get a say on the artwork sold. The NFT trading platform has also teamed up with OpenSea and takes a 2.5% fee on each sale.
Overall, Rarible is another excellent option for traders new to NFTs.
NBA Top Shot
The last NFT trading provider on our list is the NBA Top Shot.
This is the product of a partnership between the NBA and a blockchain-based firm in Vancouver called Dapper Labs. The platform offers videos and 3D spatial design of gameplay snippets which are bought through ‘packs’. Prices for the Top Shot packs start at $9 but climb to $999 with rare and legendary categories. Hundreds of thousands of buyers can queue to get their hands on the digital products.
For basketball fans, NBA Top Shot is the clear choice when it comes to NFT trading platforms.
One big attraction towards NFT trading is the possibility of better recognition and payment for creators. Nowadays, artists are generally paid by platforms or companies that will advertise and sell their work for them. Artists then get paid a portion of the sales in the form of royalties, but often these are small or don’t take into account additional value that the creation might accumulate.
NFT trading not only verifies all artwork and ties it back to the creator, but also offers special royalty possibilities. NFTs allow artists to directly profit from all sales of the NFT, no matter how far down the line. When an NFT is created, it can be tagged with a value that sends a specified portion of any sale to its original creator.
This means that a piece of art that originally sells for $10 before rocketing to $1million for the next sale would make its creator money based on its new value, rather than just the original $10.
Dangers Of NFT Trading
While blockchain ledgers are difficult to tamper with, there are still dangers and scam opportunities associated with NFTs.
Some crypto whales (people that hold significant quantities of a cryptocurrency) may sell an NFT from one wallet to another wallet that they own at a much higher price than it would be worth. This, known as wash trading, artificially inflates the price of the NFT before resale to an unsuspecting NFT trader.
Blockchain ledgers may be difficult to hack for the reasons outlined above, but there are other ways that hackers could get hold of someone’s assets. NFT trading requires a digital wallet that can hold them and these wallets can be hacked, so it is important to ensure there are plenty of defence systems in place.
Environmental Impact Of NFT Trading
There have been lots of stories circulating regarding the high energy usage of blockchain ledgers, with Bitcoin mining using the same quantity of electricity annually as Denmark. While this is, clearly, a problem, this is not down to NFT trading itself, rather the security processes of their underlying blockchains.
For a new block to be added to a blockchain, specific numbers must be mined and verified. This takes a lot of computing power but makes it very difficult to create false information in blocks. Similarly, to edit a block, every block after it must be edited correctly too. Mining lots of blocks helps make this harder, as it is more difficult to edit 1,000 blocks than ten.
This is not being ignored by blockchain systems; Ethereum is currently rolling out a new model that uses financial stakes, rather than massive computing tasks, to validate new blocks.
This new blockchain, ETH2, works the same as the previous model in every other way, facilitating NFT trading securely and transparently, just reducing its environmental impact. The energy-saving potential for this system is massive, with predictions of 99.98% energy reductions.
This may sound like it could remove the decentralisation that sits at the heart of blockchain, but this is not the case. It is simply a different method for nodes across the network to maintain security. ETH2 is also predicted to improve efficiency, with no need to wait for a new block to be mined to add a transaction.
Final Word On NFT Trading
NFT trading is growing, fast, bouncing off the successes of the game of cards in the NBA and sports, plus the growing interest in digital art to reach an investing volume of $420million as of 2021. The support industry is also growing, with NFT trading markets, platforms, apps and sites popping up left right and centre to facilitate the growing excitement.
While no one can predict the future of NFT trading, with some suggesting it is a bubble that will crash and others believing it will continue to grow exponentially, it seems likely that NFTs are here to stay.
What Is The Most Expensive NFT?
The most expensive NFT sold to date is a piece of digital artwork entitled ‘Everydays: The First 5,000 Days’, which sold for the equivalent of $70million.
What Can NFTs Be?
NFTs can be almost anything.
While most of the hype is on digital artwork and trading cards, NFTs can also be used to digitally represent physical objects.
Can I Buy An NFT Without Cryptocurrencies?
NFTs are based on the same blockchains as many cryptocurrencies, most often Ethereum. To buy an NFT, a transaction must be logged on the blockchain, which can only be done with cryptocurrency.
How Can I See NFTs for Sale?
All NFTs are available for all to see, though to see only those for sale, a special marketplace is required. There are many marketplaces around, all of which can be accessed via the internet.
How Are NFTs Different From Bitcoin?
Bitcoin is a cryptocurrency, which is known as a fungible token.