The term nonfungible token (NFT) usually refers to a cryptographic asset on the blockchain that represents an intangible and unique digital item like a piece of art, a photo, an in-game collectible, or a tweet that other assets cannot replace because it has a set of exceptional properties. Each NFT is unique and limited in quantity and not interchangeable; it can function as proof of authenticity and ownership.
NFTs are distinguished from one another by metadata and unique identifiers like a barcode. The information that makes up the asset is known as metadata. Metadata allows users to buy or sell objects based on their metadata rather than the entire object.
NFTs aim to replicate tangible attributes of physical items like uniqueness, scarcity and proof of ownership. On the other hand, fungible goods can be swapped because their worth, not unique features, characterizes them. However, digital products are only valid when used in conjunction with their product.
The prototypes of NFTs were colored coins, which refer to experimental assets created on the Bitcoin network in 2012. The first asset representing a nonfungible tradable blockchain marker was created in 2014 as an experiment for the Seven on Seven conference at the New Museum in New York City.
While digital collectibles and art NFTs continue to attract the most attention in the crypto community, their potential use cases continue to increase. They expand from the general use cases like digital art and games to fashion, music, academia, tokenization of real-world objects, patents, membership sales and loyalty programs. There is also room for combining the advantages of NFT technology with the functionality of decentralized finance (DeFi). For example, it is possible to borrow and lend nonfungible tokens, and they can be used as collateral to secure a loan.
Anyone interested in selling and sharing their digital creations like content, art, music and photography can create NFTs. Here is a practical guide on successfully jumping on the bandwagon of creating a nonfungible token.
NFT creation is quite a simple process. For instance, users can pick their content and get a crypto wallet. They can choose a proper NFT marketplace and follow its instructions. After an NFT is created, it is ready to be sent to friends or sold to collectors.
Here’s what you need to know more about the NFT creation process.
One NFT collector paid $69.3 million for the digital artwork titled “Everydays: The First 5000 Days” by Mike Winkelmann, also known as Beeple, making this NFT the most expensive in the history of crypto art. The CryptoPunks collection consists of 10,000 pixelated images of punks with a set of unique characteristics, which pioneered in 2015 on the Ethereum blockchain, sells for thousands of dollars.
The question arises: What is the value of these digital creations and why are collectors spending so much money on them?
Beeple’s “Everydays,” a collage of 5,000 drawings referencing every day for the past thirteen-and-a-half years, was an arduous task. However, many NFT collections, which are incredibly successful, most likely do not require a particularly complex contribution from the author.
Therefore, for anyone who wants to become an NFT artist, it is somewhat necessary to have a goal in mind and a great level of creativity. Even for those who are not as skilled as Leonardo da Vinci but have a bunch of ideas, creating an NFT is undoubtedly worth trying. Moreover, for artists by occupation who most likely already have several Beeple-like artworks that are idle in the digital studio and just waiting in the wings to be sold as NFTs, this could be a great point to start.
Truthfully, an unknown person’s innovative and appealing digital art piece will not reach the level of a craze as celebrities’ creations like Canadian singer Grimes’ 10 digital paintings which have been sold for about $6 million, NFT releases from Kings of Leon which has generated $2 million in sales, or an exciting NFT which presents Jack Dorsey’s very first tweet, which has been sold for more than $3 million.
After all, NFT technology is ideal for preserving scarcity and establishing ownership of digital and tangible assets. It offers digital creators solid options for monetizing their work and a level of flexibility that is often lacking in the traditional creative industry’s models. Attaching digital content to the blockchain as a nonfungible token is a safe and verifiable way to sell it online. Furthermore, NFT creation offers artists unlimited access to a global network of collectors and like-minded people.
Fortunately, the process of creating an NFT is neither costly, complex nor technical. Without writing any codes and with the right guide, anyone can create an NFT.
Choose the format and pick your content
Firstly, creators need to choose the format of their NFT. They can generate a nonfungible token from any multimedia file. It can be a digital painting, a photo, a text, an audio file, or a video from some notable event. There are other creative products such as crypto-collectibles, video games’ virtual items like avatars, weapons and currency, as well as virtual land in metaverses that can also be represented as NFTs.
Of course, there is room for creators’ ideas here, as it seems like everything digital could be an NFT these days. For example, it could be the World Wide Web’s source code, which was sold by its inventor, Sir Tim Berners-Lee, in the form of NFT for $5.4 million, a “high-res artistic representation” of professor George Church’s genetic data, or the data of the first person to ever sequence their own DNA. Moreover, there is still a place for non-digital tokenized real-world assets, from real estate and diamonds to designer sneakers, all of which sell in the form of NFTs.
As for the format, creators are given complete freedom of choice. It may depend on the theme of their artwork and their imagination.
Keep in mind that after creators decide what content and in which format they want to represent as an NFT, they will need to convert it to an appropriate file type, especially if it is not already digital. Most items tend to be stored as portable network graphics (PNG) or graphics interchange format (GIF) files. Texts would typically be available in portable document format (PDF), while music would likely be stored as MP3 and video kept as MP4.
How to create and mint NFTs
The value of NFTs is defined by their uniqueness. There are situations where users might want to create several identical copies of their creations. For example, if you sell a collectible, you might offer different versions, some more exclusive than others. In this case, you need to decide how many identical copies of a particular NFT you will include within the blockchain because this number will be fixed and your NFTs become immune to any modifications after their creation.
The process of creating a nonfungible token is called minting. The term refers to the process of turning a digital item into an asset on the blockchain. Similar to how metal coins are created and added into circulation, NFTs are minted once they are created. After the process, the digital item becomes tamper-proof, more secure and difficult to manipulate. Since it is represented as a nonfungible token, it can then be purchased and traded, as well as digitally tracked when it is resold or collected again in the future.
Some NFT technologies allow continuous commissions to be paid to the original creator whenever a referenced item changes owners. When minting a token, creators can program a royalty clause so that subsequent sales of their digital item generate passive income for them. If their work gets popular and increases in value, they can get monetary benefit out of it.
The minting process begins when you’ve signed your NFT and paid the gas fee. You’ll be able to see your newly minted NFT on your profile after the transaction has been validated.
Choose the NFT marketplace
After the digital item for a future NFT is ready, it is time to choose an NFT marketplace to sell it.
Choosing a platform is an essential part of the process of minting NFTs, and the right choice here depends on various factors including certain blockchain types, supported standards and formats, accessibility and a price to mint an NFT.
The first standard for representing non-fungible digital assets on the Ethereum blockchain was ERC-721. The ERC-1155 standard offers semi-fungibility. Unlike ERC-721, where the unique identifier represents one asset, the unique identifier of the ERC-1155 token represents a whole class of fungible assets, any number of which the user can transfer to others. Components based on the ERC-998 standard are the templates according to which NFTs can be either nonfungible or fungible assets.
Ethereum does not have a monopoly on NFTs. However, the majority of the platforms are Ethereum-based. Other non-Ethereum NFT marketplaces belong to ecosystems of blockchains like Cosmos, Polkadot, or Binance Smart Chain, to name a few.
Each of the NFT marketplaces operates slightly differently and has its specific instructions, as well as pros and cons. For example, some of the NFTs are curated while others are self-service based. Creating NFTs on some platforms is cheaper than others, while some marketplaces do not support specific file formats. Some platforms are user-friendly, while others have a complex user interface (UI) that could intimidate new users.
Currently, there are plenty of NFT marketplaces in the crypto space. Non-curated platforms have emerged as a viable alternative to curated ones since they provide free access to all. In order to upload NFTs onto them, users only need to register and pay the transaction fee to mint a token.
One non-curated platform is OpenSea that allows users to mint and trade NFTs, view data on them and check statistics. Created in 2017, OpenSea keeps almost all crypto art collections, as well as a huge number of items from many popular blockchain games. The platform has a fairly user-friendly creation interface that allows users to quickly and efficiently create a nonfungible token for free.
Another mass marketplace is Rarible, a self-service platform that happens to be interconnected with OpenSea. The process of creating an NFT on Rarible is very similar to OpenSea, but its functionality is slightly different. For example, the number of formats is limited and the size of the artworks is smaller. Nevertheless, Rarible has great traffic and allows users to mint tokens before selling them, whereas OpenSea handles minting a token when sold.
Unlike self-service platforms, curated ones are more selective about creators. To start selling the digital content on SuperRare or Nifty Gateway, creators need to submit an application form with stringent selection criteria and a long waiting period for the experts’ decision.
Set up a wallet and own some crypto
A cryptocurrency wallet is a critical component of any blockchain system. According to the basic blockchain principles, users need wallets to access different platforms, sign transactions and manage their balances. Hence, NFT marketplaces eliminate the need to store user account data, making the platform more secure.
Several cryptocurrency wallet applications are available on smartphones to buy and store cryptocurrencies. Many are designed specifically for blockchain newcomers and can guide them through transaction fees, security and privacy.
There are plenty of crypto wallets and browser extensions for accessing blockchain-based applications that can get the job done. Some offer increased security beyond a simple email address and password with a twelve-word access seed phrase. Before setting up a wallet, the most important thing is to make sure that it matches the cryptocurrency used on the platform you intend to use.
When looking to mint a token on the blockchain, users are required to pay a gas fee. A gas fee refers to a payment made by the user to compensate for the computing energy required to process and validate transactions on the blockchain. A gas limit is the maximum amount of gas that a user is willing to spend on a particular transaction.
Gas fees fluctuate significantly depending on the level of demand for creating transactions. Minting an NFT can be free. However, it could cost between $10 to $100, depending on the chosen marketplace. Gas fees are significantly cheaper (on average) on weekends when fewer people are transacting, which will help NFT enthusiasts keep costs down if they are minting multiple items.
Minting multiple items differs from double minting which refers to minting the same NFT twice. Users are not restricted to take the same digital item already minted on one NFT marketplace to a different one, minting it a second time and selling it again as a new NFT. Users need to keep in mind all potential consequences to their reputation such as devaluing the specified NFT and any subsequent digital item the user may want to sell, as the user’s credibility could be undermined. Therefore, double minting should be avoided by inserting an invisible code into a digital item’s file without significantly affecting the item’s appearance to the naked eye.
Then, users can download the cryptocurrency wallet app to both their smartphones and personal computers to access NFT sales receipts, since they will need to have a way to receive crypto and convert it into traditional money whenever they want.
There are two main ways to convert cryptocurrency to cash and eventually transfer it to a bank account. First, you can use third parties like crypto exchanges, ATMs and debit cards. The second option is to use a peer-to-peer (P2P) platform. Both methods are simple and safe. However, using a peer-to-peer transaction tends to be a quicker and more anonymous way to exchange your crypto for cash at a predetermined rate.
Follow the NFT platform’s instructions
Each NFT marketplace has specific instructions creators will need to follow in order to create a nonfungible token.
Firstly, the marketplace usually asks users to upload a file they want to turn into an NFT with a title and a short description. Ideally, the NFT platform’s users need to spend some time filling in their nonfungible tokens’ details and perfecting them to attract collectors and maximize the chances of selling their creations. After uploading the digital item, they will also need to choose whether to mint a single token or a collection.
Secondly, there are two possible options for selling NFTs: fixed price or auction. A fixed price sale is where users specify a price at which they want to sell the NFT. It is pretty transparent and direct. Auctions are another exciting way to sell NFT creations. There are usually two types of auctions available on different NFT marketplaces. The first type is an English auction, which is an increasing price auction and the highest bid wins at the end. There is also a form of English auction called timed auction when each lot can be bid over a defined period and at the end of the period, the collector who has submitted the highest bid wins and buys an NFT. The second type is a Dutch auction, also known as decreasing-price auction, in which the price drops until someone buys an NFT.