What are NFTs — And How to Create One?
NFTs are everywhere — arts, sports and entertainment. From Twitter’s Jack Dorsey, Mark Cuban to Elon Musk.
The total NFT transactions were valued at $250 million last year, according to a study from NonFungible and L’Atelier while trading volume on NFTs grew more than 2x in the first two months of 2021.
But what the heck are NFTs or Nifties?
How can you create yours?
How are they valued?
Let’s dig in.
What are NFTs?
NFT is short for Non-Fungible Tokens. Some call it “Nifties”, the pop-culture way.
NFTs are unique, digital items on the Blockchain. The “Non-Fungible” means the item is uniquely represented on the Blockchain.
What’s the difference between Fungible and Non-fungible assets?
- Fungible asset: it is identical and interchangeable. For example, currencies.
- Non-fungible asset: it is unique. There can be only one record. Examples: your Twitter handle, diamonds, houses, land, and Monalisa.
We have always had non-fungible assets: domain names, in-game items and social media handles on social networks like Twitter or Facebook are all non-fungible digital assets.
However, these assets have not been totally tradeable, liquid, and interoperable (ability to be moved/used across different applications).
What the blockchain has added to all non-fungible assets is a standard way to represent them on the internet and transparency (all activity is recorded on a blockchain and everyone can see these activities).
With non-fungible assets on blockchains, developers can build common, reusable, inheritable standards relevant to all non-fungible assets. These standards include ownership, transfer, and simple access control.
Characteristics of NFTs
We already mentioned some of the characteristics of NFTs above, but to highlight clearly:
- Unique: The primary quality of non-fungible tokens is that they cannot be photocopied, and they are verifiable on the blockchain.
- Permanence: Information — including images, music and signatures — stored on NFTs are permanent.
- Programmable — NFTs are just pieces of codes, which means instructions can be set in advance. For example, a musician can put their album on the blockchain as an NFT, and it can be programmed for the artist to get royalties on all sales of their music.
- Permissionless — NFTs can be used on different platforms and in multiple ways without censorship.
How can you make an NFT?
Anyone can make an NFT in a few simple steps:
1. NFTs support an array of files, like visual files (JPG, PNG, GIF, etc.), music files (MP3, etc.), 3D files (GLB, etc.), and more. So get the file you want to use as an NFT ready.
2. Next, set up an Ethereum (ETH) Wallet. This digital wallet is where you’ll securely store the cryptocurrency to create your NFT. The wallet also gives you the ability to sign in and create accounts on NFT marketplaces.
You can use MetaMask as your Ethereum Wallet. MetaMask can be added as an extension to your Chrome Browser or download as an app.
3. You will need to purchase some Ethereum (ETH) to cover the costs of creating your NFT. There are fees associated with turning your content into an NFT on these marketplaces.
You can purchase Ethereum (ETH) directly on MetaMask, or if you already have some send it to the MetaMask wallet address.
4. Then, you need to connect your wallet to an NFT Marketplace. A popular and easy-to-use NFT marketplace is called OpenSea.
Connect your MetaMask to OpenSea and your account is instantly generated. You can now go-ahead to create, mint, and sell your first NFT.
5. Upload your file to the platform and fill out the description. Once you have uploaded the item, the minting process begins, which would require some ETH to pay for approval and minting transactions.
Minting is just the way your item becomes a part of the Ethereum blockchain. Once the minting is concluded, your file can now be purchased and traded in the market and digitally tracked as it moves from one person to another in the future.
Watch the video below for a visual explanation.
How do you value an NFT?
Some items have intrinsic value, like an art or music album. However, the value of the item is only worth what someone is willing to pay. Aside from the intrinsic value, the rarer the NFT and its value to people, the higher others are willing to pay for it.
A wealthy collector of arts can buy arts just for its sake or it could be so he/she can sell in the future to someone who would pay a higher price. NFTs make it possible for the later to be done transparently and digitally.