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Non-Fungible Token (NFT): Everything You Need To Know

Non-Fungible Token (NFT): Everything You Need To Know

I guess you might have heard of NFT (Non-fungible token) before or you are just coming across this word NFT for the first time. Whichever one, In this article, we will be discussing in detail, everything you need to know about Non-Fungible Token (NFT). Sit tight and enjoy this piece.

What is an NFT?

NFTs are used to tag unique units of data with cryptography. This means that content can become registered by means of blockchain, making it possible to trace who owns what and revoke access rights whenever necessary.

Non-fungible tokens are a type of crypto token that lets you give unique data units from digital content. They can be used in many different ways, from videos to music to images.

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Non-fungible tokens are a clever way of logging content onto cryptocurrency blockchains. Your videos, songs, and images are more secure when they are on an NFT.

The NFTs are non-fungible digital collectible items, meaning they are items that are not interchangeable.

NFTs are not designed to be used as a currency but are instead used to represent ownership of digital content.

NFTs are typically characterized by their uniqueness, scarcity, tradeability, and newly introduced embedded logic.

NFTs were in fact the original intention of the digital currency Bitcoin in its early conception in 2008.

The main effect of NFTs is to make it easy to own and sell digital goods.

non-fungible-token-nft-everything-you-need-to-know
non-fungible-token-nft-everything-you-need-to-know

Non-fungible tokens, or “NFTs” as they are often called, have been steadily growing in popularity since their inception. With a single token, users can now own and sell digital goods without the hassle of setting up an account and going through the verification process on each individual site. Users can buy and sell items with NFTs on decentralized exchanges like OpenSea and Rarebits.

Nevertheless, the hope is that, by providing an ability to sell their art, digital artists will be able to profit from the work they do, and the art will reach a broader audience.

NFTs are units of data stored on a blockchain digital ledger. Each non-fungible token acts as a kind of certificate of authenticity, showing that a digital asset is unique and not interchangeable. An NFT can never be altered, never be adjusted, and never be stolen, thanks to the principles of cryptography that make the blockchain unique.

How does NFT work?

Since they are stored on blockchains, it’s easy to prove ownership. Each block in the blockchain contains information like a cryptographic hash of the previous block, a timestamp, and transaction data.

Blockchains are also resistant to change because of the chains that the blocks form. Altering one block cannot be done without changing the subsequent ones in the chain. Hence, your NFTs are relatively safe from stealing.

Generally, creators (or, if you desire, artists) will mint their work on an NFT marketplace, on platforms like OpenSea, SuperRare, Nifty Gateway, Foundation, and many others. Minting is the act of creating/developing an NFT, which means creating a smart contract that will be stored on the blockchain.

The smart contract has a lot of important information: it details the creator of the work and confirms that the creator, or other parties, receives royalties each time the NFT is sold.

The ability for artists to collect returns on resale value automatically is part of NFTs’ draw for artists (all platforms make their money by receiving a small percentage of royalties through the smart contract). But the process isn’t perfect: technological glitches can make it so that parties don’t always receive royalties. And a smart contract does not have the legal weight of copyright — it will take a relevant court case to see how the law regards smart contracts.

Smart contracts are stored on the blockchain, but the artwork itself is most often not stored on-chain because keeping that much data is too laborious and expensive; therefore, most smart contracts contain a link to the work they represent.

This means that many NFTs comprises two parts, the smart contract and the asset itself. This can generate some haze about where the value actually resides. However, there are works that are not only stored on-chain but are also created using blockchain tech.

While artists are constantly encouraged by their peers to make big dollars making NFTs of their work, there are impediments. Possibly the most prohibitive is that minting an NFT is not free, and its cost grows the more clogged the Ethereum network becomes, and the more computational measure is needed to do the job.

The financial cost of that required computational measure is the “gas fee,” which is regularly fluctuating. Presently, it costs about $70 to mint an NFT on Ethereum. The NFT creator doesn’t continually do the minting; certain platforms will offload that method and the ensuing cost to the consumer.

What is an example of NFT?

It’s not just NFT art that sells well. There have been several significant sales of NFTs in recent months, although this has given rise to the assumption that there is a market projection at the moment.

Some examples of NFT sales include:

  • The first Tweet. Jack Dorsey, the founder of Twitter, sold the NFT for his first Tweet for $2.9 million
  • The ‘Nyan Cat’ GIF. The NFT for the colorful GIF sold for 300 Ether (a cryptocurrency), worth around $561,000 at the time.
  • The ‘Charlie Bit Me’ Video. The popular video of a baby biting his brother’s finger was viewed over 800 million times on YouTube. The NFT for the video sold for approximately £500,000.

What are the Benefits of Using NFT?

NFTs are a new form of digital token that can be used to represent virtual goods.

NFTs are an example of non-fungible tokens, meaning that they are not interchangeable or exchangeable with other items.

This means that NFTs cannot be duplicated, which helps to prevent fraud.

NFTs can also be used as a form of digital ownership for unique assets, such as collectibles and art pieces.

Many people believe this is the future of ownership because it will make buying and selling more secure and transparent.

Is NFT a Good Investment?

Interestingly, NFTs are good investments if you think this is the future because they democratize access to art ownership. Crypto art or NFT art supplies a better alternative for those with less capital to invest in digital pieces. Digital art ownership has proven to be a revolution since the advent of the internet.

How do you make money from NFT?

Some people do ask this question, do you make money from NFT?
Some entrepreneurs and investors utilize NFTs like stocks and profit by buying and selling them. If you have already purchased a collection of NFTs and don’t need them anymore, you can easily sell them the same way you would if you were to create/develop them yourself. The only step you’ll skip is the minting process.

NFT Minting and The Process

Knowing that anything can be an NFT, how does your digital art or other items truthfully come to be an NFT? Do you just create your item and tell people that it’s now an NFT? Of course not!

Anything becomes an NFT through the process of minting. To convert an item into an NFT, it has to become part of the blockchain ledger.

Blockchain is a publically distributed, decentralized ledger managed by a peer-to-peer network. There’s no centralized authority responsible for maintaining it. Instead, miners are responsible for adding new blocks to the blockchain.

Each block in the blockchain contains a cryptographic hash of the previous block, a timestamp, and the transaction data. Since the blocks are connected to previous blocks, modifying them is impossible without modifying all subsequent blocks in the chain. This property keeps the blockchain secure and safe from manipulation.

When you mint an NFT, the digital asset becomes a part of the blockchain. So, if you’re using the Ethereum blockchain to mint your NFT, it will become a part of the public ledger. And once that happens, you cannot adjust it.

NFT (Non-Fungible Token) - Everything You Need To Know
NFT (Non-Fungible Token) – Everything You Need To Know

One uses a lot of energy to mint an NFT, i.e. to add it to the blockchain. Miners spend this energy in form of huge electricity bills that rack up when they solve complicated puzzles to be able to add a block to the ledger. This huge energy spending is the reason blockchain is so heavily criticized.

Now, NFT creators pay for this energy spent in form of gas fees on the Ethereum blockchain. To mint an NFT, creators must pay a network fee which is ironically called gas fees. The gas fee fluctuates depending on the demand and usage of the network. As NFTs are trending right now and Ethereum is quite in demand, gas fees on the blockchain can be around $100-140.

Once you pay the gas fees, the NFT is minted.

Process for Minting an NFT

Here’s what the procedure looks like:

  • Create a digital wallet of your choice
  • Then link that wallet to an NFT marketplace you like
  • Add some ETH (Ethereum currency) to your wallet
  • Upload the file to the marketplace and fill in other details like price or type of auction, name, and description for the file, etc.
  • Double-check the details as you can’t modify them later
  • Finally, click the Create button or its equivalent depending on the marketplace
  • Once you do that, the file is first uploaded to the IPFS (InterPlanetary File System)
  • Then, the minting process starts. You’d get the request to pay the gas fees in your wallet.
  • While all this is happening, you still have a chance to cancel. But once you confirm, the NFT is minted as soon as you pay the fee.
  • Then, you’d get an additional signing request in your wallet to authorize the selling of the NFT. If you cancel now, the NFT will stay in your wallet until you decide to sell it.

When you mint the NFT, it is mapped to a token on the blockchain where it’ll live forever while the file itself is hosted on the IPFS. You cannot modify the NFT or delete it simply.

What you can do is burn the NFT which costs you gas fees again. Burning the NFT essentially deletes or removes it from the blockchain, and this process is irreversible.

Lazy Minting: What it is?

Rarible, one of the most accessible NFT marketplaces, has introduced a new option to make NFTs more accessible for everyone. As the gas fees are too high, not all creators can pay it. Lazy Minting gives them the option to not create an NFT without paying the gas fees.

The gas fee is paid by the buyer instead. So, how is the NFT minted without paying the gas fee? The answer is that it isn’t.

The item that you want to turn into an NFT doesn’t even become an NFT until someone buys it. Rarible instead stores the file on the IPFS and delays the minting process. But the item is available on the marketplace like any other NFT. And just like any other NFT, you can sell it at a fixed price, or auction it off in timed or unlimited auctions.

When someone wants to buy the item, they pay the gas fees along with the price of the NFT. Once they pay the gas fees, the NFT is first minted in your wallet and then automatically transferred to the new owner’s wallet.

So, if no one buys your item, it is never minted as an NFT.

What Items Can be an NFT?

The NFT world is still rather new and there aren’t too many restrictions around what can be minted as an NFT. Most popular cases of items minted and sold as NFT include digital art, videos, GIFs, music, collectibles, and in-game items.

Is every NFT unique?

Although NFTs are by nature non-fungible, it doesn’t necessarily imply that all NFTs are unique. The originality and scarcity of any NFT are decided by its creator. They could be one of a kind or the creators could mint them as a rare item. So, there would be a few such items available like a trading card. But each NFT would still exist as a separate token with undeniable ownership rights to whoever buys it.

It’s important to know that even if the creator sells the item as one-of-a-kind, they’d still have the rights to reproduce it unless they explicitly transfer the rights. So, it’s always wise to know who you are buying an NFT from and that they aren’t opportunists who’d go back on their word. Because it won’t be illegal if they did, just unethical.

How do I know what NFT to buy?

For the most part, the value of NFTs is determined simply by what the market will bear. If you buy one as an investment, you’re essentially betting that someone will eventually be willing to buy it from you for more than what you paid.

Do NFTs go up in value?

NFTs are rapidly increasing in value for good reason. Some NFTs, short for non-fungible tokens, are selling for upwards of $60 million. However, if you are like most people, you aren’t exactly sure what NFTs are and why they are so important in the context of investing.

How to Make an NFT

Hopefully, you now know what NFT is, it’s time to grate that itch you’ve had all along: how to make and sell an NFT? Before you decide to create an NFT, it’s important to know that creating an NFT will cost you money.

Apparently, you’ve been seeing all the NFTs that have sold for millions or hundreds of thousands of dollars. But such occurrences are still super rare. Realistically, your NFT might not even sell. And even if it does sell, you might end up paying out of your pocket because of the minting, network, or transaction fees involved. On Ethereum, these fees are known as gas fees.

So, be ready to invest (and potentially bear loss) in your NFT. Also, there are various types of fees involved. First, you’ll need to spend money to create and list your NFT. Then, if you do make a successful sale, there are additional costs like the commission fee and transaction fee. So the whole ordeal can turn out to be costly.

Be ready to pay somewhere around $120 (could be less or more) to create your NFT. And this is just the cost for minting. Once the NFT actually sells, there are more prices associated.

There are many options available at each step of the way when it comes to creating and listing your NFT. We’ll discuss these as we move forward. Here are the steps involved in making your NFT.

Select the File you want to make into an NFT

It’s the basic starting step while making any NFT and chances are you might already have it. Still, here’s a reminder of what to select when making an NFT. It could be a digital drawing, photo, video clip, music file, a video game item (if you’re a developer), meme, any collectible item like those famous pet rocks, a GIF, even a tweet (it should be viral or famous though, to garner people’s interest). You get to decide whether you want to keep it just one-of-a-kind or a super rare collectible with a few items available.

Whatever you prefer, just make sure you own the copyright for the item. Trying to turn something you don’t have the intellectual property rights for will land you in legal trouble.

Choose a Blockchain Technology

Once you’ve made up your mind about minting an NFT, you’ll need to determine which blockchain technology you want to use for your NFT. Ethereum, the first platform to introduce a standard for NFTs, is the most popular choice among most NFT creators and the one we’ll be using for this guide.

But the transaction prices (called gas fees) for using the ERC721 standard on Ethereum for minting NFTs can range anywhere between $80 – $120. It can go even higher as gas fees are always fluctuating due to high network usage. Other blockchain options for minting NFTs include options like Tezos, Cosmos, Polkadot, Flow, Binance Smart Chain, etc. You can use other blockchains like Polygon to mint and sell NFTs for free.

Select a Digital Wallet

Now that you’ve really begun your journey in the NFT space, you’ll need some cryptocurrency to fund the minting of your NFT. And a digital wallet to keep that crypto. There are a lot of wallets to choose from to keep your currency safe. The wallet is also crucial as it allows you to create accounts on and sign in to NFT marketplaces. If you already own cryptocurrency, you still need to set up a wallet and then you can transfer your tokens to the wallet to trade on NFT marketplaces.

Most NFT marketplaces accept ETH, the native cryptocurrency of the blockchain platform Ethereum. For this guide, we’ll use a wallet that uses Ethereum as well. There are many wallets to choose from but here are a few popular choices to explore.

Rainbow Wallet: This might be a relatively new wallet but it’s a great choice for NFTs as it was built with Ethereum assets in mind. This does mean that you can’t store your Bitcoin here. It has an Android and iOS app and buying Ethereum is very easy. You can buy crypto right inside the wallet.

Coinbase Wallet: This wallet from one of the largest cryptocurrency exchanges is another great option for beginners. It is extremely easy to use the Coinbase wallet to buy crypto. But when you use a Coinbase wallet, you’ll have to buy the currency on a separate exchange and transfer it to your wallet.

MetaMask Wallet: MetaMask connects with most NFT marketplaces easily. It also has a browser extension as well as iOS and Android apps making it extremely easy to use on any device. This is the wallet we’ll use for the purpose of this guide.

These are just a few options and there are many more wallets available for you to choose from.

Setting up the MetaMask Wallet

If you want to use the MetaMask wallet, you can follow the steps in this guide to create one.

On your browser, go to metamask.io and click the ‘Download’ button.

 

 

Metamask
Metamask.io

MetaMask has extensions for most major browsers like Chrome, Edge, Firefox, and Brave. For Chrome or Edge, click the ‘Install MetaMask for Chrome’ button.

metamask chrome
Metamask Chrome Extension

The listing for the MetaMask wallet in the Chrome web store will open. Click the ‘Add to Chrome’ button.

A confirmation prompt will appear on the screen. Click the ‘Add extension’ icon to install the extension and add it to your browser.

metamask chrome Add
metamask chrome

Once the extension installs, the extended view for it will open on its own in a separate tab.

  • To create the wallet, click the ‘Get Started’ button.
Metamask Get Started
Metamask.io
  • Then, click the option for ‘Create a wallet’.
Create Wallet - MetaMask
Create Wallet – MetaMask.io
  • A set of privacy policies will appear. Click ‘I agree’ or ‘No thanks’ to move forward.
Metamask Cookies - Techieds
Metamask Cookies – Techieds
  • Then, create a password for your account, preferably a very strong one, check the option for terms of use, and click the ‘Create’ button.

Metamask Password - Techieds
Metamask Password – Techieds
  • MetaMask will give you a 12-word secret backup phrase.

Note: Write down your backup phrase and keep it somewhere safe. Don’t share this phrase with anyone under any circumstance and never lost it in any instance. If you ever forget your password and need to get into your wallet, this backup phrase is the only thing that can do it. Not even the MetaMask team can help you if you don’t have the phrase; you’ll end up losing all the tokens in your wallet. Anyone else with access to your phrase can also access your wallet and transfer all your tokens.

Complete the instructions on your screen related to the backup phrase and your wallet will be created.

You can also use the Android or iOS app to set up the MetaMask wallet.

Once you’ve set up your wallet, you’ll need to add funds to it. You can add around $120 to your wallet for minting your NFT. You can skip this right now and add funds later on as and when required. Most marketplaces also let you add funds while minting the NFT so you don’t have to start the whole process again if you do choose to defer.

Select the NFT Marketplace

The words NFT marketplace have popped throughout this guide, but we haven’t really explained what it is. An NFT marketplace is the place that allows you to buy or sell your NFTs.

While selecting your NFT marketplace, there are a few things to keep in mind. First, the marketplace should be suitable for the type of art or NFT you want to sell. Second, it should be compatible with the type of token you intend to use. It should also be secure; before choosing a marketplace, research that there have been no security-related incidents in the past. There are plenty of NFT marketplaces in existence. The ones listed below are among the top NFT marketplaces.

Some marketplaces are exclusive and only admit creators or artists after an application process. This includes marketplaces like Nifty Gateway (choice of marketplace for Grimes, Beeple, and Paris Hilton) and SuperRare. Both SuperRare and Nifty Gateway are highly curated marketplaces that only let you sell digital art. So, it’s not for creators wanting to sell memes or other stuff.

Another example involves the NBA Top Shot that’s exclusively used to sell and buy collectibles from NBA and Women’s NBA. Similarly, Axie Marketplace is a space for the game Axie Infinity which itself is NFT-based.

A few open markets include OpenSea, Rarible, and Zora where anyone can sell without an invitation or application. You can also sell any type of content, but that also means that the marketplace is flooding with a lot of NFTs and you will have to put in extra efforts to market your NFT. Before choosing any marketplace, make sure that it’s the right fit for you.

Once you’ve chosen your NFT marketplace, you’ll have to connect your digital wallet to it. Then, you can create and list your NFT on the marketplace.

For this guide, we’ll show you how to mint an NFT on Rarible. Rarible also has a new option that lets you mint NFTs for free (or, rather puts off minting for later). So, if you’re just beginning in the NFT world, this can be a good choice for you.

Connect Rarible with your Wallet

Now, the first step in using Rarible to mint your NFT is connecting it to your digital wallet. Any transaction on Rarible from your wallet needs your permission so you can rest assured that your funds are safe until you want to use them.

  • Go to rarible.com and click the ‘Sign in’ button in the top-right corner.
Rarible Sign In
Rarible Sign In
  • Then, click the ‘Sign in with MetaMask’ option. If you used any other wallet, click the corresponding option to connect your wallet to Rarible. If you can’t see the option, try closing your browser and opening Rarible again.
Rarible Log In
Rarible Log In
  • On the right side of your screen, a small window for MetaMask will open. Make sure that the checkbox next to your account is selected. Although this must be automatic, check the option yourself if it isn’t. Then, click ‘Next’.
Connect Metamask - Techieds
Connect Metamask – Techieds
  • A permission request from Rarible will open. Click ‘Connect’ to proceed.
Connect Metamask (1) - Techieds
Connect Metamask – Techieds
  • Rarible terms of service will appear. Check both the checkboxes and click the option for ‘Proceed’. Your wallet will be connected to Rarible.
Rarible TOS
Rarible Terms Of Service

Create an NFT on Rarible

Click the ‘Create’ button in the top-right corner of the screen.

Rarible Create - Techieds
Rarible Create – Techieds
  • Now, depending on whether you want to create a one-of-a-kind item or multiple types of one item, click ‘Single’ or ‘Multiple’ respectively. Here, we’ll be creating a single NFT.
Rarible Collectible - Techieds
Rarible Collectible – Techieds
  • Then, upload the digital file for your NFT. The file could be in the format PNG, GIF, WEBP, MP4, or MP3 with a max. file size 100 MB. Click ‘Choose File’ to upload your file.
Rarible Create Item - Techieds
Rarible Create Item – Techieds

Then, in the next part, you’ll have to determine how to sell your NFT. There are three options available:

  1. Fixed Price: The fixed price option allows you to list your NFT for a price you’re demanding. The first person who pays that price gets your NFT. Rarible will charge a 2.5% service fee.
  2. Open for Bids: This will start an unlimited auction that’ll allow people to make bids until you decide to accept one.
  3. Timed Auction: This will set up the auction for a limited time period during which people can put their bids. You select the currency, minimum bid, and the starting and ending dates for the timed auction.
  • Select how you want to monetize the NFT. Whether you select timed auction or fixed price for your NFT, keep in mind to not list your NFT for too low or you could end up losing money instead of making any profits.
Rarible Service Fee - Techieds
Rarible Service Fee – Techieds
  • Then, the next option is ‘Unlock once purchased’. If you enable this option, you can use it to provide high-resolution images of the artwork or bonus content with your NFT. This content is only unlocked after someone buys the NFT and only for the buyer.

In collections, by default, the option is set to ‘Rarible Singles’. We will leave it to that. You can create your own collection but that’s more technical jargon to get into. For beginners, Rarible Singles is fine.

Rarible Unlock - Techieds
Rarible Unlock – Techieds

Rarible has a new option for ‘Free minting’ now or what’s also known as lazy minting. If you use this option, you won’t have to pay any gas fees for minting your NFT as the NFT isn’t minted right away. It’s stored and is minted later when someone buys the NFT. In this case, the buyer pas the gas fees.

Rarible Free Minting - Techieds
Rarible Free Minting – Techieds

Rarible also says that using the free minting option is more sustainable as it prevents unnecessary minting transactions for NFTs that are never purchased.

Although, be aware that unless someone really wants your art, lazy minting might also put off potential buyers as they might not want to pay the extra gas fees. It’s a gamble that you get to choose. You can also burn your lazy NFT later and turn it into a regular NFT where you pay the gas fees.

If you’re using free minting, your NFT is listed on the marketplace like any other NFT, but it’s instead stored on IPFS (decentralized storage).

Also, even though you don’t need to pay the gas fees, you still have to sign the “minting authorizations” from your wallet. Once the buyer pays the gas fees, the NFT is first minted in your wallet and then transferred to the new owner automatically.

Free minting is currently only available for ‘Rarible’ collections.

Then, enter a name and description for your NFT. Then, the final option is for Royalties. You can choose anywhere from 0 to 50% royalty for resales of your artwork.

Choose a percentage you feel is fair; don’t go too high either lest the buyer gets discouraged from re-selling your NFT at all. Finally, click the ‘Create Item’ option.

Rarible Create Item - Techieds
Rarible Create Item – Techieds

The minting process will start. First, the digital files will upload. Then, if you’re not using the free minting option, you’ll have to pay the gas fees. While the minting step is in progress, the MetaMask window will pop up on the right asking you to confirm the transaction.

Metamask
Metamask

When we tried to mint the NFT, the gas fees we were asked to pay were $136.55. The next time it dropped to $132.10. That’s more than we estimated. But since gas fees fluctuate with demand, there’s no telling whether these gas fees will increase or decrease in the future.

Furthermore, the gas fees are the expenses you pay for minting the NFT. To sell the NFT, there are further expenses involved like the service fee you pay the platform.

There’s even a price to pay to accept the bid for sale. You can use the NFT Gas Station tool to get some idea of what it might cost you to mint and sell the NFT.

Click ‘Confirm’ in your MetaMask wallet to pay the gas fees. If you’re minting the NFT for free, this step is skipped.

Rarible Confirm - Techieds
Rarible – Techieds
  • Finally, sign the sell order in your wallet to confirm you want to list the NFT for sale.
Rarible - Techieds
Rarible – Techieds

Once you sign the order, the NFT will appear on the marketplace within seconds.

Hopefully, this guide has been helpful in explaining what an NFT is and how you can go about creating one. May your NFT sell for huge amounts if you do decide to create one!

Thanks for reading Non-Fungible Token (NFT): Everything You Need To Know.  You can click to read about How Do You Sell An NFT? and How Do You Buy An NFT? Here respectively.

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