Understanding NFT’s

  1. If you can prove that you own the real thing, you’ve got it made. It’s a seller’s market.

Lets begin this journey in Paris, in the Louvre — the most-visited museum on the planet. The main attraction here is the enigmatic portrait in oil on white poplar wood finished around 1500: Leonardo da Vinci’s Mona Lisa.

The “mysterious disappearance” of the “Monalisa was the most colossal theft of modern times, which earned the painting its world fame combined with the painting’s inherent appeal.

Though questions of it’s ownership continue to intrigue the world, the famous painting is now the property of the French Republic and it has been on permanent display at the Louvre in Paris since 1797.

There’s something special about arts and paintings. It’s a one off work with some unique existence in the place it happens to be; it’s the only one of its kind. When we hang reproductions of famous paintings on our walls, it just doesn’t feel the same as looking at the originals in museums.

Unique things are, by their nature, rare or scarce. And basic economics tells us that high demand plus scarcity drives value up.

If you can prove that you own the real thing, you’ve got it made. It’s a seller’s market.

But what’s all that got to do with NFTs? Well, it’s a lot easier to establish ownership and trace what belongs to whom and who made what . In the digital world, that’s the problem NFTs solve. It becomes possible to create scarce and valuable digital assets.
The problem with digital assets until recently was that establishing ownership and provenance was tricky. Because they’re so easy to copy, digital assets are hard to control, making them highly fungible. Let me bring you closer home, we all use to ban movies while in highschool, or even songs to play in our cars. Digitized files like MP3 files, music and movies are infinitely copyable. All it takes is a few clicks and you have endless copies of songs that are impossible to tell apart from the original. Add in people’s urge to share, and music became virtually free overnight.

Wait?. But what does Fungible and Non-fungible mean?
Let’s recap. Remember the Monalisa, its price is so high because Leonardo’s masterpiece is extremely non-fungible. It’s an absolute one-off and its trusted documentation proves it’s the real deal. The tech world uses a different word to describe one-offs. That word is non-fungible (NFTs). NFTs are unique cryptographic tokens that exist on a blockchain and cannot be replicated.

“Fungible” means that something is mutually interchangeable and a dollar bill is a great example.

Buying NFTs

Let’s shift gears and talk practicalities. How can you enter the NFT market? There are two options. You can buy and sell NFTs that already exist, or you can make and sell your own NFTs. We’ll come back to making and selling in a bit. For now, let’s look at the buying side of things.

To buy NFTs, you’ll need cryptocurrency. Which cryptocurrency depends on which marketplace you’re using, but the most popular marketplace — that’s OpenSea — uses Ethereum for most transactions. Others include rarible, mintable and binance- the most popular in Kenya.

That means you’ll need a cryptocurrency wallet. A secure option that’s often recommended for folks new to crypto is the Coinbase Wallet. Once you’ve set up your wallet, ideally with two-step verification, you can exchange your local currency for Ethereum.

Now you can head over to OpenSea and create your account. This part of the process should be pretty familiar if you use online marketplaces like Amazon, except you’ll be asked to connect your crypto wallet rather than entering your credit card or PayPal details.

And that’s pretty much it — you’re now ready to browse listings and buy NFTs. Not all sales are alike, though. Some NFTs are sold for a set price. In that case, you’ll be given a “buy now” option. Other sales are auctions, which means you’ll be bidding for NFTs against other prospective buyers. Some vendors prefer to take individual offers, in which case you just need to enter the amount you want to pay and the expiration date of your offer. Once the exchange is complete, the NFT will appear in your wallet. Note that OpenSea charges a 2.5 percent fee for each transaction.

That’s the simple part. Deciding which NFTs to buy is a bit trickier.

The authors’ rule of thumb is to only collect NFTs that speak to you. Some NFTs just aren’t going to explode, so pick projects you like, even if they don’t make you any money. It’s also a good idea to curate a diverse collection. NFTs are like any other investment: it’s best not to put all your eggs in one basket. Make lots of small bets on up-and-coming ventures rather than going all in on one mega project.

Remember, there’s no rush. Spend a few days browsing marketplaces and seeing what people are talking about on NFT forums. If you’re interested in a project, reach out to the creators — they’ll often be more than happy to share their vision. Starting conversations with other collectors will also give you a better feel for the market. Most important of all, only invest what you can afford to lose!

Making NFTs

NFTs are “minted.” Don’t let the terminology put you off, though — all it means is that the NFT must be added to the blockchain. If you’re using OpenSea, you’ll be adding your NFT to the Ethereum blockchain.

Here’s how to do it.

Head over to the OpenSea platform or any other NFT marketplace and look for the “create” menu in the top right corner. When you click on that, you’ll be asked to connect your cryptocurrency wallet and verify ownership of the wallet.

Next, click “My Collections.” Before minting an NFT, you have to create a collection. That’s basically a folder for your NFT. At this stage, you can also choose a name and an image to represent the collection.

Once you’ve done that, you’ll need to click “Add New Item” and verify your wallet for a second time. The next step is to upload the file you want to turn into an NFT. Now all you need to do is name the NFT and add a description. Finally, hit “Create” to begin the minting process. After confirming this step, the NFT will appear in your wallet. And that’s it — you’ve just made your first NFT!

we’ve seen, you can make an NFT out of pretty much anything — a tweet, a GIF, a video, a picture, or a digital artwork. The only limitation is copyright: you have to own the material or have a right to use it.

When it comes to choosing the content of your first NFT, keep it simple. You can use a photograph or video you’ve shot on your phone, for example. Or you can get creative and create an image. If you’re using traditional materials, you’ll need to scan it in. If you’re using digital tools, upload the file directly. Images should be as high resolution as possible, but they can’t exceed OpenSea’s maximum file size, which is 100 MB. That limit also means your video content can’t be too long.

Getting the name of your NFT right is vital: the name, after all, is the first thing potential buyers are going to see. Think of it as your chance to stand out in a crowded marketplace.

So far, so simple. So what’s next? Let’s wrap things up by taking a look at how to sell NFTs.

Selling NFTs

There are three ways to sell an NFT on OpenSea. You can set a price, wait for potential buyers to send you an offer, or start an auction. Let’s go through the options.

Setting a price bypasses one of the risks of auctions — selling an NFT for less than you think it’s worth. But that’s the rub. How valuable is your NFT anyway?

When you want to know how much something is worth, you look at the sale price of similar goods. If a three-bedroom house in the same neighborhood as your three-bedroom house sells for X amount of dollars, you have a pretty good idea of how much your home is worth.

That approach also works with certain kinds of NFTs. If your NFT is part of a series like CryptoPunks, for example, recent sales of similar CryptoPunks will help you set a realistic price for your NFT.

But say you’ve created a totally unique, single-edition NFT — how much is that worth? Well, really, it’s worth as much as people say it’s worth. It’s all about demand. How well known are you? How excited are people about what you’re making? How aggressively are you promoting your product?

If you’re generating a good amount of demand, set your price. The authors recommend optimism here. Set it a little higher than you think reasonable and see if anyone bites. You can always lower it later.

Can’t put a number to your NFT? No problem — you don’t have to set a price. Instead, you can put your NFT onto the market and wait for people to send you offers, which you’re free to accept or decline.

That said, it’s best to act fast if you like an offer. ​​On OpenSea, an offer typically expires after ten days and the person placing it can cancel at any time. You don’t need to worry about missing offers, either — OpenSea will send you an email notification every time you receive one.

If you’re highly confident about the demand for your NFT, you might not mind taking a risk. In that case, a Dutch Auction could be the best way to go.

Dutch Auctions start with a high price that gradually decreases over time. The first person to accept the price wins. Because the chance of missing out is high, participants tend to have itchy trigger fingers. Of course, the risk for you, the seller, is that the price sinks too far.

And that completes your NFT toolkit. Now you know how to buy, create, and sell NFTs. What comes next? That’s for you to decide.

Happy NFTeeing!