What are NFTs?
NFTs are under the umbrella of cryptocurrency and function through the help of blockchains. NFTs are anything: music files, digital artworks, film clips, even Tweets or video game purchases. While digital art might seem kitschy to some, it is fetching artists vast profits, and giving consumers larger proof of ownership in the process.
But to understand NFTs, we must know what blockchains are. A blockchain is a massive database of information. It can store all kinds of data. For the purpose of NFTs, we are focusing on sales information using cryptocurrency, such as Bitcoin, Ethereum, or Litecoin.
The tokens themselves are almost any type of digital file that is then “minted” on a blockchain, and cannot be transacted like currencies. That is why they are “non-fungible”: they can’t be traded because they are irreplaceable. This makes it so there is only one of that creation, making it more valuable to owners and viewers.
When selling an NFT to someone, verification of that unique metadata happens on the blockchain. Along with the sale is a unique, unquestionable account of who owns the NFT, when they bought it, and for how much.
“An NFT is really no different than a baseball card,” Joshua Bloomgarden says, an associate attorney focusing on sports and entertainment businesses at Foster Garvey in New York.“The unique thing about NFT, is that once they’re in the blockchain, they can’t be changed and for that reason are incredibly useful for proving authenticity.”
While purchasing digital art is a great way to support artists, the big incentive is ownership.
Farooq Anjum, a professor in the department of Information Systems Engineering and Management at Harrisburg University located in Harrisburg, PA, has found interest in NFTs throughout his research on cybersecurity.
“You have the famous painting, Mona Lisa, hanging in the museum in Paris, the Louvre,”Anjum says.“People can go and see it, but there is one owner of the painting, and the same concept is what they’re trying to do in the NFT world.”
“So human beings like ownership of stuff,” Anjum says. “I like to say that this is my cellphone and not yours. My pen and not yours. Similarly, I might want to say this is my digital video. You can watch it, but I own it.”
We Tried It for Ourselves
Originally, Brandon created the digital file to see how much money he could get for something created in 15 minutes. We decided it would be fun to share how easy it was throughout the process.
We wanted to ensure that nothing could be considered misuse of intellectual property, especially if this was already monetized. We took an image file from Brandon’s photography collection, and heavily manipulated it by running it through the open-source GNU Image Manipulation Program, or GIMP, which is essentially a free-to-use digital art studio.
We added adjustment layers in Photoshop and animated it to have some flash. In a process that took 15 minutes and was totally free, we created a mintable digital .JPG file for use on the blockchain.
How NFT Markets Works, in General
Gas. Dapps. Miners. There is a lot of complicated and intimidating jargon terms getting thrown around on NFT marketplaces. We went through this process to best breakdown what it means, how it works, and to show how easy it really is to get involved and mint your own.
This isn’t a “how-to” guide, so if you’re looking for a great step-by-step guide instead of a basic explanation of what NFT markets are, then this video is a great resource for you. Remember, there are a lot of ways to do this, so research, research, research.
How We Made, Listed, and Auctioned an NFT in One Hour
Before you can do anything with NFTs, there’s a required list of things you need to have. There’s no getting around this part, it is simply required for the process. Those basic necessities are:
- A digital file (which will become an NFT)
- An account on one of the many cryptocurrency exchanges
- A cryptocurrency “wallet” (we have more on this in a bit)
- An account on an NFT marketplace (we have more on this, too.)
Without getting extremely technical, these four things translate to us needing:
- A piece of art
- A bank that will notarize my art as original
- A digital bank account (here called a wallet) that will let people pay me for my art
- A place to actually sell my art
This is not a perfect translation, but it will work for now. When we have these four things, we will have immediate access to create, sell, and purchase our own NFTs.
Basically, a cryptocurrency exchange is the same as any other currency exchange. Instead of switching dollars for yen, or pounds for euros, we are instead switching dollars for cryptocurrencies. Money that is legal tender, like dollars, are often referred to as “fiat currency.”
We needed to purchase Ethereum (Ξ) to cover the basic fees of creating the NFT. This is called “gas,” as it “fuels” the transaction fees involved with actually stamping the NFT with that unique metadata. These are called “miner fees.” The gas we bought covered all of this upfront.
Next, we needed a place to store that Ethereum we just purchased. For that, we used the Coinbase wallet. A wallet is a coded digital account address that stores your cryptocurrency. This address is needed to send cryptocurrency back and forth between the marketplace and the NFT seller/buyer.
All that was left was to find a place to mint and sell this NFT.
For that, we picked OpenSea, a marketplace that standardizes their NFT formats so that, on a very basic level, it costs less to make and sell. We uploaded the file to that website and followed the prompt to connect our Coinbase wallet to initialize the minting process. This is where gas comes in to cover miner fees.
Miner fees vary, and if NFT sellers aren’t careful, they can seriously outweigh any profit they could ever hope to make. For us, the fee was Ξ.065, which was equivalent to roughly $160. However, once that fee was covered, we could mint and auction as many NFTs as we wanted on that platform.
At this time, the NFT is still up for auction with zero bids. This isn’t surprising, since NFT sellers upload thousands of NFTs every minute. It was impossible for us to find our own listing without searching for it, and after three days, there are still no offers.
Just for fun, we also posted the NFT for sale on eBay here. We had no luck there either. The risk that crypto art sales are scams on sites like eBay are a hefty and valid deterrent for buyers. The interest in art trading is localized around crypto marketplaces for a reason: security. Still, it gave us a chance to see what would happen with a little more exposure. The answer was, nothing at all.
So, there you have it: how to make and auction an NFT in one-hour. If you’re lucky, you could be the next Beeple, collecting millions of dollars for your NFT. Or, you could be like us: out $160 and lost among an open sea (pun intended) of others trying to capitalize on a fad. You are at least armed with a little more know-how and exposure to the market than you were before. Good luck.