Everybody seems to be talking about NFTs at the moment, but what exactly is an NFT? This article will give a simple explanation of NFTs, explore how to make money out of them and even give a step-by-step guide to making an NFT of your own.
Non-fungible tokens, referred to as NFTs, are digital collector’s items, where the customer receives a digital file instead of a physical object, such as a painting. The owner of the purchase has sole ownership rights of that digital item, with only one owner being permitted at any given time.
Each NFT is unique, or part of a very limited run, which like physical artworks can create a sense of scarcity about the item, making it more desirable. This perception can then increase the value of the digital artwork.
NFTs are built with the same form of programming as cryptocurrencies, such as Bitcoin, but unlike cryptocurrencies, NFTs are non-fungible. What in the fungible does that mean?
An economic term, fungible items are interchangeable and can be swapped or replaced. If someone gave you $50 dollars as a single note, it could be exchanged for ten five-dollar notes. An example of a fungible item is cryptocurrency.
NFTs are classified as non-fungible items because they can be identified from one another, each being individually definable. Unlike fungible items, they aren’t interchangeable due to their unique qualities.
The first known NFT was created in 2014 when Anil Dash, a consultant for media companies and auction houses, teamed up with artist Kevin McCoy at an event in New York which connects artists and tech professionals. Together, they created a way to generate a blockchain-supported approach to granting ownership to an original digital work. They referred to the approach as ‘monetized graphics’ and gave a live demonstration of how it worked, with Dash purchasing a video clip, Quantum, made by McCoy, for $4USD. A version of it went on to be sold in 2021 for $1.4million USD.
Fast forward to 2022, the concept of purchasing and selling digital artwork has exploded. According to research from Chainalysis, around $37 billion USD from January to May alone has been sent to NFT marketplaces.
An example of a popular NFT that has been sold is ‘Stay Free’, which was created by Edward Snowden, who you may remember as the American former computer intelligence consultant turned National Security Agency whistle-blower. The digital artwork is a portrait of Snowden created with the court documents linked to the ruling of the NSA’s illegal surveillance. The token sold for a cool $5.4million USD and the sale proceeds went to the Freedom of the Press Foundation.
Prior to this sale, the highest amount paid for an NFT was $69.3million USD via an online auction through Christie’s for ‘Everydays: The First 5000 Days’ by artist Beeple (Mike Winkleman). The artwork is made up of images from every single day from May 1, 2007 to January 7, 2021. Vignesh Sundaresan, a cryptocurrency investor, purchased the NFT and the record sale created worldwide coverage of the trend.
There are essentially six steps to creating NFTs:
What original artwork do you want to turn into an NFT? It could be anything from a painting or illustration to an album, photograph, social media post, GIF, meme or video game. Be mindful that you must be the creator of the original item or be in possession of the legal intellectual copyright before turning it into an NFT.
Choosing the blockchain technology is next. Many creators of NFTs use Ethereum, with other options including Binance Smart Chain, Cosmos, Tezos and Polkadot.
Cryptocurrency is needed to fund your NFT, so if you don’t already have a digital wallet sorted, now is the time to set it up. Having one is necessary to access your digital assets, with the top three NFT wallets being: Metamask, Math Wallet and Alpha Wallet. If you don’t already have cryptocurrency, you’ll need to buy some. Ether is recommended.
Once you’ve completed the previous steps, it’s time to select the NFT marketplace to begin creating your token. There are several options to choose from, some of the most popular including: OpenSea, Nifty Gateway, SuperRare and Rarible. Choose your marketplace and link it to your digital wallet.
Each NFT marketplace will walk you through the file upload process. Once your file is uploaded, you’ll be able to convert it into an NFT.
You will be given options as to how you want to sell your token. Marketplaces will provide different options, with some of these including:
A minimum price will be needed for auctions and it’s wise to set the minimum to at least cover all your overheads (artwork creation and materials, your time and the various associated marketplace fees) so you aren’t losing money.
At this stage, there are little to no laws specific to NFT creation and purchase in Australia. However, more general laws may be relevant, depending on the circumstances in question. For example, contract and consumer laws could be applied to minting, issuing and sales processes of NFTs, if the sale and purchase occurred between Australian based creators and buyers. If it is a sale outside of Australia, the NFT laws are largely non-existent for now.
Your best bet? Remain vigilant when it comes to the details of how each marketplace operates and stay on top of your cybersecurity practices.
If you’re looking to make money out of the creation of NFTs, it’s handy to have exposure to the latest tech tools and techniques. Academy Xi offers a range of short courses in Australia that will equip you with cutting-edge tech skills and help you build a stand-out portfolio.
If you want to create your own eye-popping digital art to sell as an NFT, consider our Graphic Design courses, which can be used either to upskill or completely transform your career and will have you creating custom designs that make a real splash with your audience.
Not sure which course is right for you? Chat to a course advisor and we’ll help you find the perfect match.