Non-fungible tokens (NFTs) are one of the biggest crypto stories of 2021. This year, we saw NFTs becoming a roaring success, especially after digital artist Beeple sold his NFT for $69 million and grabbed mainstream headlines.
In the first half of the year, several NFTs were sold for millions of dollars. CryptoPunks lead this mania, with the most expensive punk being sold for $11.7 million.
As the cryptocurrency market capitalization grew past $3 trillion, the NFT coins market has also grown over $50 billion. The NFT sector has recorded nearly $14 billion in sales, and more than 1.5 million have now bought or sold an NFT.
Global search interest for “NFT” has now also surpassed “crypto” and “Bitcoin” for the first time.
Non-fungible tokens are digital assets representing ownership of internet collectibles like art, music, and games. These assets contain identifying information recorded in smart contracts making NFTs unique.
NFTs are unique and non-fungible, which means no two NFTs are the same and one can’t be replaced by another. While the asset itself can be replicated, there is a record of ownership stored on a public ledger, blockchain, where anyone and everyone can see the certificate of ownership.
As such, NFTs are making it possible for artists to release their work digitally without the risk of counterfeits. While you can copy the image file of the NFT just like you can print out a copy of the Mona Lisa, they won’t be authentic.
While NFTs are not divisible, the market has been experimenting with fractionalizing NFTs so that many people can share the ownership of the assets. It is particularly of value for expansive NFTs as fractional NFTs allow several people to invest a small sum of money and gain fractional ownership of the asset.
Ethereum is currently the most popular blockchain where NFTs are being created, using ERC-721 and ERC-1155 standards. As of December, users have sent at least $26.9 billion worth of crypto to ERC-721 and ERC-1155 contracts in 2021, according to a Chainalysis report.
Besides Ethereum, Solana, Tezos, Flow, Secret Network, Tron, and NEO have emerged as other popular smart contract-enabled blockchains that support NFT creation.
These other blockchains are gaining traction due to network congestion and high fees on Ethereum pricing out smaller users. Ethereum is currently working on scalability, but ETH 2.0 has been in talks for years and won’t be coming, at least until sometime next year. As such, users are attracted to cheaper and faster blockchains.
Solana, in particular, has been giving competition to Ethereum and has NFT projects like SolPunks, Aurory, and Degenerate Ape Academy launched on it. In December, the former US First lady Melania Trump also announced the launch of her NFTs on Solana.
Dapper Labs, the creator of CryptoKitties NFTs, has launched its own blockchain called Flow. But despite the growth of other blockchains, Ethereum, for now, is the clear winner. “Other chains have tried to replicate Ethereum’s success in the NFT space and attract users. Despite this, Ethereum still holds the throne for NFT volume,” noted crypto research company Delphi Digital.
Today, everyone is talking about NFTs, so should you join in? Well, NFTs might have gained mainstream adoption in 2021, but they have been around since 2015, with CryptoKitties collectibles being some of the first ones.
It’s just that amidst the crypto bull market, the sky-high valuation of some NFTs captured the mainstream interest, and as everyone from celebrities to brands jumped in, it even gained more traction.
The NFT market is currently speculative, driven by FOMO (fear of missing out) and scarcity. Besides popularity, you can buy an NFT of an artist you want to support.
NFTs also gives its holders access to specific events. For instance, Bored Ape Yacht Club NFT creators hosted a private token for token holders. Owning a BAYC also makes one eligible for additional NFT drops such as Bored Ape Kennel Club and Mutant Ape Yacht Club.
Currently, NFTs are primarily limited to flipping art. But it is just the beginning, the unique proposition of NFTs is that it contains distinguishing information, and in the future, we can see their application in gaming, metaverse, copyright, intellectual property rights, real estate, software licensing, and creating decentralized alternatives to centralized organizations.
To get started, first you need a cryptocurrency wallet. Coinbase Wallet is one, which is separate from the crypto exchange Coinbase’s main app. This self-hosted crypto wallet is a standalone product that you can download even if you do not use the exchange or any of its other products. It is also available as a standalone browser extension and allows you to trade crypto and access decentralized apps (dapps) and NFTs, all from one place.
Metamask is a popular Ethereum wallet with over 10 million monthly active users. You can access this wallet via chrome extension or download its mobile app. You can also link your MetaMask to a hardware wallet like Ledger to mitigate the risk of hacks.
Make sure that you always keep your 12-word seed phrase a secret and do not give it to anyone in any case. There has been an increasing number of cases reported where NFT holders have lost their NFTs.
Once you have chosen a wallet, it's time to buy some crypto, such as Ether or SOL. You can buy crypto from exchanges like Binance, Coinbase, FTX, Kraken, and many others.
Once you have bought the asset, transfer it to the wallet. And now you can check out different marketplaces to browse for some digital art or collectibles.
Crypto exchanges have also announced their own NFT marketplaces, with Binance and FTX having launched their early last year. Coinbase’s announcement of its NFT marketplaces generated a lot of hype, with more than 1 million users signing up for its waitlist within just 24 hours of the announcement.
The benefit of using these exchanges' NFT platforms is that if you have already got an exchange account, it automatically works with their NFT marketplaces. And once you start using it, you only have to bid for the artwork you like using the crypto the creators have listed.
Besides crypto exchanges, there are several other places where you can buy NFTs.
Founded in 2017, OpenSea is the biggest and most popular NFT marketplace, which was recently valued at $13.3 billion. In August 2021, it posted a record $3.42 billion in volume, an increase of 425x since the beginning of the year. Overall, it saw over $15 billion in volume in 2021 and has already pulled in $2.2 bln in the first ten days of 2022.
Operating on Ethereum, OpenSea hosts digital artwork, music, as well as video game items, virtual worlds, and domain names. The platform supports Ether, USDC, DAI, and over 100 more tokens.
The platform lets creators mint NFTs without paying any gas fees but charges a 2.5% commission on every transaction. The buyer pays this cut for fixed-price items while the seller pays for auctioned items.
On Rarible, users can mint, buy, and sell digital art and collectibles. This platform’s layout features a scrollable stack of columns with categories, hot collections, top sellers, and live auctions.
It is a community-owned platform with a governance token known as RARI awarded to its most active users, who can use the tokens to vote for platform upgrades and participate in other-related decisions.
The company has also partnered with the likes of Adobe to help secure the work of NFT artists and creators, and Taco Bell, which has listed its art on the platform. Rarible takes a 5% cut on every sale, which is split equally between the buyer and the seller, meaning 2.5% each.
Backed by billionaire investor Mark Cuban and Marc Benioff-owned Time Ventures, Mintable is a two-sided marketplace that resembles eBay. Here, you can buy and sell NFTs ranging from digital art, photography, videos, games, templates, and domain names.
It is built on the Ethereum and Zilliqa blockchains and is integrated with MetaMask. Creators also have the option to mint free “gasless” NFTs on Mintable.
A social network for NFTs, users can buy and sell original pieces on this website. Built on Ethereum, this marketplace also requires you to fund your account with ETH to make your purchase.
The platform works closely with artists and requires them to be approved before they can be allowed to be listed. To get started on SuperRare, you would have to create a username and password that is linked to your wallet address. While buyers only pay a 3% transaction fee on all of their NFT purchases, the platform charges a hefty 15% commission on all primary sales on its platform.
This gasless NFT marketplace is owned by crypto exchange Gemini and it has worked with the likes of The Weeknd, Eminem, Grimes, Steve Aoki, and 3LAU. Nifty Gateway offers a curated selection of NFT drops on a tri-weekly basis and has a secondary marketplace for collectors reselling artwork.
Here, besides ETH, you can connect your credit card directly too. Linking your Gemini exchange account, which can be topped up using bank transfer and wire transfer, with your Nifty Gateway account, enables you to use the exchange account balance for purchases and withdrawals. When it comes to commission fees, Nifty Gateway charges a "5% fee + 30 cents" on secondary sales of every NFT on its platform.
Designed by the Vietnamese startup Sky Mavis, NFT-powered Axie Infinity hosts the 2nd largest NFT marketplace that has done over $3.85 billion in sales. However, it exclusively trades in Axies, which are digital pets.
These Axies can be bought and traded on Axie Marketplace or created via the game. They play a crucial role in-game for battling and earning tokens. Besides an Ether wallet, you would also need to set up a Ronin wallet and have to buy a minimum of three Axies to play the game.
This gallery of digital art also features short films and motion animation pieces. Earlier in 2021, crypto artist Beeple sold a collection of NFTs for $1 each on the platform. MakerPlace also hosted several NFT drops by musicians such as T-Pain and Shakira.
To sign up as a buyer, MakerPlace allows you to use your Google or Facebook account logins to save time. As part of the registration process, you have to follow five artists before you can start purchasing NFTs, and if you are a creator, you have to fill out an online form and request an invitation to join the platform.
Foundation is known for hosting the sales of viral internet meme Nyan Cat, Edward Snowden's first NFT, Pak’s Finite record, and the creations of Aphex Twin and Pussy Riot’s Nadya Tolokonnikova.
This platform works like a regular auction site. Before you can purchase artwork from the site or create a profile as an artist, you have to set up a MetaMask wallet.
To sell NFTs on this platform, you should apply for it and show your portfolio, which will be reviewed by Foundation. Once you are invited, you can start selling your NFTs and pay a 15% commission fee on every sale.
Best known for the CryptoPunks NFT project, Larva Labs originally gave these profile picture NFTs for free back in 2017. In 2021, CryptoPunks were some of the most expensive NFT sales, with CryptoPunk 7523 fetching $11.75 million at a Sotheby’s auction. The lowest a Punk is available in the market right now is 60.69 ETH (about $200k).
Larva Labs has also launched other projects such as Autoglyphs as well as Meebits, where the latter can be bid on directly from the company's built-in marketplace.
NBA Top Shot
If you are a sports enthusiast, this platform is the best place for you. Built by Dapper Labs on its Flow blockchain, NBA Top Shot lets fans trade digital moments from the National Basketball Association and Women's National Basketball Association.
On this closed marketplace, art and collectible moments such as highlights and clips can be purchased. While listing items in the marketplace is free for sellers, NBA Top Shot charges a 5% commission on every sale. BTC, ETH, BCH, USDC, and DAI are the supported cryptos for payments.
Solanart is the first NFT marketplace on Solana, which offers a curated set of NFT collections. To get started on this platform, you would need a Solana wallet such as Solflare or Phantom and fund it with SOL.
Given that NFT mania is currently focused on Ethereum and is slowly gaining traction on other blockchains, there is a relatively limited selection of NFTs for purchase on Solanart. This marketplace has seen about 4.5 million SOL in volume.
This platform enables you to collect and trade limited edition soccer NFT cards. It has partnered with more than 180 football organizations and continues to add more constantly. New cards are released daily, which Sorare sells in auctions. You can also buy a card from another player for a flat fee.
Besides trading digital collectibles with other fans via its open marketplace, you can also take part in its Global Fantasy Football Game. Sorare pays out weekly rewards in ETH for playing the game.
Sorare recently raised $680 million from SoftBank’s Vision Fund 2 at a $4.3 billion valuation.
This decentralized auction house allows creators to mint NFTs and list them for sale either through the ‘Buy it Now’ option or an auction that will last 24 hours. You can also set a royalty, a fixed percentage of the resale value, but once set, you can’t change it later.
Built on the Ethereum blockchain, Zora does not take any cut on sales. You do not have to pay for minting or listing your NFTs either. All you have to pay is the gas fee which varies based on the network usage.
Once you know which marketplace you want to use, you can register an account on any of these platforms, as different marketplaces have different registration processes.
When you get on the website, you will be prompted to connect your wallet, or you can simply go for the ‘Connect Wallet’ option on the platform. Once you have done that, start browsing. The price of NFTs will range from essentially free to hundreds of thousands of dollars and in some cases, even more.
Even if an NFT is free, you will still have to pay a fee to make it happen. So be cautious and avoid doing any transactions during hype or high volatility times as gas prices rise and fall depending on how busy the network is and could cost you a lot.
While you can snag some items right there through a “buy now” button on the platform, other items are sold via auction for which you will need to bid for the NFT that you want.
Once you have chosen the NFT you like, pay for the asset. Make sure you have extra crypto assets in your wallet so that you can cover the fees as well. Once the transaction is processed, you can access the NFT via your wallet.