Non-fungible tokens (NFTs) are all the rage this year, with millions of dollars being spent on them.
Everyone from brands, celebrities, artists, and even countries are jumping on the NFT bandwagon.
Non-fungible tokens are digital assets with unique identifying information stored in smart contracts. Currently, they are majorly used to tokenize digital art, collectibles, videos among other items. What makes this tokenized artwork so valuable is that it comes with a unique digital certificate of ownership. Each NFT is unique and is valued as such.
As for what gives NFT value, much like a physical art, it is the consumer interest that drives the value of an NFT. On top of that, the rarity, popularity, FOMO (fear of missing out), scarcity, and age in terms of just how old and OG it is, add to its value.
And while you may be tempted to right-click and save an NFT, it simply doesn’t make you its owner, just like the image of Mona Lisa that millions of people have saved in their phone gallery. The proof of authenticity is the real deal of NFTs, which is stored on the blockchain.
Because of this proof of ownership, NFTs could see its usage beyond just art and gaming. It may find use in the metaverse, copyright, and intellectual property rights, real estate, ticketing, streaming, software licensing, and creating decentralized alternatives to centralized organizations.
In 2021, NFTs exploded in popularity, and one of the most expensive NFT was a digital collage of images by Beeple that was sold for $69 million at a Christie's auction in March.
Interest in NFTs has only been going upwards this year, constantly making new highs, according to Google Trends.
The NFT coins market has grown over $50 billion, as per CoinGecko. More than $14 billion, meanwhile, has been recorded in NFT sales, while the number of unique wallets which have bought or sold an NFT so far has surpassed 1.5 million.
But NFTs aren’t something new as they have been around for years. This year, NFTs simply gained mainstream attention, which led the 2017 project CryptoPunk, claimed at the time for free, to dominate the listing of the most expensive NFTs.
The most expensive punk was Cryptopunk #7523, which was sold at a Sotheby’s auction for $11.75 million.
Besides profile pic NFTs, virtual land is getting hefty bidding. Metaverse Group, a subsidiary of Tokens.com, purchased a patch of digital land set in the fashion district of virtual real estate platform Decentraland for $2.43 million. Meanwhile, a mega-yacht in the Sandbox virtual gaming world has been sold for a whopping $650,000.
In the 2021 crypto bull market, NFTs became one of the most lucrative options. Twitter co-founder and former CEO Jack Dorsey also sold his first tweet as an NFT for $2.9 million.
With so much flowing in NFTs, how can you make money with non-fungible tokens?
The most common way to make money on NFTs is to buy and sell them. Much like an investment, while getting your hands on an NFT early one and selling it later can bring you profits, you can just as well end up with losses.
To buy NFTs, you would need a cryptocurrency wallet like MetaMask, a popular Ethereum wallet with over 10 million monthly active users. Once you have chosen a wallet, buy some crypto such as Ether, which you can from any number of crypto exchanges like Binance, Coinbase, FTX, Kraken, and many others.
Now transfer your ETH, SOL, or other cryptos to the wallet and try different marketplaces to start browsing for digital art or collectibles.
Crypto exchanges like Binance and FTX have launched their own NFT marketplaces, while Coinbase has over 1.4 million people sign up for its marketplace waitlist, and Kraken has also announced its plan. Everyone wants a piece of this burgeoning sector.
Besides exchanges, there are several places where you can buy NFTs, such as OpenSea, a popular NFT marketplace that posted a record $3.42 billion in volume. Rarible is another one that rewards its most active users with RARI tokens which can be used to vote for platform upgrades and participate in other-related decisions.
Nifty Gateway is owned by crypto exchange Gemini, which has a secondary marketplace for collectors reselling artwork. Other options include Mintable, SuperRare, Axie Marketplace, MakerPlace, Foundation, Solanart, and Sorare.
You can register an account on any of these platforms, then connect your wallet. Once you have done that, start browsing, and then buy whichever digital item or art catches your eye. Not all NFTs can be bought right then and there, as many marketplaces use an auction process for which you would have to bid.
If you win the bid, you will have to pay for the asset. Also, make sure you have the funds to cover the transaction fees, as well. Once your transaction is processed, you can access the NFT via your wallet. Now that you own the NFT, you can use any of these marketplaces to sell your NFTs as well.
If you are an artist and own the copyright of an original piece of media — a picture, a GIF, a song, a domain name, a video, or any other form of media, you can put up your work for sale on the above-mentioned NFT marketplaces.
On OpenSea, you can simply head to the “Create” tab, connect your wallet and upload your NFT. You would be required to fill out the description and after that, just wait for the bids to come in.
Minable even allows creators to mint free “gasless” NFTs. This NFT marketplace is backed by billionaire investor Mark Cuban and Marc Benioff-owned Time Ventures and resembles eBay.
Much like OpenSea, you can buy and sell all kinds of media on Rarible. Sellers can also create more than one NFT for a single image and sell it more than once. Here you have the option to log in using various wallets, including MetaMask, MyEtherWallet, Coinbase Wallet, or any mobile wallet using WalletConnect.
While the ERC-721 standard led to the boom in the NFT market, the revision of this standard has taken it one step further.
Zach Burks and James Morgan have authored an “Ethereum Improvement Proposal” or EIP-2981 to create an ERC-721 Royalty Standard that allows NFTs created, purchased, or sold on one marketplace to pay out royalties, no matter the next marketplace it is sold on. This standard would make it possible for the artist to set a royalty amount that can be paid to the creator on any marketplace that implements these tokens.
For now, Zora allows its creators a share of the NFT if its purchaser sells it on another marketplace. Every artist who mints an NFT on Zora can set a “creator share,” which is the percentage they will receive for all future sales. These shares are also automatically paid out with smart contracts.
The Foundation marketplace has an agreement with OpenSea or Rarible and gives a 10% royalty each time a creator’s piece is resold. The royalty is sent directly to the wallet that minted the NFT.
Another way to earn money from NFTs is by renting them out, especially for popular NFTs. There has been a rising trend in the NFT sector, which is to offer community benefits aligned with the ownership of their tokens.
More recently crypto exchange Kraken announced that it is developing a marketplace for NFTs where users can get loans against their NFTs as collateral. The exchange will provide custody and is working on determining the liquidation value of NFTs deposited for their usage as loans.
Crypto lender Nexo and decentralized finance (DeFi) project NFTfi already offers NFT-backed loans. ReNFT is another project that facilitates the lending of NFTs like Stoner Cats and allows lenders to set maximum borrowing periods and daily rates. The platform raised $1.5 million in a seed round led by Animoca Brands.
“ReNFT provides an alternative to speculative NFT trading by allowing owners of valuable digital assets to generate income over time,” said Regan Bozman, partner of Lattice Capital which backs the platform.
One exciting opportunity to make money from NFTs is through play-to-earn games. These blockchain-based games are the latest trend where you can purchase in-game items as NFTs and trade them.
CryptoKitties is an original collectible, and Axie Infinity is the most popular today that has reached a market capitalization of $73 billion. Gods Unchained, Sorare, Evolution, The Sandbox, Decentraland, and Zed Run are other examples. The NFT-based games could very well be the future of NFT.
Ubisoft, the company behind Assassin’s Creed and Far Cry, recently revealed its NFT-based platform Ubisoft Quartz. Currently, in beta, players can earn NFT cosmetic items on Ubisoft Quartz to use in Ghost Recon Breakpoint. “Our main objective with Ubisoft Quartz is to showcase the true value of decentralization to our players,” said Didier Genevois, Ubisoft’s Blockchain Technical Director.
NFT and DeFi’s combination means yet another opportunity to make money on your tokens by staking your non-fungible tokens. Staking is the process of depositing your digital assets into a protocol for a limited period to generate a yield on them.
Some platforms support a wide range of NFTs, however, others require you first buy their native NFTs before you can earn staking token rewards. These rewards are usually denominated in the native token of the platform. In some cases, these token rewards are governance tokens that grant its holders voting rights over the developments of the platform and ecosystem.
Splinterlands, NFTX, Kira Network, Rplanet, and Only1 are some of the platforms that have gamified the NFT and DeFi experience. DeFi lending protocol Aave’s Aavegotchi is another one that offers direct staking of Aavegotchi crypto collectibles to earn income via rarity farming.
NFTs users can also farm for yields, which means leveraging multiple DeFi protocols to generate the highest possible yield with your digital assets. It is achieved by becoming a liquidity provider by locking up your digital assets as a stake in a DeFi lending or trading pool. NFT farming can be found in blockchain games, where users can stake their in-game items to receive tokens.
The integration of DeFi and NFT has further made it possible to provide liquidity to decentralized finance protocols, a sector with over $250 billion of total value locked in it, and receive NFTs in return.
Charged Particles allows its users to generate programmable yield by combining their NFTs with interest-bearing tokens, as well as combining NFTs to make a new NFT.
NFTX is another one that allows for the creation of ERC-20 tokens backed by NFTs. These tokens make up different subsets of NFTs aggregated together to form liquidity pools. With this fungibility, the platform offers real-time fees and the ability to go short or leverage long NFTs.
As we saw this year, NFTs are no fad, and everyone wants in. This makes investing in an NFT startup a lucrative opportunity. Up until this year, NFT-based projects were working away from the limelight, but as everyone flocked to NFTs, so did the funds.
Dapper Labs, which is behind CryptoKitties and NBA TopShot, and CryptoPunk creator Larva Labs were founded in 2017. Boson Protocol, OpenSea, The Sandbox are among the popular ones, while Nifty’s, Spores, Only1, OneOf, PolkaWar, Legends of Crypto, Polychain Monsters, and many others have only started this year.
While currently limited to collectibles, creating, gaming, and trading, NFTs have a wide scope and are expected to be a big part of the Metaverse as well. The full potential of NFTs is yet to be explored as it has only entered its initial phase.
With NFTs finally gaining traction, individuals, companies, and money pouring into this ecosystem, it makes sense to be a part of this future whose true eruption in popularity is yet to be seen.