NFTs exploded in popularity in 2021 as digital artwork got sold for millions of dollars and attracted the masses.
As celebrities and big brands like Adidas, Nike, Coca-Cola, Gucci, and Eminem, to name a few, jumped on the NFT trend, social media, especially Twitter, got overrun by NFT avatars like CryptoPunks and Bored Ape Yacht Club. For now, it is a promising development for artists and creators.
Additionally, NFTs arrived at traditional art auction houses like Sotheby’s and Christie's that further took it to a mainstream audience. The rise of play-to-earn games, such as Axie Infinity, Splinterlands, and The Sandbox, were the main drivers behind this record year for NFTs.
The narrative around the metaverse, driven by Facebook’s rebranding to Meta, was the cherry on the cake that boosted the value of NFT even more.
Google search interest clearly shows the tremendous interest for NFTs, which has been only increasing since Jan. 2021. At one point, towards the end of last year, Google Trends showed that search interest for “NFT” was comparable to “bitcoin” and has been surpassing that of “Ethereum” since November 2021.
The NFT space recorded more than $23 billion in trades in 2021, according to crypto data provider Dapp Radar. NFTs’ best year yet resulted in the floor market cap for the Top 100 NFT collections being at $16.7 billion.
While in the first six months of 2021, the NFT smashed the previous figures by generating $2.5 billion in trade volume. It was in Q3 that everything changed as this number exploded to $10.7 billion.
After the decline in October and November, NFT trading volumes have started seeing a resurgence in December, moving into 2022.
Overall, more than 2.14 million unique wallets have bought or sold an NFT, according to Nonfungible.com.
Non-fungible tokens (NFTs) are blockchain-based tokens that prove ownership of digital items, such as images, videos, and audio, as well as physical assets. Each NFT is unique and has its distinct information stored on the blockchain.
Ethereum is currently the most popular blockchain for NFTs. While other blockchains like Solana, BSC, Flow, Wax, and Ronin saw increased traction time and again, no one has been able to replicate Ethereum’s success and the second largest network continues to lead the NFT space.
On Ethereum blockchain, the ERC-20 standard is for fungible tokens such as Chainlink (LINK), Maker (MKR), and Basic Attention Token (BAT). Now, the original standard to create NFT on Ethereum is ERC721. The ERC-721 standard ensures a token is unique and provides a safe transfer function.
ERC-1155 is another standard for Ethereum NFTs, which is a multi-token standard that can be used to create both fungible and non-fungible assets on Ethereum.
ERC-998, a composable NFT standard, is an extension of ERC-721, which allows non-fungible tokens to own other ERC721 tokens and ERC20 tokens.
By late September 2021, the daily number of ERC-721 transfers had increased by over 10x from the beginning of the year. And as of December, at least $26.9 billion worth of crypto was sent to ERC-721 and ERC-1155 contracts.
Now let’s get back to the main task at hand, minting an Ethereum non-fungible token. So, here’s your guide on how to create an NFT, a process called minting.
When it comes to Ethereum, there are several options where you can create your NFTs, such as OpenSea and Rarible. Besides these marketplaces, cryptocurrency exchanges like Binance, Coinbase, and Kraken have also launched their own NFT marketplaces.
It would be best for you to make an account on a crypto exchange as you can easily buy and sell crypto assets here. Also, you would need an account on these platforms to cash out your earnings once your NFT is sold. You can either convert your earnings into another crypto or use it to do several other things such as stake to earn yield and put it into DeFi.
Another important reason to get a crypto exchange account is to buy ETH, the native currency of the Ethereum network. Ether is the second-largest cryptocurrency and is available on most if not all of the trading venues.
You will require ETH because whenever you mint, buy and sell NFTs on the Ethereum network, you would be paying the fees in ETH.
Every transaction on blockchain costs fees that are paid to the miners. On the Ethereum blockchain, this fee is called ‘gas,’ which varies based on the network usage and tends to rise to very high levels during peak and high volatility times.
So, make sure you are not using the blockchain during such high usage times and also that you have enough ETH to cover the gas cost.
Before you start minting an NFT, get yourself a crypto wallet too, which is an important factor when interacting with any kind of cryptocurrency-related activities. Crypto Wallet is where you store all your crypto assets, including NFTs.
To use NFT marketplaces, you would require crypto wallets, and there are tons of them out there that support Ethereum.
MetaMask is the most popular Ethereum wallet, which is widely supported by Ethereum-based applications and has over 10 million active users. It is available as a browser plugin and as an iOS/Android app, which when you download and install, would assign you a “Secret Recovery Phrase,” a 12-word phrase that needs to be written down on paper and stored in a safe place. Because if anyone gets your seed phase, they can access your wallet and the funds in it.
You can also buy ETH on these wallets, but the fees charged here are higher than on exchanges. Now that you have a wallet, you can send your Ether sitting on your exchange to your crypto wallet. When withdrawing your ETH, you will have to provide the amount in ETH that you want to send and your Ethereum public address.
Now that you have everything you need to start your minting process, we will be moving to the platform where you will be selling your NFT.
OpenSea is currently the most popular NFT marketplace, easily accounting for more than 95% of all NFT trading volume on Ethereum. In August 2021, OpenSea saw a record $3.4 billion trading volume, up from a mere $938k a year before that, according to Dune Analytics.
While the volume declined for three consecutive months after that to post $2.37 billion in November, it has jumped back to nearly $3.25 billion in December 2021. Monthly active traders on OpenSea at 362,679, meanwhile, were the highest in December.
OpenSea volume and active users both are showing recovery signs and trending upwards moving into 2022.
To get started here, it would cost your Ether to sign up for OpenSea. This one-time fee paid in ETH is for “initialization”. OpenSea also allows you to purchase crypto, required to pay for fees, directly from its platform using a payment method such as a credit card.
On the OpenSea website, go to your ‘Profile,’ which will prompt you to connect your crypto wallet. Once you have chosen your wallet, says MetaMask, you will also be required to accept the terms and conditions on your wallet to ensure a successful connection.
Now that your profile has been created, fill out the required information, including a username and an email address to verify your account. You can also provide other details, such as your social media profiles, but they are not a necessity.
Now, you are ready to start creating your very first NFT. For this, just go to the homepage of OpenSea and click the “Create” button that is present in the top right corner. In case you want to mint multiple NFTs, you have to select “My Collections” under your profile picture.
Once you have uploaded the digital file, give a name to your NFT and fill out a description of your work, but the last part isn’t necessary. From here, you can set up the royalty, a percentage of the secondary sales that you are paid every time your NFT gets sold again. Now, as you click “create,” you have minted your NFT on OpenSea. \
To list your freshly minted NFT for sale, click the “sell” button available on the top right corner of the website. You can either sell your NFT for a fixed price or put it up for an auction. If you go the fixed price route, you won't be paying for the gas fees, as the buyer will be bearing the burden of this cost.
Now, if you choose the auction option, where interested people will submit offers to buy your NFT, the seller pays for the gas. In "Timed auction," you can set a minimum price as well as the duration of the auction.
Once you have decided which way you want to go, you can click “complete listing.” But it’s not listed for sale yet as OpenSea would require you to initialize your wallet.
If it’s your first time, then you have to pay for it in ETH that you transferred to your wallet. If there is enough ETH in your wallet to cover the gas fees, a “confirm” button would appear, which won’t if there is a lack of funds. And in a matter of a few minutes, you will be initialized.
Once you have approved the item for sale and confirmed the price you want to sell it for, which would require you to sign off through wallet, your NFT is officially ready to receive bidding and be sold.
Unlike OpenSea to mint an NFT on Rarible, you are not required to pay an “initialization” fee. Both OpenSea and Rarible charge a 2.5% fee on both the buyer and the seller. This fee is relatively cheaper than other NFT marketplaces like SuperRare, which charges a 3% transaction fee on every purchase paid by the buyer. While Nifty Gateway takes 5% plus $0.30 on every secondary sale, Foundation charges a hefty 15% fee per sale, but it is paid by the seller.
You can also import NFTs on OpenSea that are minted on other marketplaces, in most cases. These two platforms OpenSea and Rarible, also allow you to sell NFTs using other blockchains.
Rarible supports Flow blockchain, created by Dapper Labs, which was behind NBA Top Shot and CryptoKitties. Using Flow on Rarible, however, limits you to single edition NFTs, and you cannot choose the auction option to sell them.
OpenSea supports Ethereum scaling solution Polygon, which offers low fees and fast transaction processing. On Polygon, much like Flow, you won't be able to use ETH, but it allows for direct transfers between Polygon and Ethereum through a process called ‘bridging,’ which incurs gas fees. Katlyn is another blockchain available on OpenSea.
Ethereum is one of the most important and currently the most used blockchains for NFTs. This year, it will undergo a structural change that will make it more scalable and more secure, which should further help NFT adoption.
This significant change on the horizon for Ethereum is “The Merge,” which will swap out Ethereum’s current proof of work (PoW) consensus algorithm for a proof of stake (PoS) consensus mechanism.
2021 was an exciting time for NFTs as they experienced vast growth. This past year, the exuberance was primarily seen around art and avatar NFTs that had the mainstream learning the power of this technology.
But backed by a strong year, 2022 is expected to be an even stronger one with a $23 billion trading volume looking like only the tip of the iceberg given the continued rise in the demand for NFTs.
The potential for NFT is simply massive, which goes beyond just art and collectibles and “monetary impact within the industry.” Not to mention, the narrative surrounding the metaverse and play-to-earn has only started.