The world went completely nuts over NFTs back in 2021. The hysteria then kind of went into hiatus with episodic spark of a flame. Yet NFTs still can be a rather good investment, of course, if you know what you're doing.
Non-Fungible Tokens (NFTs) might not seem the golden opportunity as of now. But they still attract investors, artists, and entrepreneurs of all sorts.
Navigating this space might seem complicated and frightening. Even if you have some experience as a cryptocurrency investor, you will soon feel that NFT world is so much different from what you know.
But with the right approach, NFTs might be a profitable venture. Here's what you should know for starters.
What is an NFT?
A Non-Fungible Token (NFT) is a unique digital asset that represents ownership or proof of authenticity of a specific item or piece of content. It is stored on a blockchain. Just like any other crypto asset.
But unlike cryptocurrencies such as Bitcoin or Ethereum, which are fungible and can be exchanged on a one-to-one basis, NFTs are distinct.
Think of a Bitcoin as a dollar bill. Any dollar bill has an equal value to another dollar bill of the same nomination (i.e. 100 dollars always equals another 100 dollars).
Think of an NFT as a unique golden necklace. While gold itself might have a specific price at the moment, it is the style of the necklace, the mastery of a craftsman, that define how much it actually costs. And you can't compare one necklace to another just because they have roughly the same weight.
Each NFT has unique properties and metadata that distinguish it from other tokens. There will be no two interchangeable NFTs. Ever.
Thus, NFTs are a perfect too for representing digital art, collectibles, music, virtual real estate, and more.
NFTs are stored in a decentralized manner. You can always show a definitive proof that you - and only you - are the real owner of this specific NFT.
Since their inception, NFTs have massively changed the landscape of the digital art.
Specifically, NFTs changed the way digital content is bought, sold, and owned. Creators can monetize their work directly. No traditional intermediaries required.
But there is another unique feature that makes NFTs an undisputable part of the crypto future. Thanks to smart contracts NFT creators can retain royalties on secondary sales.
It means that having created an NFT, you can define the conditions of its future sales. No matter how many times your NFT will change hands after you sell it for the first time, you will get your royalty each time.
NFT technology also proved to be an impeccable way to prove ownership to something. And many analysts think that NFTs are just at the beginning of their way into the crypto future.
Pros and Cons of NFTs as an Investment
Pros of NFTs
Investing in NFTs offers several compelling advantages.
Firstly, owning an NFT means you - and only you own it now. You have unique ownership, you own one-of-a-kind digital asset. This uniqueness can drive demand and scarcity, particularly for popular or culturally significant items.
Creating an NFT by yourself you can embed royalties into the digital contracts. You will receive a percentage of future sales. That is a phenomenal benefit, compared to traditional market of the art goods.
And, of course, having NFTs greatly diversifies your crypto portfolio.
Cons of NFTs
Investing in NFTs also comes with notable risks and drawbacks.
The market for NFTs is highly speculative and volatile. Hype usually drive the prices rather than intrinsic value.
Many beginner investors have felt this painfully in 2022 when the initial NFT boom suddenly began to fold.
The other thing one shouldn't forget before investing in NFTs is the total absence of any kind of regulations. Consumer protection here is non-existent. Everything you ever to with NFTs is up to your personal risk.
Another substantial risk is liquidity. The market is pretty saturated, even beloved celebrities sometimes find it difficult to find buyers.
Creating and Selling NFTs
One of the most direct ways to make money with NFTs is by creating and selling them. This process involves several steps:
a. Choose a Platform
Selecting the right platform is crucial. Some popular platforms include:
OpenSea: The largest NFT marketplace.
Rarible: User-friendly with a strong community.
Mintable: Ideal for beginners with an easy-to-use interface.
Each platform has its pros and cons. Research to find the best fit for your needs.
b. Create Digital Art
Your NFT can be any digital asset—art, music, videos, or even virtual items. Creativity is key. Use tools like Adobe Photoshop or Procreate for visual art, or GarageBand for music creation.
c. Mint Your NFT
Minting involves converting your digital art into an NFT on the blockchain. This process is simple on platforms like OpenSea:
Sign up for an account.
Connect your digital wallet (e.g., MetaMask).
Upload your digital file.
Fill in details (title, description, etc.).
Set your price (fixed price, auction, or declining price).
d. List for Sale
Once minted, list your NFT for sale. Promote it on social media and NFT communities to attract buyers.
e. Earn Royalties
Many platforms allow creators to earn royalties on secondary sales. This means you can continue to earn whenever your NFT is resold.
Investing in NFTs
Investing in NFTs can be lucrative, but it requires careful research and strategy. Here’s how to get started:
a. Research
Understand the market. Follow NFT news, join communities, and study trends. Key resources include:
Twitter: Follow NFT influencers.
Discord: Join NFT project servers.
News Sites: Read sites like CoinDesk and Decrypt.
b. Choose Projects Wisely
Not all NFTs are created equal. Look for projects with:
Strong Community: Active and engaged communities.
Unique Value Proposition: Unique or innovative offerings.
Credible Team: Experienced and reputable creators.
c. Buy Low, Sell High
Timing is crucial. Buy NFTs at a low price during minting or early stages. Sell when the value appreciates. Use platforms like OpenSea to track price trends.
d. Hold for Value Appreciation
Some NFTs appreciate over time. Holding high-quality NFTs can yield significant returns. This strategy requires patience and a long-term view.
Flipping NFTs
Flipping involves buying NFTs at a low price and selling them for a profit. It’s akin to day trading in stocks. Here’s a step-by-step guide:
a. Identify Underpriced NFTs
Look for NFTs undervalued by the market. Tools like Rarity.tools and Nansen can help identify these opportunities.
b. Buy at the Right Time
Timing is everything. Buy during drops or when the market is slow. Avoid buying during hype peaks.
c. List for Sale
After purchasing, list your NFT at a higher price. Use auction listings to attract competitive bids.
d. Monitor Market Trends
Stay updated with market trends. Be ready to adjust your prices or hold your NFTs if the market shifts.
Participating in NFT Airdrops
Airdrops are free distributions of NFTs to community members. They’re often used to promote new projects. Here’s how to capitalize on them:
a. Join NFT Communities
Many airdrops are announced in NFT communities. Join Discord servers, follow Twitter accounts, and subscribe to newsletters.
b. Fulfill Requirements
Airdrops often have requirements, such as holding a specific NFT or participating in community activities. Ensure you meet these criteria.
c. Claim Your Airdrop
When an airdrop is announced, follow the instructions to claim your NFT. This usually involves connecting your wallet to the project’s website.
d. Hold or Sell
Decide whether to hold the airdropped NFT for potential value appreciation or sell it immediately for quick profits.
5. Staking and Earning NFTs
Staking involves locking up your NFTs or cryptocurrencies in a platform to earn rewards, including NFTs. Here’s how it works:
a. Choose a Staking Platform
Select a platform that offers NFT staking. Popular options include:
Rarible: Offers staking for its native token RARI.
BakerySwap: Allows NFT staking for various rewards.
Zora: Innovative platform with staking options.
b. Stake Your Assets
Lock your NFTs or cryptocurrencies into the staking pool. Ensure you understand the terms and potential risks.
c. Earn Rewards
Rewards vary by platform. You may earn additional NFTs, tokens, or both. Monitor your staking dashboard to track earnings.
d. Reinvest or Cash Out
Decide whether to reinvest your rewards or cash them out. Reinvesting can compound your earnings, while cashing out provides immediate profit.
Key Takeaways
NFTs offer numerous ways to make money. Even if you are a beginner who has just learnt what an NFT is.
There plenty of ways you can profit from NFTs for creators and investors.
Find undervalued NFTs and sell them to someone else. Stake NFTs for rewards. Participate in airdrops. Create NFTs of your own, be it a drawing or a song.
Just mind the risks.
The NFT market is dynamic and evolving. You should always have a clear plan and reliable information.
