Everything you need to know about NFTs and minting.
Non-fungible tokens (NFTs) were so popular in 2021 that Collins Dictionary made it the word of the year. Several NFTs sold for millions of dollars, with one piece -- Pak's "The Merge" -- selling for over $90 million. However, their moment in the spotlight was relatively brief. Interest in pretty much everything crypto related fell away last year, including NFTs.
What is an NFT?
The easiest way to understand a non-fungible token is to think of it as a digital certificate of ownership. These certificates get stored on the blockchain, which -- in theory -- means they form a secure, permanent record that can't be tampered with. Anything can be made into an NFT, including music, art, movies, and even my coffee cup.
Without getting too technical on you, non-fungible refers to something that is unique and isn't interchangeable. So a dollar bill is fungible, because the bill itself isn't special; it can be replaced with any other dollar bill and you'd still be able to spend it. On the other hand, if that dollar bill had been signed by George Clooney, it would become unique and non-fungible and worth more than a dollar.
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What it means to 'mint' an NFT
Minting an NFT is the process of publishing your NFT on the blockchain. There are a few different ways you can do this, depending on how much you're willing to pay and what market you're trying to reach. In addition to the work you want to turn into an NFT, you'll need the following two things:
- An NFT wallet
- An account with an NFT marketplace
There are a number of different NFT marketplaces. Have a look to see which one suits you -- consider the reputation of the platform, how big its community is, what fees it charges, and how user-friendly it is. Some marketplaces have a process to authenticate content creators, which basically establishes you as a legitimate seller. Be prepared to jump through some hoops if you want to get approved.
It's also important to consider which blockchain you want to mint on. You pay a gas fee for every transaction that's made on the blockchain. Gas fees on Ethereum (ETH) are more expensive than on other chains, but Ethereum is also the most popular blockchain for NFT sales. Some NFT platforms will allow you to mint on other chains, such as Polygon (MATIC), Solana (SOL), and Avalanche (AVAX).
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A couple of platforms will let you skip the gas fees altogether by only recording the NFT on the chain when someone agrees to buy it. It's sometimes known as gas-free minting or lazy minting. In this scenario, the buyer will pay the minting fees. However, this can make it harder to sell your masterpiece.
Pros and cons of NFTs
Like many things related to the blockchain, it is early days and we don't know how this technology will unfold. There's certainly a value in being able to store a digital certificate of ownership, and crypto advocates argue that one day we might use NFTs to store real estate records, amongst other things. NFTs have the potential to change the way we own things and the way we sell them.
One of the oft-touted benefits of NFTs is that they empower creators. For example, artists can take credit for work they created, and, in some cases, receive royalties when the work gets sold on. Plus, musicians and artists don't need to rely on galleries or record labels to sell and promote their work, as they can connect directly with their audience
Once an NFT has been minted, there's an easy way to track the authenticity of each piece, including who has owned it and who made it. That's all very well. Unfortunately, people have been minting NFTs of work they didn't create, without the artist's permission, and selling them on NFT marketplaces. NFT fraudsters and scammers have made off with hundreds of millions of dollars in different ways.
Bottom line
The NFT market of 2021 had many hallmarks of the dot.com bubble of the early 2000s. Relatively ordinary pieces of art became more valuable just because they were NFTs. People who'd never bought art before speculated on these digital assets in the hope of getting rich. That doesn't mean NFTs are inherently worthless. Indeed, it could be part of the next generation of the internet and transform the way we own things.
But if you're going to enter the world of NFTs, don't buy or mint NFTs for the sake of it. Use this technology as a tool and understand the value of the item itself. There's an environmental and physical cost to minting NFTs, and there are no guarantees you'll make back your minting costs. NFTs are vehicles, so they are not inherently valuable or worthless. It all depends on what's inside.
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