Getting Started With NFTs

1. What Is An NFT?

Non-Fungible Token is what NFT means.

Non-Fungible, it means that the token is unique and cannot be exchanged for another token. Because these tokens are unique, and it can be used to represent unique digital assets like a digital artwork for example.

A unique serial number  would be a simple analogy. When you buy an iPhone, for example, every phone comes with a unique serial number that is used to identify the authenticity of the phone, and is registered to the phone’s holder. Comparably, when you buy an NFT artwork, the artwork comes with a non-fungible token that is used to identify that artwork, and is tied to the artwork’s holder.

However, an NFT is much more than a record of authenticity and ownership.

Can you imagine if your phone’s serial number was actually a computer program that could receive payments, update its ownership information, and distribute royalties, among other functions. This is what your NFT can do.

This way, NFTs make the process of trading digital assets a lot easier. They protect the financial interests of creators and add programmable functionality to digital assets. And because NFTs are stored on the blockchain, they’re also highly secure and traceable.

This is just an overview of what NFTs are and how they work, but there’s much more to it. To learn more, you can read our NFT Basics series.

2. What Can Be Made Into An NFT?

Precisely anything that can be stored as a digital file can be made into an NFT – art, documents, videos,music, you name it. Although, when you’re minting on an NFT marketplace, there will be certain file format requirements for your NFT.

On Trophee, the main file attached to your NFT (preview file) can be any image file, MP4 or MOV. You will  notice that all of these file formats are visual formats, and most marketplaces will have a similar requirement because NFTs need to be visually displayed to make attractive listings. However, your NFT can also include bonus downloadable files, which can be any file format.

So, if you’re minting a song, you should use an mp4 with video or cover art so that it looks good on marketplaces. And you could include the high-fidelity audio files as downloadable files instead. By doing so, you’re making sure your NFT stands out on the market while also providing your buyers with the best quality of work.

Being able to put in downloadable files with your NFT also means that you could include more than one type of asset in a single NFT. Your main file could be an image, while your downloadable file could be text, audio, or something else. For example, some creators mint their digital artwork, and include an accompanying piece of poetry in the downloadable file. Others use it to include secret messages or behind-the-scenes videos.

There are few limits to what you can include in an NFT, so don’t be afraid to experiment and get creative! Because of smart contract capabilities, there are many interactive applications for NFTs too, such as concert tickets, vaccine passports, and membership cards.

3. NFTs?What are its Benefits? 

As we all know hype alone wouldn’t be able to build a $40 billion industry. NFTs offer lots of real benefits for creators and collectors alike, enriching the creator economy and offering buyers better avenues for engagement and participation. Here are the benefits of NFTs:

Benefits of NFTs for Creators

1. No barriers or gatekeepers in accessing a global market. As long as you have internet access, you can sell your NFTs to anyone in the world without having to rely on galleries. It doesn’t matter where in the world you are. 
2. Through NFTs, you can earn more money. It is mainly because NFTs gives verifiable authenticity and scarcity. NFT digital art can sell for more money than regular digital art. With built-in resale royalties, creators can also be able to make money throughout the lifetime of their work. Royalties can even be automatically split and paid out by a smart contract, for collaborative works.
3. Track your buyers to provide more utility and avenues for engagement. NFT ownership can be publicly tracked on the blockchain. This lets creators easily see who their NFT holders are, and use this information to refine their marketing techniques, or create a membership system by giving their buyers more content and benefits.
4. Give more interaction and functionality to your work. You can give more various files with one NFT purchase through downloadable files and unlockable content. You can also make interactive works that can be used on metaverse platforms or decentralized games!
5. NFTs cannot be forged. Every NFT is unique, and has a distinctive address on the blockchain and token ID. This makes it so easy to verify if an NFT artwork is authentic, or if it’s a copycat.

Benefits of NFTs for Collectors

1. Your NFT purchase directly supports artists. When you acquire an NFT, all the money goes to the artist, instead of middlemen like galleries. Royalties are paid out to the original artist too, if you’re buying on the secondary market.
2. With on-going value added, some NFTs act as memberships. Because ownership can be easily tracked through the blockchain, some creators will continue to dish out benefits for holders over time. Buying an artist’s first NFT could entitle you to free content in the future, or access to merchandise and even events.
3. NFTs are forever, and guaranteed to be authentic. They cannot be changed or damaged, mainly because they are stored on the blockchain. You should feel secure knowing that your investment is safe, forever (this is only true for NFTs with decentralized metadata storage). You can also easily verify the authenticity of the NFT on the blockchain.
4. You can make money by reselling NFTs. As some NFTs can greatly appreciate in value over time, flipping NFTs is a viable way to generate some extra income. NFTs are not a particularly liquid asset, if you know how to pick winners, but there’s a lot of money to be made.
5. NFTs will be your access pass to digital members’ clubs. Communities form around NFT projects – as some projects are focusing on their community, making new ways for people to connect in the digital age. Every NFT community is different. Find your tribe, find your vibe, and enjoy community benefits! Some of them have games, merchandise, exclusive digital spaces, networking opportunities, and even IRL events and meetups.

4. NFT Starting Costs and Gas Fees 

NFT Gas Fees

As we all know, minting an NFT needs “gas fees”, which is the price users pay for the computing energy used to process transactions on the blockchain.

The cost to mint an NFT depends on your choice of blockchain is unpredictable. Minting can be very cheap – or even free – on some blockchains, but the most widely used NFT market is on the Ethereum network, which can have pretty expensive gas fees – up to a couple of hundred dollars occassionally!

 For new NFT creators, having access to the massive market on Ethereum is valuable because it gives them the widest exposure. Yet, if you can’t afford the gas fees, you have a few options:

1. Use another blockchain, where fees are extremely low. The tradeoff is that you get less exposure.

2. Use gasless minting features such as OpenSea’s Lazy Minting. This way you can stay on Ethereum without having to pay gas fees. The tradeoff here is that you can’t set royalties for your work.

NFT Marketplace Fees

Most marketplaces will charge a fee for facilitating the sale of your NFT. OpenSea charges 2.5 percent, while some other marketplaces like Foundation can charge up to 15%. Before you choose a marketplace, make sure you know all the fees and costs associated with using that marketplace.

5. Blockchains and NFT Marketplaces

There are many blockchains that support NFTs, and there are multiple NFT marketplaces on each blockchain.

The leading blockchain for NFTs is Ethereum because it has the most buyers, the average Ethereum NFT sells for more money than NFTs on other networks, and it is the most secure. However, the Ethereum network has issues with scalability and high gas fees which can be a barrier to entry for some creators.

Other blockchains like Solana and Tezos have lower fees, but creators don’t get as much exposure because the markets on these networks are smaller. They are also much newer than Ethereum, and are less secure.

Similarly, each NFT marketplace has different benefits. They all differ in the fees charged, and the amount of marketing support they provide to creators. Before you start selling your NFT, read up on the benefits of each blockchain and NFT marketplace so you know exactly what you’re getting into, and what kind of support you can expect.

5. Legal – Copyrights and Tax

NFT Copyrights

Copyrights are crucial for protecting an artist’s intellectual property. It is what guarantees security for the the artist, by making sure that only the author has the power to distribute, monetize, and make derivatives of their work.

NFTs are protected under the same copyright laws that protect all other creative works. Buying an NFT does not entitle you to the copyright of that work, unless the NFT creator choses to transfer the copyright to you.

NFT Taxes

Before you get started selling NFTs, make sure you understand what taxes, if any, you will need to pay. In the USA, profits from NFT sales are considered income and will be taxed at your ordinary income tax rate, about 10% – 37%. NFT profits are also subject to self-employment taxes, at a rate of 15.3%. When trading NFTs, either for cryptocurrency or another NFT, you will also be subject to capital gains tax.

Here’s a useful guide on NFT taxes by TaxBit.

NFT tax regulations vary from country to country, so do your own research before spending any of your NFT profits!

Get Started Creating NFTs

Now that you know all the things to consider before getting started on your NFT journey, you can begin creating and selling NFTs! The next guide in this series will cover the best practices in NFT creation and marketing.

‍The NFT industry is the fastest growing industry in the world. In 2021, NFTs generated over $40 billion dollars in trading volume, was the most searched word on Google, and was crowned the Collins Dictionary’s word of the year. With this explosion of interest, more and more creators are now looking towards NFTs as a new avenue for monetizing their work.This article is the first of a series dedicated to creators called Creators’ 101. This series will guide you in this emerging industry, and tackle the many questions you may have about NFTs as a creator. To start with, here’s everything you need to know when getting started with NFTs:

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