Gushing over NFTs (Non-Fungible Tokens), the recent blockchain fad, are you? From CryptoKitties to Jack Dorsey, the Twitter founder, selling his first-ever tweet autographed, NFTs have come a long way in recording the existence of assets over the blockchain. Att some time or the other, everyone must have heard about the fascinating world of NFT art as a quick and easy way of selling art digitally. And must have wondered – what is NFT? Or whether you can yourself mint one? Or how to buy an NFT?
Before you do so, here are 5 things you need to know before you DIY your art into a fungible token.
#1 What Rights Does An NFT Confer?
Before you are actually mint your first NFT, it would be prudent to understand what is an NFT and what you actually gain from owning an NFT. Ownership of an NFT doesn’t inherently bring in copyrights. So are NFTs just about bragging ownership rights? No, Oscar Gonzalez, a CNET reporter, elicits on this, “What the owner of the token has is a record and a hash code showing ownership of the unique token associated with the particular digital asset.” To put it simply, Anyone on the internet can download it and use it on their social media without raising any copyright infringement issue, but only the owner can sell the NFT.
Take the example of Nyan Cat, an animated GIF, which was sold for $5,90,000 recently. The owner of the Nyan Cat only holds ownership rights over the Nyan Cat NFT and nothing more, while the intellectual and creative rights are still held by the artist who made it.
Nyan Cat is a typical example where the artist retains ownership of the work ( Not the NFT), while the NFT collector owns the original (digital) copy. Each of the NFTs can have its own set of conditions and ownership rules written by the person/artist who mints it. It would be worth mentioning here that an NFT, being written over a blockchain, has complete records of its reselling history. As such, the original artist who minted the NFT receives automated resale royalties each time the NFT is resold.
#2 Where to Mint and Sell Your NFT?
Minting is the process whereby an item, whether an art piece, gif, tweet or even a ‘unique moment,’ is authenticated on the blockchain (majorly Ethereum) by issuing a token. The token is non-fungible, i.e., cannot be replicated, and contains the digital record of the item. Quite simple to understand, right. But where to mint your NFTs? You need to make three important decisions before you go minting your work regarding the choice of:
- Blockchain: The choice of the blockchain on which you want to mint your NFTs, determines the gas fees you would have to pay for mining your NFTs. The majority of the platforms run on the Ethereum network, where the ‘gas fees’ fluctuates with network demand and the energy required for verifying each transaction.
- NFT Marketplace: Most of the reputable NFT platforms today have a vetting process for NFT creators where artists are required to undergo an application process before minting their NFTs. Platforms such as Rarible and Foundation operate on this model. You need to consider that platforms with extensive vetting procedures attract more serious collectors than marketplaces that allow anyone. NFT marketplaces having an identity verification process in place lend a greater level of authenticity to the minted token. While there are some marketplaces, such as Nifty Gateway, Knoworigin, SuperRare, etc., that are curated and ‘invite-only.’ WazirX launched India’s first NFT marketplace on 31st May that operates on the ‘invite only’ principle for artists and creators from India and other parts of South-East Asia. The minting process takes place on the Binance blockchain, the parent company of WazirX, analyze and can later be transferred to other blockchains such as Ethereum. The sale essentially takes place via WRX tokens- the native coin of the WazirX platform.
- Costs: Depending on your needs, you can choose an NFT platform that lets you mint your NFT art for free but charges the gas fees from buyers for the same in a structured way. This type of platform may be suitable for the creator who wants to mint a large number of NFTs. While, if the creator is interested in minting only a ‘single’ master copy, they may prefer a platform that charges a one-time upfront fee.
Creators should also keep in mind the exposure guaranteed by a particular blockchain or marketplace. For even if you save some pennies on the gas fees or costs, you would be denied the right audience if the platform is not popular.
#3 How to Keep your NFTs safe?
NFT space, being in a nascent phase, still suffers from a few problems such as data gaps, plagiarism, fraud, identity theft, etc. There have been quite a few instances where the works of small artists have been copied by malicious players to profit from them. Even though verification processes are in place, the threat persists. Until now, no set traditional takedowns are in place in case a listed NFT token gets copied. It may be difficult or even impossible to take down your NFT. Also, pursuing a random copycat or initiating legal action against the same may be extremely difficult and uneconomical. What respite is then available in such cases?
Moish E. Peltz, Esq, the Chairman of the Intellectual Property Practice Group at Falcon Rappaport & Berkman PLLC, replies to this, “to the extent you can identify an infringer, it may still be possible to apply traditional IP rules to remedy infringement of your work.” Simply contact the platform on which NFTs are being sold immediately once you find someone copying your work.
Other precautionary measures include investing in a hardware wallet or an external hard drive that is more secure. Keep your wallet address and seed phrase safe and use VPN whenever trading in cryptocurrencies.
#4 How to Counter the NFT Volatility?
NFTs belong to the volatile asset class and are still in their nascence. The volatility, no doubt, is conspicuous in the meteoric rise of NFTs in February when the market exploded past $170 million. Within three months, we saw the NFT market crashing to just $19.4 million as May ended. Consequently, Investors who bought the NFTs at lofty prices were left with little in their kitties. Therefore minting NFTs isn’t just about digitizing your art or work. It should be a well-thought decision on the part of the creators. There are certain considerations to keep in mind to keep your NFTs safe from market fluctuations:
- Consider the risk-to-reward ratio to analyse whether the returns you would gain from minting NFTs are worth the time, effort, and money you put into it.
- Build strong relationships with your audience or fans interested in purchasing your work to strengthen your personal economy.
- Persevere and not consider minting NFTs rewarding you with any windfalls gains within a short span of time.
#5 How do NFTs Impact Businesses?
NFTs have the potential to transform owning rights as the future tool for selling digital merchandise or artwork. For instance, Top Shots, the NBA Collectibles, are significant highlights from NBA games that are a rage amongst fans. No wonder, A LeBron James Top Shot was sold for more than $200,000! You can practically mint anything into NFTs, including pictures, photos, collectibles, gifs, songs, memories, and even your own gaseous emissions. That’s NFT explained!
The NFT market is an entirely new niche with wonderful possibilities in the future. Without considering the off-chain migration of the actual asset to the new owner, NFTs provide a new way of transferring on-chain ownership when tied to the actual asset. As Cointelegraph quotes, NFTs facilitate ‘the tokenization of ownership’ by “keeping them secure, ultimately revolutionizing the compensation, storage, legality and the security of property.”
It is worth noting that NFT minting isn’t quite an environment-friendly process due to the huge amount of computational power required to validate the transactions. Creators must, therefore, consider the carbon footprint the digitization of their work would leave and make informed choices. Randomly minting NFTs without a goal or with no underlying value will only add to the environmental cost without much considerable gains.
We hope reading the above points would have helped you crystallize your decision to some extent. Comment down below what other things you believe a creator must know before minting their first NFTs.