Everything artists and creators need to know to get started with NFTs and Crypto Art
This article is not intended to be financial advice.
Written by Joe McNaney| Guest Writer
Non-Fungible Tokens (NFTs) stepped into the public eye during the first few months of 2021. Fine art auction houses such as Christie's and Sotheby's were able to fetch high prices for works by digital artist Beeple, the team at Larva Labs, and many more. So why are collectors shilling out upwards of $69 million for a JPEG? Well, when you buy an NFT, you’re not just buying the JPEG, you’re buying the token.
Regardless of your experience in crypto, you will be familiar with the idea that scarce assets and resources tend to have value. Provable scarcity, immutability, and programmability are just a few areas from which NFTs derive their value.
From the artist’s perspective, NFTs provide the potential for a new digital golden age. This article is meant to be their first stop on their inevitable deep dive into the fast-moving and ever-evolving world of non-fungible tokens. Good luck. ✨
What are Non-Fungible Tokens (NFTs)?
Investopedia defines a non-fungible token (NFT) as a “cryptographic asset on a blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can be used as a medium for commercial transactions.”
Digital assets created up to this point, exist, for the most part within their own asset class, often controlled by the company that created them; a domain name purchased on GoDaddy can not be used as a Twitter handle, a skin from Fortnite can not be brought into Madden, and so on and so forth.
A benefit of digital asset standardization is that NFTs can easily move from one developer’s sandbox ecosystem to another.
Building assets and making use of NFTs on a public blockchain such as Ethereum, standardizes the digital asset economy and opens new pathways to creation and value capture. For example, a car with a New York State license can still be driven in Florida because the rules of the road across the country are standardized.
A NFTs interoperability allows for a free market to exist and thrive. Similar to how you can go to a yard sale or Walmart and sell that product on eBay, you will have the freedom to exchange or trade your NFT in the method you desire.
Your assets are more liquid than ever with Web 3.0, “the third generation of internet services for websites and applications that will focus on using a machine-based understanding of data to provide a data-driven and Semantic Web,” offers creatives and businesses access to the most frictionless marketplace ever created.
With the simple signature of your digital wallet (such as MetaMask), you can send a unique asset from your local mall to the Taj Mahal in seconds, a process which in the past would have taken a few days and several hundred dollars. The Ethereum network will allow your creative masterpiece to be seen and bought by anyone by a crypto wallet anywhere across the globe. Remember, you aren't just sending an email with a JPEG, each token has unique identification codes and metadata that distinguishes them from each other.
Immutability & Provable Scarcity
Given your NFTs unique metadata, one can look back at the token and the smart contract from which it was created to identify how many tokens were produced in the same collection, and if it is indeed a 1 of 1. OpenSea notes, “developers can also enforce that specific properties do not change over time by encoding them on-chain. This is particularly interesting for art, which relies heavily on the provable scarcity of an original piece.”
Web 3.0 assets are similar to digital assets that exist within Web 2.0, or “the second stage of development of the World Wide Web, characterized especially by the change from static web pages to dynamic or user-generated content and the growth of social media.” NFTs are fully programmable and can make use of complex mechanics including but not limited to: generative coding of future NFTs, redeeming of already existing ERC-20 tokens, and even changing the name of the NFT as time goes on.
Gaming is the space in which programmability will likely shine the brightest. From the advent of one of the first blockchain-based games, “CryptoKitties” to the more current Ethereum based game that is paying folks in some countries a living wage in “Axie Infinity,” it is clear that an NFTs in-game utility comes from it’s programmability, consequently producing assets to have value beyond sentimentality or scarcity.
Why does putting this all together make NFTs such a disruptive opportunity?
In one word: decentralization. NFTs already have and will continue to disrupt the digital economy as people come to realize just how similar an Ethereum based NFT marketplace mimics a traditional physical one. If Best Buy is selling a MacBook for $2000 and Wal-Mart is selling one for $1850, the free market will likely do its job and drive business to Walmart because they are charging less for the same product. The previous scenario assumes that Best Buy and Wal-Mart are equal in every other way, which is not always the case. Let’s say you live in a rural area and the nearest Best Buy is 10 minutes away but the closest Walmart is 10 hours away. The time and gas it will cost you may deter you from pursuing the lower priced computer. There is a lot of friction that exists in this free-market system.
So along comes the internet and ecommerce. Click a few buttons and you don’t even have to go to the store, how wonderful! But there is still the issue of centralized companies like Amazon slowly eliminating the small creators because they don’t have the manpower to churn out products as quickly. Then there is of course the matter of transporting and keeping track of physical goods. If only there was a way to send an asset from one person to another, prove it is the one you created, and allow the consumer to use it without mega-corporations creating a pseudo monopoly over your product. Welcome Web 3.0, blockchain, and NFT technology!
See the chart below to get a sense of web development over time.
A Brief History of NFTs, From Crypto Kitties to Axie Infinity
CryptoKitties, CryptoPunks, and the Ethereum Name Service were some of the earliest NFT projects started back in 2017. CryptoKitties staked claim as one of the first blockchain contracts deployed for entertainment. CryptoPunks are widely accepted as the first ERC-721 NFT collection and have driven demand through the roof in 2021 as NFT historic artifacts and avatars to represent your digital identity. Then we have The Ethereum Name Service, which pre-dates the invention of the ERC-721 token but is still technically an NFT. An ENS domain can be purchased on the ENS website and is meant to be a human readable wallet address that can be linked to your Ether Wallet. Instead of having sent you an NFT or token to an address that looks like this, "
0xd8dA6BF26964aF9D7eEd9e03E53415D37aA96045" it can read like this,
vitalik.eth. That address belongs to the current face of and Co-Creator of Ethereum, Vitalik Buterin.
From Kevin McCoy's "Quantum" to Colored Coins, Counterparty, Rare Pepes, Cryptopunks, and CryptoKitties, take a deeper look at some of the defining moments of NFT history.
What can an NFT represent?
It is important to understand that while NFTs can be art, not all are.
Other use cases for NFTs include but are not limited to, intellectual property documentation, records of historical artifacts, proof of ownership of both physical and digital assets, gaming, programmable digital art, music, video, fractional ownership of the real estate, social tokens, VR wearables, virtual real estate, event tickets, subscription badges, blockchain domain names, and more.
Some of the most notable and highly-anticipated use cases for NFTs mentioned above are virtual real estate and gaming. This excitement stems from an idea known as “the metaverse,” or a virtual world in which assets are scarce and hold real value. Forbes’ Cathy Hackl takes a bullish stance in her recent article “The Metaverse Is Coming And It’s A Very Big Deal.”
Some of the most notable Metaverses currently being built out and brought up include, Decentreland, The SandBox Game, Crypto Voxels, and more.
For artists, developers, and content creators, there has never been a higher demand for your skill sets and creativity! There is a massive burgeoning community developing each day that accepts all artists and creators to participate! Take a look at the all-time sales volume and statistics for the top virtual worlds as of July 2021.
While this may sound just like a video game, it is so much more because these platforms are being built on top of the Ethereum blockchain. Perhaps now would be a good time to dive into the little diamond symbol you see in the graphic above. That is one of the symbols used to notate Ether sales, the native token on the Ethereum blockchain.
Fungible vs. Non-Fungible
The second piece of information to take away from Investopedia’s definition is an NFTs inability to be exchanged for something identical. To use an example from the traditional physical art industry, Da Vinci’s “The Mona Lisa” and Diego Velázquez’ “Las Meninas” are both well-known and valuable pieces of art but, no one would walk into a coffee shop, hand over “The Mona Lisa,” and ask for “Las Meninas” in exchange… NFTs are unique and therefore, you guessed it, non-fungible.
Often you will see a non-fungible token appear with a 1/1 next to it on marketplaces; however, you will also come across variations on this ranging anywhere from 2/2 to 10,000/10,000 (or more). While many refer to a token with multiple minted copies as an NFT, technically, this is incorrect. Any token that is followed by a notation that signals there is more than one of these tokens minted to the blockchain is a “semi-fungible token”.
The often overlooked semi-fungible token functions differently than a non-fungible token. As an artist, you may want to consider why you are making multiple copies of your piece before minting it to your preferred blockchain.
Breaking Down the Various ERC Token Standards
Smart contract standards enable continuous innovation on Ethereum, and they continue to bring in more and more individuals looking to program value and agreements in new ways on the internet.
While there are thousands upon thousands of types of art a person can create, a new cryptoartist needs to understand the different types of tokens (smart contract standards) they may come across. For the sake of this comparison, we will use token types on the Ethereum blockchain, though we will cover alternative blockchains in a bit.
What is an ERC-721 Token?
An ERC-721 token is a non-fungible token with an ERC-721 smart contract. These tokens are one of a kind, unique, and rare.
What is an ERC-1155 Token?
An ERC-1155 token is a semi-fungible token minted to an ERC-1155 smart contract. These tokens can be quite plentiful and may come with different utilities than an ERC-721 token.
Think of an ERC-721 token as a ticket to a concert with an assigned seat and an ERC-1155 token as a general admission ticket. While the general admission ticket can be swapped with anyone else at the concert, the assigned seat ticket can not be swapped. While both of the ticket types have value, they are not the dollar and you can’t then go to the concession stand and pay for a hot dog with that ticket because while it has value, that value comes from a specific utility the owner gets from owning the ticket, in this case, entry to the concert.
What is an ERC-20 Token?
An ERC-20 token is neither a non-fungible nor a semi-fungible token. An ERC-20 token is a fully fungible token that acts similarly to Bitcoin or the dollar.
You’ll come across ERC-20 tokens quite often on your journey as a crypto artist. They are a key player in Decentralized Finance (DeFi) and many organizations in the DeFi and Ethereum space make use of their own ERC-20 token.
A Brief Explanation of Portion’s ERC-20 Token ($PRT)
→ Portion Tokens ($PRT) are ERC-20 assets on the Ethereum Blockchain that are key to platform governance and curation.
→ PRT tokens can be used to bid on, purchase, and sell art and collectibles on the Portion platform.
→ Artists earn 500 $PRT every time they mint a NFT on Portion, distributed every Sunday.
→ Collectors earn 500 $PRT every time they purchase a NFT on Portion, distributed every Sunday.
→ Artists earn 11% royalties on secondary sales, paid in $PRT
→ Portion token holders can stake or farm their $PRT to collect yield.
→ PRT tokens are utilized for DAO platform governance and voting.
→ Staked PRT Tokens earn rewards from auction sales and platform fees (coming soon)!
Getting Started: How to Create (“Mint”) NFT Art
As an artist venturing into the world of cryptoart they may be eager to sell sell sell but it is first important to take the time to educate yourself on the basics of cryptocurrencies and the process of creating a crypto wallet, using the Ethereum network, and minting your first NFT. There is story after story out there about artists and creators who didn’t take the time to understand the ins and outs of crypto who ended up losing a lot of money, (the author of this article being one of them…)
After understanding the risks, volatility, and mechanics of cryptocurrency and DeFi you are going to need to purchase the cryptocurrency affiliated with the blockchain upon which you plan on minting your artwork. The most notable blockchains that have either developed or are in the process of developing NFT compatibility include; Ethereum, Tezos, Wax, Binance, Cardano, Polygon (MATIC), and Flow.
For simplicity’s sake, we will continue with our example of NFTs on the Ethereum blockchain as it is the most widely used.
Step 1: Purchase ETH and Set Up Wallets.
- Register an account with a centralized exchange like Coinbase, Gemini, Binance, or Kraken.
- Buy $ETH. Please note that Ethereum is the blockchain on which transactions are processed and Ether ($ETH) is the cryptocurrency you will be purchasing.
- Download the MetaMask browser extension and create a crypto wallet. MetaMask will act as a wallet you would walk around with and your Coinbase account will behave like a bank of sorts.
- WRITE DOWN YOUR SEED PHRASE AND KEEP IT SAFE, NEVER DIGITALLY! The downside to Web 3.0, and blockchain-based decentralized applications is that there is no password recovery. If you forget your password, your seed phrase will be the only way to access your wallet again. Write down your seed phrase (recovery phrase) on a piece of paper and keep it somewhere safe!
(Embed Video Explainer) Metamask Wallet Setup
Step 2: Choose Which NFT Marketplace to Sell on.
- For those looking to mint 1 of 1 pieces of digital art, consider curated marketplaces such as Portion, SuperRare, MakersPlace, and Foundation.
- For those looking to have more flexibility or control over their project, consider sites like OpenSea or Rarible.
Step 3: Decide How to Price Your Art.
- Consider your experiences and the costs you took on to create the piece you are selling when deciding on a price point for your NFT.
- Gauge the market and similar artists.
- Consider if you are minting a 1 of 1 or a multiple. The general rule of thumb is that the price of your editions should be equal to the price of your 1 of 1.
- Make your Genesis (first) piece a 1 of 1 and consider sticking with 1 of 1s until demand is proven to be there. Multiples tend to be better suited for established artists in high demand or for tokens with utility, like the previously mentioned general admission concert ticket.
- Consider the price of ETH. While there is a mantra in the world of Ethereum that “1 ETH = 1ETH” there is no denying that the NFT market as a whole follows in ETH’s footsteps. The market tends to slow down as the price of ETH rises or if the market is particularly volatile. This may lead to many transactions being made on the blockchain making block space harder to get and lead to higher “gas fees,” which we will cover in a bit.
Step 4: Auction or Buy it Now?
- While some marketplaces strictly offer the option to create and sell NFTs via an auction style, others allow more choices, consider your potential buyers and your own sanity when selecting between the two.
For a complete step-by-step guide on how to create (mint) an NFT on Portion, check out this tutorial.
An Overview of the Top NFT Marketplaces
There are many NFT marketplaces and more seem to pop up weekly given the fast developing space. As an artist, you will want to consider which marketplace will be the best fit before blindly minting your work. The Top NFT Marketplaces for Creators to Sell Non-Fungible Tokens may differ in how they run their sales, allow who can sell, and even operate on different blockchains, so be sure to look closely before you pay the gas costs to mint your work.
One of the most focused upon perks of NFTs from the artist’s perspective is the ability to receive royalties for resales of their work.
Not only do NFTs allow creators to monetize their work on primary markets, but some blockchains such as Ethereum enable NFTs to go a step further by integrating royalties, which are payments made to a creator every time their work is purchased on a secondary market. That means that anytime an NFT changes hands on secondary markets, the artist gets a certain percentage for every trade, in perpetuity.
This is a massively revolutionary way to help creative industries with broken royalty systems. Many artists, especially musicians, don’t collect all royalties because of a lack of transparency, either because the songs are not properly registered or because they remain unclaimed and go to publishing companies.
Let’s say upcoming artist “X” sells their genesis piece for 0.1 ETH to buyer “X”. Artist “X” then goes on to become a well-known name and consistently sells pieces of their work for 1 ETH. The demand for artist “X’s” genesis piece skyrockets and buyer “X” is planning on selling the piece for 10 ETH to buyer “Y”. In a traditional format, the artist takes home nothing but the good feeling that someone values their art so highly. While some laws have been thrown around, like the “ART Act” which, as Hyperallergic notes, “If passed, the act would require a 5% royalty on all works of art worth over $5,000 sold at auction (with a maximum royalty payment capped at $35,000). The act would only apply to auction houses with annual sales of over a million dollars,” no such law has been passed. Luckily, you can write royalties into a smart contract!
Platforms such as Portion incentivize artists to create outstanding quality works which are well accepted by the market and collectors, so all original artist will continue to receive 11% royalties as Portion Tokens incentives (similar to the royalties system in the traditional art market). This is a residual reward each time a work is resold on a secondary market.
Ethereum Gas Fees Explained
Once you confirm your first transaction on the Ethereum Mainnet, your MetaMask will prompt you to “sign” your wallet to confirm that you want to pay the gas fee to edit the blockchain.
According to the Ethereum Network’s documentation, “Gas refers to the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network. Since each Ethereum transaction requires computational resources to execute, each transaction requires a fee. Gas refers to the fee required to successfully conduct a transaction on Ethereum.”
Here are a few helpful tools to understand and visualize Gas and block transactions:
→ Etherscan: A Block Explorer and Analytics Platform for Ethereum, a decentralized smart contracts platform.
→ Gas tracker: An all-in-one tool to optimize your gas fees.
→ TxStreet: A cryptocurrency (Bitcoin, Ethereum etc) blockchain live transaction visualizer.
How to Market My NFT Art
A day in the NFT market is a year in the non-NFT world. You will not be able to keep up and you will feel FOMO. Keep going.
Unlike physical art and collectibles, NFTs exist in a largely frictionless marketplace. The costs and risks of moving a fragile work of art across the Atlantic from The MET to The Louvre are astronomical, but with crypto art you just need a little ETH and a few clicks of a button.
Once you have completed the process of creating your NFT artwork, you should promote it out to the NFT community and engage with potential collectors. There’s a really strong community around NFTs and artists are becoming increasingly collaborative and creative in how they support each other’s artwork in online (and metaverse) communities. Social media is the marketing tool of choice, Twitter, Discord, Telegram, Instagram, Reddit, and Clubhouse reign supreme over the likes of Facebook, Linkedin, or other social media platforms. Don’t forget to check out virtual platforms like Decentraland and Cryptovoxels too! Spend your time building a community and supporting those around you and build genuine connections!
Crypto relies heavily on a human's urge to copy and belong, NFTs take this to the next level. Having a sharable meme to show your community is on the same page is exactly what content this space wants. Episode 72 podcast Bankless does a nice deep dive into mimetics and the power of the meme. Here are a few of my favorites:
Source: @wannabeeple on Twitter
See the chart below for some quick tips on how to efficiently market yourself in the increasingly competitive NFT market.
Do I have to pay taxes on NFTs?
Quick Answer: Yes.
Long Answer: This article by TokenTax Co-founder, Zac McClure.
Are NFTs a Fad?
Quick Answer: No
Are NFTs bad for the environment?
Quick Answer: Yes, but...
Long Answer: This article by The Morning Star’s Vikram Barhat.
Long Alternative Answer: This article by Art News’ Shanti Escalante-De Mattei
Who are some notable NFT creators?
What are some notable NFT Collectibles?
Congratulations! You’re on your way to becoming the Frida Khalo of the Metaverse! For a quick visual summary of the content explained in the article above, check out the infographic below.
More Informative NFT Articles:
What is Portion?
Portion is a decentralized auction house that was founded to directly support the greater Artistic community and was incepted in 2016 to capture the digital scarcity paradigm shift. Recognizing the impact that Blockchains would have for tracking the provenance of rare goods, art, and collectibles, the Portion team created the initial concept before the "NFT" word was colloquialized.
Today, Portion’s Curated Drops source works from iconoclastic artists from across the media landscape, while our Community Curated Market empowers emerging artists and formats. Portion Artists keep up to 100% of the proceeds from their art sales and earn 11% royalties on secondary sales.
Everything the Portion team, partners, and community does is in service of breaking down barriers to art and wealth while growing the PRT economy.
The Portion Ecosystem — NFTs, DeFi, and DAOs.
→ NFTs — One-of-a-kind digital items that push the boundaries of art and technology.
→ DeFi — A shared economy with the PRT Token powering staking, bidding, and payments.
→ DAOs — Aligning incentives with decentralized governance.