Hello! I heard you’re looking to learn about NFTs. Well, you’ve stumbled upon the perfect piece of literature for that exact thing.
In this guide, we will be covering the basics of NFTs:
- What is an NFT?
- How do you buy an NFT?
- How do I know it’s a good NFT project?
- Some extra tips and tricks.
What are NFTs?
NFT stands for Non-Fungible Token. Which means there is only ‘one’ specific copy of that NFT in existence, making it unique and irreplaceable. They are digital assets that are stored on the blockchain; which means they can be any sort of digital asset, such as art, games, and much more.
If you were to purchase an NFT on a marketplace such as OpenSea (the most popular one) then the wallet address you used to purchase the NFT will be verified on the blockchain. Meaning no one can take or copy your exact NFT. And before we get our britches in a bunch, yes, people can screenshot NFTs and ‘say it’s theirs’ but if the NFT taken from you is not part of the original collection that is listed on the marketplace of your choosing, it’s not really their NFT and has no value. It’s like having a copy of the declaration of independence and someone taking a picture of it and saying they own it. It’s just not how it works. The only one with value is the real one.
As a whole, NFTs belong to collections. You may have heard of some of these collections such as, Bored Ape Yacht Club or Crypto Punks. Because of this, popular NFTs will be verified on OpenSea with a blue tick, like every social media platform. Projects that copy other NFTs do not get verified and along with that, must be trading a specific amount of volume in order to be considered for verification. These are called ‘Blue Chip’ NFTs.
The most popular place to buy and sell NFTs as mentioned earlier is OpenSea. The OpenSea marketplace belongs to the Ethereum (ETH) main-net; which means to purchase NFTs you will need ETH or WETH which are a cryptocurrency. To get this, you’ll need a MetaMask wallet on either your phone or as a Google Chrome Extension for your computer.
I mentioned ETH and WETH earlier. WETH stands for ‘Wrapped Etherium’. Meaning it can be traded on what’s called decentralized exchanges or DEX for short. The only time you’ll ever need to use WETH is when you’re placing bids on auctioned NFTs. In most cases, bids are usually placed by bidding bots, which bid under the ‘floor price’ of an NFT to try and get cheap NFTs. The floor price, as I mentioned, is the cheapest NFT in a collection that is for sale.
When looking to purchase an NFT from a collection you’re interested in, you want to buy one of the following:
- Floor Price NFT – Buying a floor price NFT which stands out from the pack, has good colors, and is visually appealing is more likely to get you a sale than one that blends in with the others.
- Rare NFT – To find out if an NFT is rare, it’s often advised to check Rarity Tools which will tell you which NFTs and what attributes are rare for your particular collection. You can do this by using their built-in filtering system and looking at the top candidates.
A roadmap is a plan that the creators of the NFT collection are going to follow. It outlines the main stages of the project and talks about how they plan to innovate and add to these stages in the future. The roadmap is representative of how invested and important the project is to the owners, whether it’s for the long term because they’re trying to grow something meaningful or if the owners of the NFT are looking to make some fast money.
There are things that can be added to the roadmap to make the project more enticing for future investors like you. This may be games, DLC, or a future airdrop (gift) coming your way. A trend in NFTs of the past was just to make them very aesthetically appealing for use in profile pictures, but as the industry ages, so does the competition. You see, current new-stage NFT projects require much more than just good art, having something tangible that comes from your investment is key. The problem is, with the well meaning projects, there comes bad projects and rugpulls who will promise you the world in exchange for your investment. The key here is to just do your due diligence and try not to get too emotionally invested in a project. Look for positive signs; like if they plan to create a game to go along with their NFT, see if the creators have actual game design or programming experience. Another thing you should be looking for on the roadmap is doxxes or the staff members of the project revealing their true identity. Doxxes don’t always guarantee success of a project, but if someone is putting themselves out there and thousands of people lose money, that’s a good sign they’re trying to do something meaningful. But even with doxxes, please be careful. People can fake a doxx with technology and fake followers.
Marketing. The golden word that quite honestly makes the economy go round. Marketing helps to spread awareness about products, services, and their benefits to people who have never been exposed to them. NFT marketing in particular is a little different from traditional marketing.
You see, NFT marketing plays a huge role in a project’s success. By paying attention to whether or not the project is using genuine marketing tactics and not loading the discord server, instagram, or twitter with fake accounts and engagement, you can save yourself from getting burned by a project’s failure. A lot of groups out there have botted members, the best way to ensure you’re part of a real and active discord is to ensure the discord server in particular has verification methods in place for accessing the server and its channels, as bots don’t particularly have the capacity to join them.
In particular, the total members of a server with a verified role on discord should be 2 out of 3. Many people will join a server and just not complete verification and many bots targeting the server will be stuck without a verified role as well. Keeping an eye on the verified role for the server will give you an accurate representation of how actually active a project is. But that doesn’t mean you still can’t be fooled. Look out for activity within the server and in response to announcements. If the announcements are receiving a lot of responses from verified members, that’s a good sign. In this case, you’ll want every 1 in 60 members to react to an announcement for good engagement.
Falling For Hype
You’ve seen the twitter threads, seen the TikTok videos, this project is blowing up and you don’t want to miss out! But wait, seriously, stop right there. You may want to try to get into the pre-sale for a super hyped up project, this is also known as a whitelist. This allows people to mint the NFTs before everyone else (sometimes even with a discount), and when a project sells out, allows for an easy flip of 2 to 3 times what you bought it for. But as stated, do your research. These projects that are beyond hyped will sell out and getting on the whitelist may just be a waste of time. Try to catch projects as early as you can. I recommend Twitter for this one.
So far in this beginner’s guide to NFTs we’ve only mentioned brand new projects. But we haven’t gone over what you should look for in old projects, for which, all of the previous things mentioned still do apply. But if you’re looking to invest into a project that has been around for a while, you’ll want the community to still be around and active, making friends, and creating a warm and welcoming environment for newcomers to the NFT. If you’re entering an older project that is 3 or 4 years old, you’ll be at lower risk for problems because they’ve already survived through multiple different years and crypto markets!
Lastly, the final way to check the hype is by looking at the ‘activity’ of the project on the applicable marketplace. Since OpenSea is the most common one, let’s use them as an example. Head over to activity and sort by ‘all time’ as shown in the image below. Some of the older projects may never move again, it’s important to understand the activity.
NFT Rarity Blueprint
With NFTs, you might be asking how to tell if you have a rare one, especially after mint. In general, NFTs tend to have more ‘traits’ than other NFTs in the collection. These extra traits add value and rarity to them. The very rare ones in the collection are usually hand made by the artist and not generated with random attributes like the rest of the collection. See the below example:
In general, NFTs have a ‘base’ that they start with. For example, with Holy Heroes, a project that I am invested in, they are little 8-bit heroes. It’s the accessories they come with that make them rarer. They may not be hand-drawn by the artist like the one above, but they may include attributes like a helmet that only two of the other characters in the entire collection have.
Minting Your First NFT
In this article, I’ve nailed into your brain how important it is to pay attention to what you’re investing into and to get involved in the community. You’ve finally found a project you want to invest in, and you believe in what the project stands for. Now it’s time to make one (or multiple!) your NFTs.
When NFTs are about to be released to the public for everyone to mint, there are usually two ways that this is done. The first is minting, which is the traditional approach. How this happens is that they put the NFTs on a buying or auction website, where you buy the NFT and it instantly goes into your wallet. This usually requires gas fees depending on what main-net you are purchasing from. Since Etherium is the most popular one, expect a heavy ‘gas’ fee of $40 to $300 per transaction. If you were to mint a Solana NFT for instance, there is no negligible gas fee. Which is why many projects are moving over to Solana, to make them more accessible for the public.
The other way you might end up minting an NFT is through the process of airdropping. Now, I mentioned airdropping way back in this article. It’s essentially when an NFT is placed directly into your wallet without you paying any money at all in gas fees. Projects often do this for long time holders or just as a way to give back to the community.
Words Of NFT Wisdom
When trading NFTs, you can always make mistakes. These can be massive losses or even accidental wins (my first NFT was airdropped to me and was worth $20, two days later it was over $400). There will be plenty of people in this space who try to take advantage of you and get to you. With that said, you’ll often see fake collections popping up on marketplaces that try to mimic the real collection before or even after launch. You’ll also receive lots of dms from people trying to get you to mint from fake websites to steal your money. When selling your NFT, make sure that you list it on a timer. This is so you have a price that you hope it sells at, but if it doesn’t, you can relist it for free instead of paying gas fees again.