The popularity of NFTs has been steadily rising over the past couple of years as more and more collectors are entering the market. It is a very modern way to collect digital art in much the same way traditional art collectors build their own collections and galleries. In fact, collectors of digital art will be increasingly “building” their own galleries in the Metaverse without the costs of RL construction. But, before you build a gallery, let’s answer some questions about collecting NFTs.
What is an NFT?
NFT stands for “non-fungible token”, meaning it has a digital signature making it unique. (Fungible currency is made up of physical money and cryptocurrency that can be traded easily.) An NFT will likely have a smart contract created by the originator of the NFT to set down rules for trading such as royalties. This means that the original artist is owed a royalty every time the NFT changes hands. (Far different from buying an actual oil painting from an artist and selling it later. In that case, the artist does not get paid after the initial point of sale.)
Also, blockchain is necessary for collecting NFTs. This allows information to be gathered and organized into “blocks” which are then used to record transactions and allow for the tracking of digital assets. We usually associate the blockchain with cryptocurrency because it allows for safe and private transactions involving cryptocurrency.
How to Pay for an NFT. Ethereum, anyone?
Although there are many different cryptocurrencies, NFTs are part of the Ethereum cryptocurrency blockchain. When you purchase an NFT it will be priced in Ethereum. So if you pay .25 eth for a piece of digital art, you are paying one quarter of the value of one Ethereum. This can vary constantly due to the fluctuating price of cryptocurrencies. And it requires an initial investment in Ethereum funded by actual currency or another cryptocurrency.
Confused? You, the collector, will need to set up a “wallet” – not unlike an investment portfolio – to hold your cryptocurrencies, which you have acquired by changing physical currency into crypto.
Once you have your wallet set up you can peruse the available art on Open Seas or Rarible (or one of the other platforms such as HARTi or Fayre.) At that point it is up to you as a collector to decide what NFTs appeal to you. There are collections designed to appeal to a broad base of collectors and their varied tastes. Bored Apes Yacht Club (BAYC) is a project that has enjoyed universal appeal and huge success, as is World of Women and World of Women. The creators have continued to interact with collectors long after the project sold out and offer fun activities and information to continue the engagement. Other projects are created to compliment physical merchandise and brands and use the NFTs as collectible marketing tools. Interestingly, world-class jewelry brand, Tiffanys, is not only creating their own tokens but will soon be offering to create real jewelry based on tokens owned by collectors. In other words, you can have your BAYC token recreated in actual precious metals and gemstones! If you are so inclined.
Only a year ago, NFT projects were launched, heavily promoted on Discord, and hoped to sell out within hours. The quick sellouts and large sums of cryptocurrency changing hands made NFTs appealing and noticeable. The number of early collectors and projects ballooned in the hopes of making many people millionaires overnight. And it worked. But as with any such investment, projects have “slowed down” and become more intentional and sophisticated in their design and marketing.
This is to be expected as the market matures and shifts to become more stable and universally appealing. NFTs are here for the long-haul and projects are focusing on the quality of art as well as being deliberate in how the art is promoted. As a potential collector you have the opportunity to research projects and collect pieces that are meaningful to you – or just because they look like a good investment opportunity. Many projects also have a charitable connection, allowing their collectors to make an emotionally meaningful investment while supporting a favorite charity.
Finding an NFT collection
In addition, enthusiasts can follow their favorite projects on a variety of social media platforms. Once the darlings of Discord, a favorite platform of gamers, projects are now promoted equally on Instagram, Twitter, and a variety of NFT and crypto media outlets. Although it is still savvy to communicate through Discord, Twitter is also a preferred outlet for finding new projects before they mint.
Once you have chosen a project, you can sign up to be notified of early releases. If you are confident that your chosen project will sell out, signing up allows you early access to the sale. NFts have value only because the market says they have value. In this case, the market is generally referred to as the community. Following the community on social media will give you an idea of how popular the project may be and the amount of sales on minting day. And, like any other form of art, the NFTs have the potential to increase in value based on popularity, their appeal to known successful collectors (whales) and how they are used.
What to do with your new NFT!
Once you own the NFT you do have the right to use it as a profile picture on social media which can enhance the value by increasing the visibility of the project. You may have seen celebrity collectors showing off their collected art by wearing the art as clothing or jewelry and using it as a profile picture. This can increase the value of the project and thus the value of the individual NFT for future trading.
And, thanks to the blockchain, the art really belongs to you. Even though anyone can look at it online or even print out a version, the original is safely stored on the block chain and cannot be duplicated. Think of it as owning a painting by Monet as opposed to a poster or print of the painting. The actual original is what is valuable and NFTs are no different.
Some final words of advice. Buy digital art that appeals to you. Buying art of any kind on speculation is risky and you need to understand that there is always a chance of buying an NFT that will increase in value (sometimes wildly increase in value) but there is also a chance of buying a price of digital art that won’t increase. But if you like the art, then enjoy the process. If you want to invest for financial reasons, do your research and immerse yourself in the communities. And have fun! This is a new type of art collecting but it’s here to stay. If you have an NFT project – our NFT marketing agency is ready to help.