NFTs 101 — A Beginner’s Guide

What is an NFT? A quick flashback

NFT stands for the non-fungible token. While cryptocurrencies are fungible — meaning that they can be replicated and exchanged for one another token — NFTs are not alike, and each one has a unique digital signature with its own unique value. For instance, a $10 bill has the same value as ten $1 bills, but you can not value an NFT with another one since each and every one of them has their unique and variable value.

An NFT is a token itself but it is linked to a tangible and intangible asset such as a digital 3D portrait, artwork etc. So, the non-fungibility actually derives from the variety of linked assets.

How valuable are NFTs?

As mentioned above, NFTs’ value varies with the assets it is linked to. Therefore, while one NFT can be worth billions of dollars as seen with Beeple’s “Everydays — The First 5000 Days” being sold for $69 Million, the other’s worth might be just a couple of dollars. An NFT can only have one owner at a time. Ownership is managed through the unique ID and metadata that no other token can replicate; therefore, it provides a clarity of ownership rights which facilitates the use of the rights against infringers. This allows the intellectual property rights of certain NFTs to be enforced through the law.

How to start investing in NFTs?

<a href=”https://www.freepik.com/vectors/money">Money vector created by freepik — www.freepik.com</a>

Investing in NFT can be in several ways; buying, creating and selling NFTs. Therefore, you’ll be able to reach the steps of all investing ways below.

Buying an NFT

You can start investing in NFTs by following these steps:

1.Digital Wallet

Firstly, you should have a digital wallet in store and control cryptocurrency and digital assets. You can use Metamask or something else.

2. Buy Some Cryptocurrency

As in thereal-world you should have some money in your wallet and it is cryptocurrency for the NFT marketplace. Since most NFT marketplaces are using the Ethereum Blockchain and its native cryptocurrency, ETH, you should buy some ETH to be able to buy an NFT.

3. An Account on an NFT Marketplace

To buy an NFT you should get in a marketplace where NFTs are listed for sale. Open Sea, Rarible, NBA Top Shot Marketplace are just a few of them. While you sign up to these marketplaces you will be asked to sync your digital wallet to the site.

4. Now You’re Ready to Buy Some NFTs

Once you’ve signed up and synced your digital wallet to the site you’ll be able to buy an NFT in the marketplace that you’ve entered.

Creating and Selling an NFT (Minting NFT)

<a href=’https://www.freepik.com/vectors/digital'>Digital vector created by freepik — www.freepik.com</a>

1. Choosing the Asset

An NFT linked with an asset which can be both real and digital world assets. The most important thing is the ownership of assets. You should make sure that you have the intellectual property rights or possible related rights of the item. Otherwise, it can cause a legal problem for you.

2. Choosing Blockchain

After choosing the asset, you should determine which blockchain technology you’ll use for your NFT. Ethereum is the most common blockchain technology among the NFT market.

3. Digital Wallet

You should have a digital wallet to store and control cryptocurrency and digital assets before you put your NFT on the market. You can use Metamask or something else.

4. An Account at an NFT Marketplace

To sell an NFT you should get in a marketplace where NFTs are listed for sale. Open Sea, Rarible, NBA Top Shot Marketplace are just a few of them. While you sign up to these marketplaces you will be asked to sync your digital wallet to the site.

5. Uploading File

The next step is the NFT minting, which refers to turning your asset into a digital asset. You should follow the steps of your chosen NFT marketplace. In the end of this process your asset is going to be a marketable NFT.

6. Setting up the Sale Process

Once you have created your NFT you now should decide how you want to monetize your NFT. It can be sold with a fixed price, in a timed auction or in an unlimited auction. You’ll also need to determine the conditions like minimum price, royalties, length of auction.

Conclusion

You can invest in NFTs by buying, creating and selling them.

As it has been stated before,the NFTs are linked with a real or digital asset. That asset may be subject to an Intellectual Property (IP) Right (trademark, design, copyright etc.); therefore, issues regarding IP law may arise. If you think to start investing in NFTs you should at least know what are the main issues. The main issues/legal risks are as following:

  • Does the NFT owner also hold the IP rights of linked asset(s)?
  • Which rights included on the transaction of an NFT (right of distribution, right of reproduction etc.)?
  • The technical or problems caused by the seller on delivery of the linked asset.

You should be careful while investing in NFTs and keep an eye on the market. NFTs are accepted as digital art; therefore, it’ll be better for you to have an understanding of the art-world and NFT market before starting to invest in them.

WACEO is a non-profit organization helps blockchain organizations to be legally compliant. It enters into contracts on behalf of blockchain organizations with service providers. It also provides support to stakeholders in the form of contracts, policies and procedures.

For more information on WACEO and our work and to keep yourself updated on the latest developments in blockchain organizations, visit our website.

Author: Turan Kocakaya

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