NFT 101 — let me simplify NFTs for you

Background info

What are NFTs?

NFT stands for Non-Fungible Token. NFTs are digital assets stored on a blockchain, showcasing proof of ownership. NFTs can be bought or sold on platforms such as OpenSea, Rarible and more.

In order to purchase NFTs on such exchanges, you will need to have a wallet.

What is a wallet?

A cryptocurrency wallet is a digital wallet that allows users to manage, use and trade their cryptocurrencies, while also serving as a storage and management tool for your NFTs.

The most popular wallet to use and one of the easiest to set up is MetaMask. MetaMask is also one of the most compatible wallets for NFT projects and exchanges alike.

Here's the link to getting started on MetaMask: https://docs.metamask.io/guide/getting-started.html

Funding your wallet

There are two main ways to fund your MetaMask wallet, both methods of which will be shared here

Purchasing cryptocurrency in MetaMask

Open your MetaMask wallet by clicking the extension icon in your browser
Click ‘Buy’ and you will be presented with 2 options, two of which involve purchasing cryptocurrency in MetaMask:
Buy ETH with Wyre - this allows you to use a debit card to complete the purchase of ETH
Buy ETH with Transak - this allows you to use a debit card or bank transfer to complete the purchase of ETH
Once done, check your transaction history for a proof of purchase, and if successful, the ETH will appear in your wallet shortly
As these are third-party tools MetaMask charges a premium for purchasing ETH via the above two options.

There is a third and more cost-effective option, as follows:

Sending cryptocurrency into your wallet from an exchange

By purchasing cryptocurrencies on an exchange such as Coinbase or Binance, you are able to send the supported currency to your MetaMask wallet
On your cryptocurrency exchange’s interface, there will be an option for you to ‘send’ cryptocurrency
Click ‘send’, select the cryptocurrency you wish to transfer and enter your MetaMask address into the ‘To’ field
You are able to copy and paste your address from the MetaMask extension at the click of a button
When sending cryptocurrency into your MetaMask wallet, users are required to pay a certain gas fee, which is the IRL equivalent of a transaction fee/ shipping fee

Getting your NFT

This is split into two parts, minting and purchasing on exchanges

Minting your NFT

When projects are launching, the team will announce information regarding how you can mint your NFT
Please make sure that you only follow the instructions given by the team on how, when and where to mint your NFT
On launch day, head over to the project’s website where you will be required to follow certain instructions
Connect your wallet to the website and check your eligibility to mint. If you are eligible,
Enter your desired mint amount (projects will usually allocate between 1 - 10 mints to each wallet) and click ‘Mint’
A MetaMask popup will appear from your browser extension telling you:
1. ETH required to mint your desired amount of NFTs
2. ‘Suggested gas fee’ to pay
3. Total maximum amount of ETH required to mint your NFTs
Click ‘Reject’ to stop the transaction or ‘Confirm’ to proceed with minting
After clicking ‘Confirm’ the transaction has been sent for confirmation on the blockchain and if successful, your NFT will show up in your wallet shortly.

Purchasing your NFT on exchanges

The most popular exchange to purchase or sell NFTs is OpenSea

Head to Opensea.io and click the OpenSea profile icon at the top right
Click ‘Profile’ and you will be prompted by your MetaMask extension to complete several steps
Upon reaching the final prompt, click ‘Sign’ and your account will be created!
In the search bar, look for the project whose NFT you wish to purchase and proceed to the project page

At this point, it is imperative that you select the official project OpenSea page
It is recommended that you only follow official links from the projects Twitter or Discord channels

Once you find the NFT you wish to purchase, click on the image/ video
If it is available for purchase, click ‘Buy Now’; which will trigger a pop up where you will be required to agree to T&Cs before clicking ‘Checkout’
A popup will emerge from the MetaMask extension showing the ETH to pay for purchasing the NFT along with a quote for Gas fees
Should you have enough cryptocurrency, click ‘Confirm’ and your transaction will be processed
If successful, your NFT will show up in your wallet and in your OpenSea profile

Safety

MetaMask is a hot wallet, meaning it's connected to internet and can be hacked. In the past year a lot of collectors lost their NFTs either via social engineering or interacting with smart contracts created by bad actors.
This is why I suggest you to set up a cold wallet. A cold wallet is a wallet that is not connected to internet and it's an actual hardware wallet. The most popular ones are Ledger https://www.ledger.com/ and Trezor https://trezor.io/

Another layer of security would be to spread your NFTs across multiple wallets so in case you're getting hacked you won't lose all of them. But this doesn't mean you need to keep a spreadsheet with all of them or forget them somewhere. You can use https://floordle.app/ to sync your wallets and view all your NFTs in one place. Floordle will only read your public available data and will never ask for your private keys or mnemonic phrase.

Cryptocurrency/NFT jargon

Gas
Refers to the fee required to successfully complete a transaction, including minting or trading NFTs. Gas fees are dependent on the supply and demand for the computational power of the network

Gas War
Refers to a surge in gas prices, caused when the demand for computational power massively outstrips supply. Caused by a large amount of transactions looking to get confirmed within a small time frame. The higher the gas paid, the higher the priority of the transaction to be confirmed.

Minting
The process in which a digital art piece becomes a part of the blockchain, a public ledger that is tamper-proof. The art piece then becomes an NFT which shows proof of ownership and is able to be easily purchased and transacted in the market

Whitelist/ pre-sale
A modification to the sale of the NFT such that only specific individuals/ wallet addresses can mint NFTs of a project. This prevents the public from participating and at the same time, prevents a gas war

Utility
Referred to as the ‘usefulness’ of holding an NFT. Some projects have utility that grants unique perks to holders of a specific NFT collection such as derivative projects, airdrops or exclusive merchandise

Useful resources:

The industry is moving fast, and sometimes you might get overwhelmed with all the new terms. This is why consensys put up a glossary
https://consensys.net/knowledge-base/a-blockchain-glossary-for-beginners/
https://metamask.zendesk.com/hc/en-us/articles/360015489611 - Basics of Blockchain and Ethereum
https://floordle.app/ - NFT collections tracker

Say something nice to lamperoyge…

3

This is super simple and helpful, thank you!

Here's a question: Are NFTs really worth it? I mean, outside of trying to make some money. I read an analogy somewhere that it's like taking a photo of the Mona Lisa, hanging it up in your closet where no one can see it, and cutting down a rainforest to do it.

midwestFounder

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5 years ago
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  NFTs can work like any other speculative asset, where you buy it and hope that the value of it goes up one day, so you can sell it for a profit, but.. one of the benefits of buying art is it lets you financially support artists you like.
  
  Buying an NFT also usually gets you some basic usage rights, like being able to post the image online, set it as your profile picture, or of course bragging rights that you own the art, with a blockchain entry to back it up:))
  
  capusniac
  
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  5 years ago
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    Also, usage-rights are not baked into NFTs. Intellectual property is a social contract (ask the people who were minting Magic the Gathering cards about this). If you have an NFT, you do not own the usage rights to that work. You can't print it on t-shirts and sell them. All you have is a receipt of purchase which you can brag about on twitter.
    
    HermanMartinus
    
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    5 years ago
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    That isn't entirely true. Artists have come out en-masse against NFTs since it's rampant with other people minting their artwork without permission, and causing people to speculate on instead of appreciate their art. Not to mention the climate impact.
    
    The reason I can say this with confidence is that I run a SaaS that caters explicitly to artists, and when Gumroad (our payment provider) discussed potentially supporting NFTs artists started boycotting Gumroad which lead to the highest month of churn my company has ever had :D
    
    HermanMartinus
    
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    5 years ago
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      Yeah, that’s why I said basic usage rights. Although it depends on the terms set by the artist. You can give the buyer printing rights if it is agreed upon.
      
      I believe we’ll see NFTs used completely different from how they’re used today, especially with the evolution of Metaverse.
      
      NFTs can include functionalities and rewards with the actual asset. Depending on who’s selling it, an experience or a physical component can be sold behind each NFT.
      
      capusniac
      
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      5 years ago
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    This comment was deleted 4 years ago
    
    DeletedUser
    
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    5 years ago
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Awesome piece, lamperoyge!

I'd like to add a bit of security information for people who are new in the NFT world:
1. If you have an issue with your wallet and/or the Marketplaces that you are using; NEVER post your problem on a public forum / chat group. Scammers are literally lurking everywhere, waiting for someone with a question. Once they see someone asking a question, they'll approach them using different tricks & methods.
Always use the wallet / marketplace official & private channel to communicate (maybe Zendesk)
1. Never share your seed phrase / recovery phrase with anyone. Not even to the person who claims to be a representative from your wallet / marketplace. When someone has your wallet's seed phrase / recovery phrase, they have full access of your assets.
2. Most of the NFT communities exist in Discord.. Best way to browse is by joining the marketplace's Discord Server and then scout interesting projects there :)
3. Don't forget to have fun!
izzurel

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5 years ago
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NFT 102: Start making NFTs
NFT 103: Market them

Put up a guide for the second one
https://flurly.com/p/nft-launch

pooriaarab

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5 years ago
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1

Was looking for a simple walk-through. This was super helpful! Thanks. What implications does this have tax wise. Probably depends on the country you live in, but I'd love to get your thoughts if any.

rishoutloud

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5 years ago
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  Hey, sorry for the late reply
  
  Minting NFTs does not trigger a tax event, while selling one for crypto does. Will prepare a guide for this these days and post it here
  
  lamperoyge
  
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  4 years ago
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