NFTs have been around for several years. However, the explosion of non-fungible tokens that happened in early May turned a niche market into a global industry.
Since then, the non-fungible markets have cooled. Still, many analysts agree that the true potential of non-fungible token technology has yet to be realized. It could therefore pay off to enter the market early as a creator.
If you are thinking of making an NFT, here are five of the most important things to keep in mind.
1. Where is your NFT sold?
It doesn’t matter what type of non-fungible token you want to make: people have minted tokens from songs, digital pictures, photos, memes, and even their own gaseous emissions and have managed to make good money.
However, you should consider where your NFT will be sold. While some NFT marketplaces allow anyone to make non-fungible tokens, a growing number of reputable platforms have a verification process for NFT makers. This is often an application process or a recommendation from another artist.
While ultimately it doesn’t make much difference where your NFT is created or sold, NFT marketplaces with more extensive artist review processes may attract more serious collectors than marketplaces that can be used by anyone. Therefore, depending on your needs as an NFT creator, it may be useful to look around for a platform that may or may not have an artist review process.
Beyond artistic verification, you may want to use an NFT platform that provides artists with some level of identity verification. With your identity verified, NFT collectors can rest assured that they are buying their non-fungible tokens from the source. It can also protect artists from plagiarism and identity theft.
2. Cost & fee structure
“There is no such thing as a free lunch”: The saying goes in the world of non-fungible tokens as much as it does anywhere else. While some NFT creation platforms offer the ability to create NFTs “for free,” somebody will have to pay the price at some point.
For example, some NFT platforms offer their users the ability to create non-fungible tokens without paying any upfront cost. However, your fees can be structured in such a way that the buyer of the NFT must pay the transaction fees that were used to mint the token upon purchase. Some platforms collect a portion of the NFT every time they are subsequently sold.
Depending on your needs as an NFT artist, such fee structures may or may not be suitable for you. For example, a non-fungible token maker who wants to create hundreds or thousands of NFTs based on a single piece of art may want to get in touch with a platform that allows them to do so with no upfront cost. Failure to do so could result in tens of thousands of dollars in gas charges.
Alternatively, if an author wants to make a single “master copy” of an NFT, they may prefer to contact a platform that charges up front but does not charge (or minimal) fees later.
The cost of creating an NFT can vary widely depending on which blockchain the marketplace is based on. For example, users of Ethereum-based NFT marketplaces may pay $ 20 to $ 80 per transaction (at press time), while users of a BSC-based NFT marketplace may pay just a few cents for a transaction.
3. The environmental debate about NFT production
It wasn’t long after non-fungible tokens became a cultural phenomenon that they received huge backlash, mostly because of their environmental footprint.
Critics argue that creating a non-fungible token has a high carbon footprint. They say the process of NFT creation is so toxic to the environment that it should be avoided altogether. Artist Memo Akten has compiled data showing that an artist who regularly creates NFTs can emit more than 163,000 kg of CO2 in a single year.
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However, proponents of the technology have indicated that the environmental problem of the NFT world is a nuanced issue. For example, not all blockchains are created equal. While the Ethereum blockchain (which is home to the largest NFT ecosystem) has a large carbon footprint, other, less energy-intensive blockchains also support NFT creation.
Other NFT proponents have pointed out that while the Ethereum blockchain consumes a lot of energy, the relationship between transactions on the network and the network’s carbon footprint is not necessarily clear.
In a blog post published earlier this year, the NFT platform SuperRare stated, “It’s important to note that Ethereum has a fixed energy consumption at a given point in time.” In other words, “While the network is constantly processing transactions (financial deals, NFT minting etc.), these transactions do not really increase or affect the energy consumption of the network. “
Additionally, the Ethereum network is currently being upgraded to Ethereum 2.0, a newer version of the network that will have a much smaller carbon footprint than the current iteration of Ethereum. According to reports, some artists are waiting for the upgrade to complete before diving into the NFT world for the first time.
4. Market volatility
When NFTs first appeared in early March 2021, all eyes were on the non-fungible token space. Suddenly they all did. When the NFT market peaked in the first week of May, NFTs traded $ 170 million in seven days. However, during the seven-day period at the end of the month, only $ 19.4 million in NFT sales were recorded. Overall, the decline corresponded to a slump of 90 percent.
As the NFT market cooled, prices fell towards the bottom. Investors who may have paid top dollars on NFTs when the market peaked stayed in hand. As a result, interest in non-fungible tokens appears to be waning, and it is unclear when (or if) it will recover.
Therefore, when considering creating a single NFT or a series of tokens, it is important to consider the risk / reward ratio. While your risks as a creator can be minimal compared to the risks investors take in purchasing non-fungible tokens, the time and money you invest in creating the NFT doesn’t necessarily translate into a ton of money.
One strategy to mitigate the potential impact of market volatility on your NFT sales is to build strong relationships with the fans and investors who buy your work. While The Powers That Be will always play a role in any financial market, building community around the things you create can help strengthen your personal economy in the face of uncontrollable market forces.
5. Fraud, Security, and Identity
Like any emerging market, the NFT space still has some problems to solve. In addition to the environmental concerns regarding the non-fungible token creation, the issues of fraud and plagiarism are a major concern for artists in the room.
Unfortunately, there are many instances of malicious actors copying the work of small artists and creating NFTs from it that will benefit them. While identity verification has mitigated this problem to some extent on some platforms, there is always a risk that the work will be copied.
Worse, affected YouTubers may not be able to do much about it. Moish E. Peltz, Esq, chairman of the Intellectual Property Practice Group at Falcon Rappaport & Berkman PLLC, told Finance Magnates that in this case, it “could be incredibly difficult, or perhaps even impossible, to mine (or otherwise enforce). Your intellectual property rights), ”explained Peltz.
“As far as the token is listed on a platform, it is unclear to what extent traditional takedown mechanisms such as the DMCA apply to NFT platforms and how different platforms react to such submissions for violations,” he continued.
“Also, it can be extremely difficult, impossible, or simply economically feasible to prosecute random copycats who duplicate your intellectual property within an NFT. However, provided you can identify an infringer, it may still be possible to use traditional IP rules to remediate the infringement of your work. “
So if anyone in the NFT world is impersonating their work, it is best to contact the platform on which the NFTs are sold right away.