How to Create NFT Art
NFTs NFTs NFTs! NFT art has arguably been the best thing about 2021. Crypto's most dearly loved baby girl has been booming ever since she was introduced to the world. No denying this digital asset could be the biggest thing to revolutionise the world since the internet was conceived. Yes, truly fantastic. That is what NFT (or Non-Fungible Token) art is set to become as it grows in popularity across the globe. It is the latest in fintech and artificial intelligence that can validate the authenticity of any digital file in the form of art, music, video games, etc. made by a creator or digital artist. It is also becoming a gold rush everyone is invited to, from artists to any mammal with a pulse that can use Photoshop. There is a rapidly growing interest as to why the NFT craze is the talk of the town.
What Makes NFT Art Desirable?
What makes NFT art so desirable? Addressing the elephant in the room is the fact it's a very lucrative market right now. Crypto art is significantly responsible for why the blockchain industry is soaring. DappRadar reported how NFTs peaked at over NZD34.04 billion (USD23 billion) in trading volumes for the fourth quarter of 2021. NFT sales have soared exponentially. In the 3rd quarter of 2021, NFTs generated NZD15.24 billion (USD10.67) in trading volume. That’s an increase of 704% from the 2nd Quarter of 2021. Previously, NFT trading volume grew 25% each quarter for the last three quarters. From Q3 2020 to Q3 2021, year-on-year trading volume rose an astronomical 38,060%! Where was I during all this madness? Its demand is off the charts! With such figures, investors are attracted because they speculate NFT art will continue to increase in value. Still not convinced? NFT trading volumes for the 4th quarter make it bigger than McDonald’s!
Furthermore, media outlets circulating the story of digital artist Mike Winkelmann, a.k.a Beeple, selling an NFT for NZD95.22 million to Vignesh Sundaresan on 11th March last year certainly added to people's NFT curiosity. Even though it took the highly talented artist over 13 years to create the collection (hence the name Everydays - The first 5000 days), the fact they are non-fungible tokens piqued interest in digital content. Another project that added fuel to the NFT hype train was Chris Torres’ Nyan Cat, a GIF he created in 2011 and remastered into an NFT in early 2021 sold for almost NZD796,500! Seeing this happen made everyone believe they can draw a basic JPEG image and make absurd profits, thus propelling NFT art mania.
From an NFT artist perspective, NFTs have revitalised an industry on life support. Selling art is tough, so for the art world to be highly profitable in the past year has really incentivised creators. Blockchain not only verifies ownership, but digital artists can now receive royalties each time their art is sold in the NFT marketplace. Thanks to blockchain technology, many people believe justice has finally been brought to the art community.
Legal Implications NFT Sales; Yes, You Over There!
Crypto-assets' definition and tax rules don’t apply to NFTs, but that doesn’t mean there’s no taxation for those selling them. The New Zealand Inland Revenue (IRD) hasn’t clearly stated that NFTs are taxed. Nonetheless, it’s advised to consult them. The New Zealand Parliamentary Counsel Office has said in the Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill crypto assets are excluded from Goods and Services Tax. However, it’s crucial to note that GST of 15% applies to New Zealand residents buying NFTs.
In terms of having a different perspective, Malta-based law firm WH Partners highly recommends hiring a lawyer and seeking professional advice regarding the legality of selling NFTs. Such advice can help define NFT digital art as 1) a financial instrument because a security backs it and 2) abides with Intellectual Property or copyright laws giving the content creator image rights and rights reserved. I.P. is quite tricky because even though the buyer purchases an NFT, the exclusive rights aren’t purchased with it unless the contract specifies it.
Having NFTs clearly defined in a smart contract can aid someone selling one in complying with Intellectual Property (I.P) and copyright laws. A Smart contract can clearly state the original creator, the current owner, and who owns exclusive image credit and reserved rights. This will help avoid any issues that would have gone to court. An NFT smart contract can have conditions written to address these two issues that decide if an NFT sale is legal or illegal. A smart contract of the NFT sale should specify if the client is acquiring the digital asset as a licence to use or as I.P. Furthermore, the issuer also needs to provide the ownership of the I.P being sold or licenced.
Tools Needed to Create NFT Artwork
Now we’re aware of the risks, let's create the Mona Lisa of digital artwork. The marketplace where the NFT is eventually sold often gives the option to use a generic NFT token or create one from scratch.
Decide on a Concept; It’s Not Russian Roulette
It's important to know what type of art you want to make. NFT Art can be 3D art, digital, contemporary, photo painting etc. Even a physical drawing is OK, as long as there’s a digital file. There are many free options for creating digital art. Software such as KRITA, Sketchpad etc., are ideal for everyone. However, using Adobe Photoshop for NZD31.35/month is worth it because there are more tools to work with. After creating your work, save it as a digital file on a computer, phone etc. You'll then upload it to an NFT marketplace (discussed soon).
Gas Prices on the Rise, Be Sure to Invoice BP
The cost associated with creating an NFT is Gas fees. No relation to petrol. These ether fees are incurred by anyone minting (certifying/authenticating) an NFT on the Ethereum blockchain. A significant amount of input is required for a computer minting NFT information to the Ethereum blockchain. Input refers to the services of Ethereum miners when verifying and processing commands on the blockchain. Their fee for conducting this work is known as gas fees.
As a digital artist, the gas fees you will have to pay fluctuate based on the supply and demand for processing power. This is really important as you are expected to pay gas fees somewhere between NZD37.43 to NZD149.70 in ether (as of 25th January). It’s crucial to set a gas limit that states how many gas units you must purchase for the transaction. It’s more efficient to pay a higher gas fee to execute faster transactions. Failure to do this runs the risk of your transaction not being processed, and you can lose the gas fees you paid initially. The last item to note with all of the above is there's no guarantee anyone will purchase your NFT art.
Selecting a Crypto Wallet: Mine Is Half Robocop and Cow
The next step is creating an account on an NFT marketplace/platform. This is done by setting up a crypto wallet. A digital wallet ensures the safeguard of private keys and facilitates the transacting and storage of tokens. It's a requirement to use a wallet compatible with the same blockchain network as your cryptocurrency. For example, selling NFTs on a platform such as OpenSea requires a digital wallet that supports Ethereum since OpenSea uses the Ethereum blockchain. Digital wallets compatible with OpenSea include Metamask wallet, Coinbase Wallet and TrustWallet, to name a few.
Connecting the wallet to the platform is a simple process of copying and pasting your wallet address. Note there should already be the appropriate amount of crypto in the wallet. Once the account is complete, there are two options: uploading the digital file (to be minted as an NFT) or using a generic token already on the NFT marketplace. Next, the creator sets the price for the auction bid. The last step is minting the NFT information. The most used network is Ethereum, as mentioned earlier. The platform sends a notification to the crypto wallet confirming you made an order to mint the NFT. You must pay a transaction fee from the crypto wallet to execute this request.
How to Market and Sell Your NFT Art
1) Marketing NFT Art
Directly from Mike Winkelmann himself, sharing your digital content for free on social media is the best form of marketing. Let your art piece speak for itself and engage with your social following as much as possible. Don't try to sell an NFT straight away. People are attracted to people, not robot salespeople. A community/audience is created for the love of an NFT collection. The demand for the NFT may rise, thus increasing its value. More tips on marketing an NFT: consider using social media influencers and article reviews. In such situations, it would be wise to have an NFT that is unique or has utility because having some kind of purpose is valuable. A generic NFT does more harm than good.
2) Selling NFT Art
2.1) The NFT Marketplace
In more detail, it's important to discuss NFT platforms or marketplaces. The choices are limitless to sell digital art. The most popular is OpenSea. It should be noted some marketplaces such as OpenSea require payment for initialising one's account. An estimate of this fee can be anywhere from NZD74.75 to NZD448.52.
A second recommendation would be Rarible. These two platforms are the largest markets of NFT collectables, boasting a plethora of digital assets. What makes these two marketplaces more attractive is that digital art can be created and listed on an auction via the art of lazy minting without paying any gas fees. Yes, genuinely fantastic.
The next platform to recommend is Nifty Gateway. It’s a platform for the real NFT artist - a market that upholds prestige and integrity in the NFT space.
The 4th and final NFT platform is Litho. Launched by NZ-based CENNZnet, Litho is the world's only user-first blockchain technology, which means digital artists create NFT artwork based on how the customers want them to look.
2.2) A List Showing All the Revenue and Expenses
Whichever marketplace you choose, consider the trading/ listing fees incurred for NFT sellers and creators before the sale. Fees vary based on the marketplace.
From the experience of a digital artist selling NFTs, an accurate illustration of the revenues and expenses of a creator selling nonfungible tokens will be the following:
*Note that the figures and percentages used are not considered the official revenues and expenses incurred by the NFT artist and are for illustration purposes. Not all revenues/expenditures will be included in an NFT marketplace.
- Primary sale
- Secondary sale (-5% fee for buyer)
- Royalties (10% to original creator)
- Gas fee (*subject to Gas limit)
- One-time initialising fee (if required)
- Listing fee
- Claim fee
- 15% of primary sale allocated to platform
- Artist net profit = total revenue-total expenses.
Now let's use an example of selling an NFT project on Foundation (an NFT platform) using a Coinbase Wallet.
e.g. Primary sale Price is NZ$500
Mint Price: -NZ$70
Listing fee: -NZ$80
Foundation: NZ$75 *(This is 15% of primary sale allocated to Foundation)
Total Expenses = NZ$245
Artist net profit = NZ$500 - NZ$ 245 =NZ$255
Once the digital art has been created; an audience that wants to purchase the Non-Fungible Token has successfully been built; an account on a suitable platform has been created, and related costs and revenues have been assessed; it's finally time to sell that crypto art!
To make it very clear, aspiring NFT creators should walk into the art world with their eyes wide open. Creating NFT art should be seen as an opportunity to create a digital asset with utility. Don't buy into the NFT craze blindly; just because crypto isn’t fully regulated doesn’t mean common sense should fly out the window. You should handle technology with the potential to revolutionise entire industries with care.
Now enough about NFTs! Actually, one last time because they’re really cool. NFTs NFTs NFTs!
About the author:
The above references an opinion and is for informational purposes only. Do not take this as personalised financial advice or investment advice. The views expressed by the author do not necessarily represent the opinion of BitPrime.
Last updated: 25/02/2022