What are NFTs, and how do they work? – Guide for Beginners

What are NFTs, and how do they work?

Deals with non-fungible assets from January to July 2021 increased to $ 2.5 billion, which is 26 times more than in the previous 12 months ($ 95 million). Interest in the new type of tokens is growing. This is due to the uniqueness of the technology, which allows you to confirm the ownership of the digitized object. Anyone can create an NFT token for free and get an artifact from a picture, music file, gif, or NBA card. This action is performed on special services, and then the asset is put up for trading there or on other platforms.

What is an NFT token?

Even people who are not interested in cryptocurrencies know about the existence of Bitcoin. But NFT is different from a regular asset. This is a certificate of ownership.

Each unique token has an identifier in the block, allowing it to be distinguished from many others. All information about the creator is stored in the blockchain and cannot be changed or falsified.

What can be turned into NFT?

Non-fungible tokens were first created in 2017 on the Ethereum blockchain. Then Larva Labs released a collection of CryptoPunks cards, each of which cost from $ 0.5 to $ 5. They are selling for hundreds of thousands of dollars in 2021. And this is not the only example of how digital material gains value.

You can turn into NFT:

  • objects of art – paintings, photographs, books;
  • research results, analytical data;
  • insurance policies and other financial instruments;
  • game items – characters, equipment;
  • domain names;
  • virtual and physical real estate;
  • collections of drawings, stamps, and other objects from the real world;
  • music files, pictures, gif-animations, and more.

Unique crypto assets have gained a lot of popularity due to their connection with art. The new technology has become an opportunity for artists to make money from sales outside of traditional auctions and exhibitions. For example, Mike Winkelmann combined 5 thousand of his paintings into one NFT. The collage was sold at Christie’s auction for $ 69 million. And artist Pokras Lampas received $ 28,000 for a photo of the Chirkeyskaya HPP in Dagestan. The picture was taken with a regular smartphone.

How much does it cost to make an NFT?

The most popular platforms for working with non-fungible tokens are OpenSea, Rarible, and Mintable. They have all the conditions for creating your own NFTs. You just need to connect the wallet and take the content that will be tied to the token. Additionally, you can confirm the right in WIPO PROOF – the World Intellectual Property Organization (WIPO) at the UN.

However, you first need to choose the blockchain on which the crypto asset will be created. Among the demanded are the following:

  • Ethereum;
  • Binance Smart Chain (BSC);
  • Tron.

Anyone can make an NFT token for free and sell it on platforms that run on the same blockchain network.

Selection and cost estimation

The crypto market is highly volatile. It is almost impossible to objectively evaluate the work. But the main criterion that can attract NFT buyers is the name of the author. Therefore, many aspiring artists work with large companies. This is how collectible cards from gaming organizations (NBA Top Shot), unique editions of drawings (The Boys), and other items can be worth millions of dollars.

In this area, originality and an aesthetic component are valuable. Capturing the attention of the audience is one of the main tasks of the developers of a product that needs to be created and sold. An exception is a situation when an object from the real world is transferred to the format of a non-fungible token. As a rule, it already has a certain value.

PDF document

The legal model for the creation of the NFT was developed in accordance with the requirements of the Paris Convention for the Protection of Industrial Property and a new instrument of WIPO with the UN. Ownership of NFT can be verified using a PDF document that is electronically signed by its author. The file will become real proof of ownership.


Anyone can create a PDF. In order to legally protect the ownership right, it is worth going through verification on the official WIPO-PROOF website. For this, you need:

  • register in the system;
  • upload a file;
  • add a description of the asset;
  • pay a commission from the wallet.

The cost of the service is 20 CHF ($ 21.6). The user will receive a WIPO token as proof.

Conversion to NFT

It is free to register digital collections on special platforms. The cost of creating an NFT is tied to the cost of the gas required for the transaction.

On some projects, you can make artifacts without commission.

To convert the intellectual property to NFT format, you will need:

  1. Register on one of the popular platforms (Rarible, OpenSea, and others).
  2. Go to the Create section and start the procedure.
  3. On the Metadata page, add a description of the piece and set a price. It is also necessary to indicate the IPFS link to the public offer agreement signed by the author.
  4. Add the WIPO token address obtained as proof of content ownership.
  5. If an asset is tied to an invention, then it is worth adding a report from an international patent attorney, which will confirm the novelty of the product and provide information about intellectual property.
  6. In the private description of Unlockable Content (available only for a client who bought NFT), indicate a link to the original object.
  7. Pay the commission (gas) that is used to create.
  8. Get a link to a token.

It is better to disassemble the nuances of placing certain types of digital property on your own. As an example, you can take several similar lots on a selected platform to issue a unique NFT.

Sell NFT, and it needs to be placed on one of the marketplaces. In 2021, the following services were popular in sales:

  1. OpenSea is the largest marketplace with domain names, images, game items, and more. Both large projects (CryptoPunk) and ordinary users sell works here. An artifact can be valued from a few hundred to several hundred thousand dollars.
  2. Mintable is a platform for creating and selling unique crypto assets and collections. Charges users for each user action of the MINT coin.
  3. Rarible is a Russian art-oriented project. Artists and musicians exhibit their works here.

You can find many more projects with similar functionality: SuperRare, Foundation, Async Art, and others. The priority is a large audience that influences sales. The most popular lots on Rarible and OpenSea are bought in the first minutes after publication.

Why buy NFT?

There are at least five reasons to buy NFT:

  1. Participation in the formation of a new cultural paradigm. NFT democratizes the digital art market as much as possible, and gives way to experimenters and innovators.
  2. An opportunity to invest in NFT as an increasingly popular asset. As collector Priyanka Desai points out, the narrowness makes NFT an attractive asset. With the help of these tokens, a person is able to get something “beautiful, unique and special” – a piece of the Internet that belongs only to him.
  3. NFTs allow you to support a particular creative community directly. For example, there are collectors supporting the crypto art of black artists.
  4. With the help of NFT, anyone can become a collector. You can even build your personal virtual gallery with spaces like SomniumSpace and Cryptovoxels.
  5. An evolving, unlimited ecosystem. Anyone can build a platform or hardware to support NFT.

Where is NFT already working, and how it is changing these areas?

NFT is used in many different areas of the crypto-industry and even goes beyond it.


Games are now the largest sector of the digital economy, with many completely non-interchangeable items. And they can greatly benefit from the implementation of NFT. Each in-game item becomes more valuable by being tokenized. This means that game itself becomes more valuable for the user. And developers will no longer be forced to apply complex models to pump money out of the player.

NFT and blockchain enable the Earn-to-Play model in games.

To withdraw funds, you have to use unofficial marketplaces, where there is little trust for both the seller and the buyer.

Any asset in a blockchain game is easily transferable by nature. Therefore, games can become a real income for many. In the most famous crypto game Axie Infinity, some players from third-world countries earn more than they would earn offline.

Best projects:

  1. Axie Infinity is the largest crypto game ever. We need to breed mythical creatures, Axie. They were inspired by the Pokemon universe. Pets can fight. For them, you can buy land and build your kingdom.
  2. Gods Unchained is a classic card collecting game.
  3. Neon District is a cyberpunk RPG.
  4. Sorare is a football manager combined with collecting.
  5. CryptoKitties is a CryptoKitties breeding game. Actually, it all started with her.


Thanks to the blockchain, artists have received financial support that allows them to devote all their free time to creativity. And also to explore with its help those changes that are taking place in society.

Some digital artists deny singling out “crypto art” as a separate area. The choice of themes, styles, and artistic techniques, all creates a rather homogeneous world, for which it is already possible to single out a separate term “crypto art”, although not yet fully formed.

The programmability of NFT allows, for example, to make royalties automatic. That is, will be able to receive% of each resale of his work. And this will not depend on the willingness or unwillingness of the intermediary to pay him. The commission is spelled out in the smart contract and will go to the crypto wallet automatically.

The record was the sale of the painting “Everyday’s: The First 5000 Days” by artist Mike Winkelmann (known as Beeple). The JPG file, consisting of all the images that the artist painted daily for five thousand days, was sold for $ 69.3 million. Winkelmann’s painting was the first NFT-work sold in the history of the auction house Christie’s.

Best projects:

  1. SuperRare is one of the first sites. For rare editions of digital works. The high average quality of work and prices. There is pre-moderation.
  2. NiftyGateway is a top marketplace for crypto arts. Mass drops are possible when one work is sold in several copies, and separately one VIP version is priced more expensive. On this site, most of the sales of the largest in terms of the amount of proceeds are organized—strict pre-moderation.
  3. Foundation is a young pre-moderated platform.
  4. Rarible is the most democratic platform. Anyone can tokenize their work. Rarible is used not only for crypto art. This is a marketplace for any NFT.
  5. OpenSea is the largest NFT and crypto arts marketplace in particular. Mostly secondary sales are made on OpenSea. It is less convenient to promote them on OpenSea. But if you rely on your subscribers, OpenSea is a great choice.

Notable digital artists:

  • Beeple;
  • Coldie;
  • MBSJQ;
  • Muratpak;
  • Hackatao;
  • Fewocius.

Outlook: Does NFT Have a Future?

Thanks to the digital royalty system (endless income for content creators), NFT is a natural extension of platforms for creators like Patreon. When an artist or musician creates an NFT, they give their fans an additional opportunity to express their approval and affection. This is a kind of artifact that has value for fans. However, unlike a regular physical souvenir, NFT does not just give the author a one-time bonus but provides him with endless income from further sales.

Actor William Shatner believes that NFT is the coin of the future and a real phenomenon for selling rare items on the Internet. In 2020, 89-year-old Shatner sold some memorabilia in the form of virtual trading cards on the Wax blockchain (there were also cards such as dental x-rays or candid photos). It took only 9 minutes for all the objects to be sold. Shatner’s head shot, for example, went for $ 6,800.

Many compare the current situation to the ICO bubble in 2017, predicting all NFTs will zero out in the coming months. In fact, there is definitely much more benefit here. The main thing is not to forget that any alternative markets are high-risk, so you need to invest with caution.


Why buy NFT?

By purchasing non-fungible tokens, the user obtains ownership of the content related to them. At the same time, the content still remains free: anyone can download, watch, or listen to it. The more content spreads on the World Wide Web, the more attention to it, the higher the interest, and the higher the cultural value.

How is NFT different from a regular asset?

This is a certificate of ownership. Each unique token has a number that identifies it among many others. All information about the creator is stored in the blockchain and cannot be changed or falsified.

Where to sell NFT?

Well-known marketplaces offer great trading opportunities. Transactions take place in the format of auctions or P2P (between buyer and seller). All interested users can participate in the auction. Marketplaces are divided into general (OpenSea) and have a specific format (Rarible). An alternative option is closed areas. Only approved authors can publish on them. It is impossible to sell an image or other work without prior moderation.

The NFT - WTF?