The Ultimate Beginner’s guide to NFTs
I absolutely love NFTs and have been collecting since March 2018. I have been able to learn a lot over that time and would love to share that knowledge to make it easier for you to dive into this amazing world! This may be overwhelming at first, but can serve as a resource for you to keep coming back to as you fall further down the rabbit hole.
What do I do first?
Download the Metamask Chrome extension. This will enable you to surf Web3 apps and connect and transact on them. Check out security below for more details before you get started
Set up an account on an exchange. Coinbase or Gemini are good options. Buy Ether and send it from the exchange to your metamask wallet.
Now what do I do?
Check out Opensea and look around. It is not all that intuitive though to understand what you are buying, so let’s get into that a little more.
ERC20, ERC721, ERC1155- I’m confused!
Cryptokitties was the first NFT to use the new ERC721 standard- this is a token standard that allows for identifying tokens as unique or “non-fungible.” Prior to that ERC20 tokens were used, but these are meant to be fungible, or interchangeable (like tokens traded on an exchange). Crypotpunks was one of the first NFTs made on Ethereum and used ERC20 tokens with unique ID’s in their metadata to differentiate them. But sites like opensea cannot recognize that, and thus they must be “wrapped” inside an ERC721 token to be tradeable as an NFT.
ERC1155 is a more recent standard that came out initially for gaming which are best described as “semi-fungible.” You can make 100 NFTs that are all the same. The advantage is that they can be bulk minted and transferred to save on gas costs. They also can use a shared contract (like the opensea shared store contract) rather than using their own custom contract (like ERC721 tokens require). On Opensea you will see them appear like this:
You will see a listings section and an offers section- these are global offers meaning any owner can accept one as these tokens are all identical. There are no serial numbers. If you are curious, click the contract address and it takes you to etherscan.io where you can see it in more detail. Click “contract” and you will see that this is a contract created by fortune magazine rather than the OS shared contract. This is usually considered favorable as it is a more customized contract.
What is Gas?
Gas is the fee that Ethereum Miners charge you for the transaction they are carrying out on the blockchain. Transfers of an NFT from one wallet to another (buying and selling) cost less than minting; minting is when you run a transaction on the smart contract to create your token and uses more computational power than just transferring. Gas is paid to the miner everytime you run a transaction. Metamask will predict what the gas fee is and suggest one:
Sometimes you need to manually increase the gas amount to ensure the transaction happens fast enough to prevent someone else from “sniping” your mint or to ensure the transaction happens quickly if you are in a hurry.
Ok, but what exactly is an NFT anyway?
short answer: NFTs are digitally scarce assets, usually pictures (jpegs) or short movies (gifs) +/- audio (mp3). They utilize a blockchain (usually Ethereum) to make them digitally scarce (prove unique ownership). If you own one, only you can authorize the transfer of that asset to someone else (either as a gift or in exchange for another asset like ETH or another NFT).
Long answer: it’s more complicated. Come back to this part later! But what you usually are buying is a digitally scarce or unique token- but a token is merely a digital ledger entry that assigns ownership to a wallet address. The NFT is the image/video/sound that is assigned to this token. The token metadata usually contains a link to wherever that image is hosted on the internet. Some versions of this are better than others. The best way is to have something like this as part of your custom contract:
https://arweave.net/VeuugH4Hx8X9URCn7ojv8WjxRue5A82Nm1G47YhIb8Q
which in turn leads you to this:
The first is the arweave link (this is a decentralized site that will forever host this image and its metadata hashed and thus protected from ever being changed after the fact)
the second is the link to the actual image. This way, no matter what happens to Opensea or any other hosting site, the image is forever locked to this token. As long as Ethereum lives it lives.
An even cooler way is to have the image itself hosted on-chain. The term on-chain generative art refers to art that can be created from using a simple script that takes the input from the token metadata (that is actually on the Ethereum blockchain) and creates the image in your browser. It does not need to pull from a hosted image but rather creates the image right then and there. artblocks.io and avastars use this (see “What is Generative Art?” below). Almost all NFTs, however, are not fully on-chain as it is too complicated to do so.
The Opensea shared storefront is more opaque- you cannot really verify where the metadata is stored. These tokens rely on Opensea existing. Theoretically if Opensea went under, your precious jpegs would be lost. Your token in your wallet would point to a broken link. REKT.
hic et nunc is an NFT platform on the Tezos blockchain. It uses POS (proof of stake) rather than POW (proof of work) to mine it’s blocks and secure the network. This is not dependent on using massive amounts of energy like Bitcoin and Ethereum do. It also has gas fees that are pennies per transaction. It has a very different feel than Opensea- check it out!
The site is quite primitive- you cannot (as of now) follow artists or sort in anyway- what you see is what you get. Browse and if you see something you like you can click on the creator and check out their other stuff. It often won’t fully load and crashes often. But the art is fantastic and often quite affordable. There are other sites that browse the contract better:
you will need a temple wallet and some tezos to get started. I made a video to help:
you can buy tezos on Coinbase and send to your temple wallet just like you would send eth to Metamask
Security
It is best to start off doing it right- otherwise your collection may grow beyond your wildest dreams and suddenly you have way too much money invested to not be taking security seriously. It is a lot harder to fix things later. Store your seed phrase only on paper in 2 different places. 1 needs to be fire/water proof. NEVER SHARE THIS WITH ANYONE OR STORE IN THE CLOUD. NEVER TAKE A PICTURE OF IT. This seed phrase is the only way to access your assets if your metamask extension gets erased/corrupted/removed.
aantonop is a great resource:
why do you need a hardware wallet?
buy one here (do NOT buy on Amazon):
Once you get it, this video helps explain how to use it.
For trading NFTs, you can add your ledger wallet to Metamask and I recommend using Firefox browser for this as it works best (you will need to add the Metamask extension to Firefox) and then add your ledger.
This way when you transact you are merely using the metamask UI but not storing your keys online, the keys stay secure on your hardware wallet. Also, once you add your ledger to metamask, you have to allow contract data for it to work on sites like opensea. DO NOT EVER put those keys into metamask or any other form or wallet online- if someone asks you to enter your seed phrase it is ALWAYS a scam. You will be robbed of all of your assets. The only reason you would ever enter your seed phrase is if you lose or break your ledger and you buy another one to replace it. Likewise for your metamask wallet, if your browser extension gets erased somehow or you buy a new computer, you can enter the seed phrase into the metamask wallet once you re-install it. But never enter your ledger seed phrase into metamask or you defeat the entire purpose of having a cold wallet because you just put the private keys on a hot wallet.
To prevent phishing attacks, always bookmark links you interact with like Opensea or any exchanges. If you get on the wrong site and connect your wallet you can get REKT.
Cryptoart
The main curated sites for minting (making an NFT) and buying/selling are:
Of course there are others, but these are the main ones. Important to note, if you buy an NFT from one of these sites, they are minted on that contract. So in the future, if you want to transfer, buy, or sell you have to interact with that contract. 3rd party sites like Opensea will allow you to trade them but they will be listed under the “Known Origin” collection for example.
This gets confusing- as you can see this is an Xcopy piece but the Opensea label just says “KnownOrigin.” You have to click open properties and then you will see “XCopy” as one of them. You can then click this tab and it will show you all of the XCopy works listed under the KnownOrigin contract:
Here is another example- a Hackatao piece that was minted on SuperRare:
This allows for some digging- if you have a favorite artist, you can go to their twitter where it usually has a linktree that shows links to all of their art across platforms. Sometimes you can find some hidden gems! There is not (of yet) an aggregator that easily displays all artworks from an artist across all platforms and their lowest sales price, etc.
Social Media
Perhaps a necessary evil to some, Twitter is essential to this space as is discord. You absolutely must be on both. Artists tend to post to IG but it is not as important as they all have twitter accounts as well. Start by following me! @punk3178 on Twitter. Pro tip- put your ID’s on your Opensea account so that people can contact you for deals, OTC trades are a big part of the space and are safe as long as you use precautions. Or you can negotiate a deal and then use Opensea to offer to a specific address or place a bid.
What is Generative Art?
Generative Art has been around a long time, and basically refers to art created through code. It is a natural fit for blockchain technology however. The code can be placed inside a smartcontract and inputs create tokens that generate outputs in your web browser using on-chain information. Onchain means that all the information needed to render the image is on the blockchain, as opposed to just a pointer to a web hosted image that exists elsewhere. Snowfro explains it much better than I could here.
I created a short video to help you navigate art blocks items on Opensea.
What are the best sites for keeping up with the market?
Opensea rankings shows sales volume and floor prices
cryptoslam.io a better way to search through sales volumes, especially for specific traits
wgmi.io free site shows floor prices, premium site shows your wallet or any other wallet and provides an estimate of the value of that wallet’s NFTs
Twitter threads
https://twitter.com/punk6529/status/1429399888786333697?s=20
Podcasts:
zima red podcast This is essential listening
Nonfungerbils podcast
Modern Finance podcast Also essential
The First Mint podcast
Etherscan is a critical tool- you can make a watchlist of all of your different accounts and also you can use the transaction notes to keep records for cost basis, etc.
I plan on adding to this over time and feel free to give feedback on twitter!
