This is not financial advice; NFTs may involve risk; NFTs may be regulated in your jurisdiction; do your own research; etc.
In Newsletter NFTs, Stackloot, and Twiloot, I described a problem (creators need money), a potential solution (NFTs), and content on which creators might base NFTs (newsletter content, words, numbers).
If you haven’t read it yet, I hope you will.
In today’s post, I have a few points to add.
In the early 1990s, the internet was confusing. In the early 2020s, cryptocurrency is confusing.
Confusion can dissipate with experience. If you anticipate benefits, I presume you’re more likely to seek the experience.
You know the benefits of the internet. Even with its problems, I’m guessing you’re happy the internet is widely available and continues to grow.
You might not know the benefits of cryptocurrency yet. But if you read a little about NFTs, Web3, the metaverse, DAOs, DeFi, etc., you’ll get a sense of the appealing and useful future for cryptocurrency – along with problems, as with the internet.
With respect to NFTs, I’ll do my best to assist you in getting past problems and to the benefits. I hope this will also be helpful in your exploration of other aspects of cryptocurrency.
In looking back at the first post, I feel I understated the potential of NFTs for creators.
Creators are interested in numbers, visual art, and other forms of creativity in addition to words. Creators, being creative, might dream up innovative NFTs. For example, even very basic art, in the right context – say, an amazing world that a set of stick figure NFTs inhabit – might generate interest.
Moreover, while metadata of word- or number-based NFTs has significant potential for use, I should also emphasize NFTs’ possible function as a gateway to additional content. A creator’s NFT (an image, a representation of a post, etc.) could provide access to a surprise, a special post, or other perks.
I should note that NFTs can be part of a larger ecosystem, as Mirror is demonstrating. You might consider issuing social tokens or taking part in a DAO. But in this article, like the previous one, I’ll focus on NFTs.
Before I continue, three pieces of advice:
1. Be willing to make mistakes initially, which might involve spending cryptocurrency. (My main early mistakes were: not realizing that I needed to confirm each authorization or fee in my cryptocurrency wallet before proceeding with a transaction; and not getting cryptocurrency on the blockchain I had intended.)
2. There's no security issue with revealing your cryptocurrency wallet address. In fact you need to do that in order to use applications such as OpenSea or a cryptocurrency exchange. Just don't reveal your wallet's private key or other information that would allow someone to take over your wallet.
3. Learn to use MetaMask on desktop and mobile. It's the wallet most widely accepted by cryptocurrency applications. You can add blockchains and tokens to it as needed.
A current problem with using cryptocurrency is Ethereum gas fees. Since my previous post, I’ve realized how much these fees hinder the NFT process. I've also learned more about how creators can sell – and buyers can buy – NFTs without incurring high fees.
If you start selling NFTs, you’ll have a new way to make money and connect with fans. Even if you list NFTs but don’t sell any now, the experience of using cryptocurrency products should leave you better prepared for the future.
NFTs are typically created on the Ethereum blockchain. Many decentralized applications (dapps) also run on Ethereum. Ethereum's main currency, ether (ETH), has a higher market value than any cryptocurrency other than bitcoin (BTC).
But Ethereum suffers from high transaction (aka gas) fees. While Ethereum gas fees fluctuate lower as well as higher, typically each fee is the equivalent of tens of dollars.
These fees add up. An NFT seller or buyer might potentially incur an Ethereum gas fee when: moving cryptocurrency to, from, or on the Ethereum blockchain; establishing or funding an account on an Ethereum NFT marketplace; buying or selling an NFT there; and withdrawing funds from an account there. (It helps that you can see the fee in your cryptocurrency wallet, and can reject or seek to lower it if it’s too high. But that’s just for one transaction. The next transaction may bring another fee, and so on.)
Because Ethereum is well established and widely used, in particular for NFTs, one could argue that it’s best if feasible to sell NFTs on Ethereum.
I think it’s feasible to sell NFTs at 0.5 ETH (currently about $1,750) or above. Buyers who keep transactions to a minimum and to times when gas prices are low could hold their fees per purchase under 0.05 ETH, which seems tolerable in relation to an 0.5 ETH NFT. (Perhaps some buyers would buy, say, a 0.2 ETH NFT with a 0.05 ETH fee.)
By contrast, potential buyers of 0.1 ETH NFTs might balk at 0.05 ETH in fees. Certainly people interested in 0.01 or 0.001 ETH NFTs wouldn’t like these fees. Potential sellers wouldn’t want such fees either for themselves or their buyers.
I might eventually list NFTs on Ethereum if I expect to sell them – individually or as a bundle – for 0.5 ETH or more. I've started a collection – NFTs of the Absurd – that might fit the bill, though I’m beginning at 0.1 ETH and not on Ethereum. (I’m taking a risk that I won’t sell anything at 0.5 or even 0.1 ETH. But I like to gamble once in a while. I’ll let you know how it works out in a subsequent post. 🙂)
I intend to avoid Ethereum even for higher priced NFTs, at least for now. Transactions such as minting on Ethereum use significant energy and thus negatively impact the environment. Ethereum expects to consume much less energy as it upgrades. But I don’t want to wait months (or more) for the anticipated improvement.
So, where to mint and transact in NFTs? There are several marketplaces that use non-Ethereum platforms. Presuming the platforms will persist and their NFTs will be easy to use, those marketplaces are reasonable options.
I feel the best solution is OpenSea's Polygon listings. (I’m copying my Ethereum collections over to Polygon collections. I might eventually hide or delete the Ethereum listings; but I’ll keep them for now in case you want to see them.)
OpenSea is by far the largest NFT marketplace. And it recently added Polygon listings with no gas fee for a purchase or sale. (There’s a fee for opening an account and potentially fees for funding and withdrawing from it.) Polygon listings accounted for 49% of purchases on OpenSea in September 2021.
Polygon is essentially a scaling solution for Ethereum, with low transaction fees. Developers have already built over a thousand dapps on Polygon – including NFT creation tools and marketplaces. Polygon NFTs are created with the same standards as Ethereum NFTs (ERC-721 and ERC-1155) and are compatible with Ethereum.
Polygon is relatively new and might experience growing pains. It recently raised transaction fees (paid in its native token MATIC). But Polygon’s fees are still pennies rather than Ethereum’s tens of dollars per transaction. Other than fees for transferring or exchanging money onto or off of the Polygon network, and any fees charged by an NFT marketplace, fees are essentially not an issue for NFTs on Polygon.
Polygon provides a bridge to move various cryptocurrencies from Ethereum to Polygon. Likewise, OpenSea lets you bridge ETH from Ethereum to Polygon. The problem with these bridges is that they charge an Ethereum gas fee. (You might try Hyphen, which may have lower gas fees for transfers, though its “gasless mode” wasn’t working when I checked.)
Prior to last week, I used a MATIC faucet to put enough MATIC in my Polygon account to cover transactions on Polygon. Then I used RenBridge to convert BTC from the Bitcoin blockchain into renBTC on Polygon, for a fee of several dollars rather than several tens of dollars. And finally I swapped renBTC for ETH on Polygon, which required a small MATIC fee.
Because Polygon raised fees, a faucet is now insufficient to provide enough MATIC to cover (still very small) transaction fees on Polygon. Apparently because of this, Polygon now lets you swap several cryptocurrencies on Polygon – including AAVE, DAI, ETH, LINK, USDC, and USDT – into MATIC in a gasless transaction.
Whatever you do, try to avoid a large fee and make sure that the destination is Polygon. (Early in the process, I mistakenly obtained both MATIC and WETH – wrapped ether – on Ethereum rather than Polygon. Neither is useful on Ethereum; and both require fees to move to Polygon. Live and learn…)
As I noted at the beginning, experience helps. I’ve learned a lot. I think you will too.
The future will be fascinating. I feel it will be more beneficial to both creators and audiences.
See you on OpenSea (and Sub Pub)! 🙂
Do you have any questions, comments, suggestions?
As with the first post, please share this post with anyone who may be interested.