How to invest in Non-Fungible Tokens (NFTs)

Last month, Claire Elise Boucher, known in the music world as Grimes, earned $5.8 million in 20 minutes with the sale of Non-Fungible Tokens, or NFTs.

In fact, top NFT platforms have made close to $500 million in sales over the past month, according to CryptoSlam.

Recently Tesla founder Elon Musk gratified us all with a song:

“NFT for your vanity. Computers never sleep. It’s verified. It’s guaranteed,” he tweeted (doesn’t he always)?

“I’m selling this song about NFTs as an NFT,” the tweet said.

Musk’s tweet, including his caption, clip and song, was listed for sale as an NFT on ‘Valuables’,  a platform owned by the social media network  Cent. Bidding reached $1.12 million. (Valuables requires users to log on to the platform via their Twitter account to verify that tweets listed for sale originated with their creators.)

Musk then changed his mind (doesn’t he always?) and decided not to sell the NFT.

But you don’t have to be Elon Musk or Grimes to earn a great deal of money very quickly in the current craze for NFTs – non-fungible means that they are certified authentic by the blockchain, and cannot be forged. You can still invest at a low price and wait for your NFT to appreciate.

For example, Cryptokitties, which were first released in 2017, are today highly valued NFTs under the Ethereum standard. Some can still be acquired for a very low price, and they have a good record for appreciation. A CryptoKitty named Dragon was sold for ETH 600 or $172,000 in 2018. (CryptoKitties is soon to migrate to an alternative network called Flow.)

But investing in NFTs is not always easy. Apart from choosing a winning investment, buyers must pay large fees along with the cost of the item, and this can be daunting.

“Choosing an NFT,” one trader explains, “is not a matter of paying a high price or a low price. The important thing is to choose one that will be worth more. This is not always easy to do in such a young market which follows many different trends.”

The cost of ‘gas’

A large percentage of NFTs are traded and sold on Ethereum blockchains, and there are official standards. “Most NFTs are built using a consistent standard known as ERC-721. However there are other standards that you might want to look into. The ERC-1155 standard allows for semi-fungible tokens which is particularly useful in the realm of gaming. And more recently, EIP-2309 has been proposed to make minting NFTs a lot more efficient. This standard lets you mint as many as you like in one transaction!” the official website tells us.

The official currency for doing business on Ethereum is ether. Transactions using ether also involve a fee for ‘gas,’ which is the amount of computational power (electricity) needed to process the transaction. Gas prices are denoted in small fractions of ether called gwei.

Many users find gas fees to be quite high. They go up when the price of ether goes up, investors make money and will want more. Usage increases, and this drives up the price of ‘gas.’

So a $30 NFT purchase could add on a ‘gas’ fee of $50 or more, depending on the state of network congestion.

The Ethereum blockchain has the most liquidity for NFT sales, but there are alternatives. The NFT can be made under alternative standards and then sold on either WAX or Flow.

WAX, which stands for Worldwide Asset Exchange, is in fact faster and cheaper than Ethereum, traders say. It is also environmentally friendly as it uses far less energy to operate – it relies on the Proof-of-Stake system which requires much less computation than the Proof-of-Work system used by bitcoin and Ethereum.

WAX calls itself the ‘King of NFTs’ and it has a custom tool to enable users to create NFTs quickly and easily.

The WAX Creator program rewards people for using a very simple WAX Creator tool that allows anyone to make Non-Fungible Tokens (NFTs) like stickers, collectible carts, and art. This WAX Creator program has already created over 150,000 NFTs, according to the official website.

 WAX doesn’t provide statistics for overall NFT sales, but a recent example gives the sense of how high demand is on the platform.

“Last month, the trading cards giant Topps announced the debut of its Major League Baseball Series 1 NFT collection on the WAX blockchain — featuring base cards, throwback designs and motion animated sets. Standard and premium packs featuring pre-minted cards were available, giving players the chance to discover rare and legendary cards,” CoinTelegraph reports.

WAX reported attracting a record number of buyers, with more than 70,000 NFT packs selling out in under an hour. It was the biggest sale that Topps has conducted on the blockchain to date. One legendary exclusive collectible ended up selling for $87,672 on the secondary market, just three days after the primary sale took place, according to the report.

As we mentioned, Cryptokitties are to definitively migrate to Flow, an alternative NFT platform created by DapperLabs. Flow got its start in 2017