Part 2: The NFT Gold Rush. How are people making money with NFTs?
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This is the new gold rush and those that are early in the game have the best chance to stake their claim in this new world. There are two types of art that are being traded:
- One of Ones: Self explanatory, and the example that we’re all largely familiar with. There is only one Mona Lisa, so now you’re just buying the digital rights of ownership. One of the most famous creators in this space, Beeple famously sold one of his pieces of $69M at Christie’s Auction. These are quite simple, Art collectors and traders buy and sell based on perceived value.
2. Projects/Collections: aka. Generative art / “art created by a computer script programmed by the artist.” These groups typically have 1–10,000s of pieces of NFT art in each collection. These projects often start with a base design template (e.g. an animal like an Ape), and then dress them up differently, so every NFT is unique, with some being rarer than others and thus commanding higher value. (We will go deeper into this later).
Who are the players making money from NFTs?
- Creators: People/teams are creating digital art, and offering them to buyers. Artists are taking their skills online and selling their artwork digitally. Creators make money through the public mint (similar to the familiar concept of a pre-sale), and through on-going royalties from every transaction that takes place thereafter. The mint price can be as low as 0.1 ETH for a “decent” collection with a new team, or as high as 1 ETH per NFT for a collection where its team of creators have an established reputation. In a 10,000 NFT collection, this would be 10,000 x 0.1 ETH = 1,000 ETH (less fees and other costs), or ~USD $4.2M based on today’s valuation.
Traders: People purchase these pieces of digital art with the intention to sell the NFT later on.
- Some may start with the intention to show their support for the artist and/or the crypto space
- To own and treasure a piece of art that speaks to them
- To speculate on the future sale value
- To engage in questionable money making schemes
Just like other traders, the idea is to buy low and sell high, and just like the traditional markets you win some and lose some, and the idea is to maximize your profits and minimize your losses. Similarly, there are different type of traders and strategies, there are day traders who are flipping their NFTs for a quick buck, as well as different type of speculative hodlers who will hold their NFTs in the short and long term to sell them at a later date and hoping they’ve got the keys to the next Cryptopunk or Bored Ape Yacht Club where the NFTs are worth in the millions.
Tools and Services: In order for the NFT market to exist there must be infrastructure to support it. The art is traded on digital marketplaces like Opensea and Nifty Gateway along with a plethora of analytical tools, education tools etc. Creators will be paying to host their artwork on these marketplaces and paying fees for the honor. While traders will be paying subscription fees for analytical tools to try and get that edge in identifying the perfect NFT.
So there you have it, we hope this article has shed some light on how various people are making money on NFTs in its current state. We only went through it at a very surface level, as you can imagine there is a lot that goes into deciding “what has value” and the different buying strategies.
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This was part 2 of the information series where we are helping to educate the masses on what NFTs on how to make profits on their purchases. Tune in next time as we go deeper into: What makes a NFT valuable.
