How to Earn with NFTs
According to the 2022 Q1 report by blockchain apps tracking company dappradar, NFTs generated $12 billion in trades in the first quarter of 2022 alone, and the number of unique traders is growing. The market capitalization is expected to reach $80 billion in 2025.
There’s a massive potential for making high profits with NFTs. This holds not only for NFT start-ups or creators but also for people like us who want to collect and trade NFTs.
Whether you want to invest in NFTs and hold them for a long time or flip them for fast profits, you must have a good grasp of the industry and its dynamics. Let’s go over some of the key factors that will influence your financial success with NFTs.
What’s NFT minting?
The timing of your NFT purchase is crucial. Will you buy it as soon as it’s created, or will you wait for the collection to mature in the secondary market?
The first time an NFT is published on a blockchain is called minting. NFT projects usually mint in three stages:
- Whitelist: this list is typically limited to a few early believers. They could, for example, be active community members or owners of an earlier NFT released by the same project.
- Presale: prerequisites for this will vary from project to project. However, we can say the rules are less stringent than the whitelist. The team might, for example, may request that you follow and share the project on social media.
- Public: after whitelist and presale mints are over, the public sale opens for everyone to join.
It’s important to note that blockchain network activity will be high during minting, whether public or presale; that’s why fees can be very high, as well. Most of the time, they can be higher than the price of the NFT assets themselves.
In addition, particularly in the case of popular collections, since there’ll be many people trying to buy the same NFTs, the collections sell out quickly on the day of initial minting. As a result, you may not be able to buy it.
Also, note that while mint prices for successful projects are expected to be lower than secondary market prices, there is no guarantee that the price will rise over time. That’s why some traders prefer to buy from a marketplace like OpenSea after monitoring the floor price and other project statistics.
Minting NFTs is not a very complicated task, nor it is very expensive for creators or brands now that there are many solutions built mainly for that purpose such as MintNFTs.co.
Understand that there are various types of NFTs
Not all NFTs are of the same kind. Depending on the NFT type, you might develop a different profit strategy. For instance, there’re
- Art NFTs: artists, designers, musicians, or other creative people or collaborations create these NFTs.
- Collectibles or Profile Picture NFTs: the most popular NFT collections that have made the headlines like BAYC or Cryptopunks are of this type. They usually consist of 10,000 unique NFTs with randomly generated traits and attributes.
- Gaming NFTs: games assets like hero characters or items like swords or wearables can be generated as NFTs.
- Metaverse Lands: These are the digital pieces of real estate offered as NFTs such as Sandbox and Mars4.
Understanding this distinction is particularly important in terms of NFT utility. While Art NFTs can be valuable simply because of the art and its creator, the other types don’t exactly work like that. They begin as NFT collections but eventually evolve into gaming or metaverse projects where NFTs have more utilities.
Explore if the NFT offers additional utilities
NFTs are not just jpegs. The utility aspect is essential to understand because the market places a high value on it. Basically, the utility shows the use case of an NFT.
To begin with, every NFT grants digital ownership. Some NFTs provide access to clubs or events. For instance, the famous BAYC NFTs function as an access pass to an exclusive club.
Then there’re priority access NFTs that provide owners with the right to get on whitelists for future NFT drops and airdrops.
While some NFTs provide governance rights, other NFTs can be staked to earn passive income.
Most projects offer a combination of these utilities. By following the projects on your shortlist closely in official community channels and reading their whitepapers and roadmaps, you can learn which utilities the team plans to execute in the future.
The team behind the project is of utmost importance
We suggest that you check the team members’ backgrounds whenever you consider investing in an NFT project. The founder and other team members must be capable of executing the steps outlined in the roadmap.
What kind of experience do they have? Did they carry out other blockchain projects previously? Do they have any competitive advantage that they can transfer to the crypto world? For example, a team behind an NFT project may not have any blockchain project experience, but they might have worked on gaming projects in the conventional game industry. Another source of leverage can be the founding team’s network.
There are opportunities on every blockchain
It’s correct that the most popular NFT collections launch on Ethereum. However, opportunities abound; you should keep an eye on NFT projects built on other networks as well. The first-quarter report we mentioned at the beginning of the article shows that the sales happening in blockchains other than Ethereum are on the rise. For instance, the number of trades on the Avalance network increased by 582% and 34% on Solana and Polygon blockchains compared to the previous quarter.
Consider, for example, the Clay Nation project, which is built on Cardano. The world-renowned rapper Snoop Dogg partnered with this project, and the floor price has since then risen to 2600 ADA from its initial mint price of 40 ADA.
Furthermore, the fees charged by other blockchains are significantly lower than those of Ethereum. As a result, we see that many blockchain NFT initiatives, primarily gaming and metaverse projects, prefer to build their projects on them.
The NFT industry has many downsides and risks. You should be aware of fraudulent actions and always do your due diligence.
However, internalizing the information and tips we’ve provided in this article will help you put the odds in your favor.