NFT Army Beginners Guide to NFT’s: Volume 1
In the first part of my introductory series I am going to go over the basics of what an NFT is and how and where you can buy and sell them. I am by no means an expert on blockchain technology or the cryptocurrency markets, but I do perfectly understand how confusing and difficult it can be to get started in this exciting new world. This series of articles is designed to be an NFT “Boot Camp” for existing DFS Army members to learn the NFT basics. Let’s get started!
What is an NFT?
Per Wikipedia: “A non-fungible token is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital assets to be unique and therefore not interchangeable. NFT’s can be used to represent items such as photos, videos, audio, and other types of digital files.”
Per Meriam-Webster: “a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and this is used to certify authenticity and ownership (as a specific digital asset and specific rights relating to it).”
NFT’s can be used for a wide variety of functions, and progressing technology is continuing to find more and more use cases. An NFT can be used to track cargo shipments, verify identity, verify access to secure networks, and several other industrial and economic uses.
For the purposes of this beginner’s guide to NFT’s, we will be focusing on 3 specific types of NFT’s: Artwork, Collectibles, and Gaming items and characters.
What is the Blockchain?
I am not going to go in-depth on blockchains and crypto currencies. The basics that you will need to know is that a blockchain network allows for every transaction conducted on it to be fully public, transparent, and permanent. Every new transaction is stored in groups known as a block. Each new block is added to the end of the chain of blocks. These additions are made by miners, or validators, spread out across the globe, with each node containing the entire blockchain. These nodes create a consensus based ledger that cannot be fraudulently altered. All crypto currencies and NFT’s are stored on these blockchain networks.
Ethereum (ETH) is a crypto currency that is currently #2 in total market cap behind Bitcoin (BTC) and is the native currency of the Ethereum blockchain. The Majority of the NFT’s we will be dealing with and discussing are traded in ETH on this network. NFT’s do reside on other networks as well, but Ethereum is where the bulk of the action happens. You can buy, sell, and trade ETH on all major exchanges such as Coinbase and Binance.
Stable Coins are a term for a specific type of crypto currency that remain “stable” and are all typically designed to be pegged to the U.S. Dollar. Stable coins are a way to divest from riskier crypto currencies into USD value without removing funds from the blockchain. The most common examples are USDC, DAI, and Tether (Best to avoid Tether as there is concern it is not properly backed by cash). There are several other Stable coins available as well, always DYOR before obtaining them as extreme market conditions can cause them to deviate from true USD value.
MetaMask (MM) is a digital wallet that allows easy access to blockchain based websites. There are many other types of digital wallets out there but MM is the most commonly used. When we say MM you can infer we are talking about a digital wallet in general. After creating your digital wallet you can freely send ETH and other crypto currencies from Coinbase or other exchanges. These wallets can then be used to buy and sell most of your NFT’s. MM can also be integrated with other blockchains such as the Polygon network and Binance Smart Chain, making it an easy 1 stop shop with 1 account, and MM can also be linked to a hardware wallet such as Ledger for added security.
Polygon, formally known as Matic, is a Layer 2 Ethereum “Side Chain”. It is its own network that integrates with Ethereum. Polygon has plans to integrate to multiple different blockchains over time, allowing NFT’s and currencies to be bridged, or transferred, between different networks. They tout themselves as the “Internet of blockchains”. Polygon’s biggest strength is its super low transaction fees, allowing blockchain gaming such as Zed Run to operate there. MetaMask can be set up for Polygon easily, allowing any items you hold on there to be easily viewed in your OpenSea account.
OpenSea (OS) is an NFT marketplace that works on Ethereum and Polygon. This allows for nearly all of your NFT’s to be viewed and traded on 1 platform. OpenSea trades occur mostly in ETH, but transactions can be made in USDC and DAI. Wrapped ETH (WETH) and ETH on Polygon are commonly used as well. The 3 forms of ETH can be easily identified on OpenSea by their color coding.
- ETH: Black Diamond. This is your standard ETH on the Ethereum blockchain. A large majority of OS sales occur in ETH
- Wrapped ETH (WETH): Pink Diamond. WETH is ETH that has been converted to the ERC-20 token standard (“Alt” coins such as Doge are ERC-20 tokens). WETH is used on OS for auctions and bids. ETH can be “wrapped“, and WETH can be “unwrapped” easily through OS for a transaction fee.
- ETH on Polygon: Purple Diamond. ETH on Polygon is ETH that has been bridged to the Polygon blockchain. You will need to bridge to polygon in order to trade NFT’s that reside on the Polygon Network such as Zed Run racehorses.
All 3 above examples of ETH are IDENTICAL in value. When wrapping or bridging, the ETH being converted is burned (destroyed) and new tokens are created to replace them. The same process happens in reverse order when converting back to ETH. This process cannot change the total supply of ETH. Therefore the values remain lock at a 1:1 ratio.
Smart Contracts are how NFT’s are created and categorized into their respective collections. They identify who created the NFT, how many exist, and who owns them. The contract is a way for the NFT to always be able to be traced back to its original creator, and for that creator to also receive royalty payments for secondary sales. NFT’s can also me minted directly from the smart contract using an advanced method, allowing you to bypass the projects website.
Artwork was on of the first widely adopted use cases for NFT’s. Minting art as an NFT allows artist full control of how they sell and distribute their work to the public. This also allows them to receive royalty fees on secondary sales. No longer does an artist need to go unrewarded when their works resell at high valuations.
Generative Art Projects ( The 10k Collections)
Generative Art is the hot buzz right now and most likely why you are here reading this. These are collections of similar artworks with randomly generated traits such as hair color, glasses, clothing, etc. They are the projects you have most likely already heard of such as Bored Apes Yacht Club and Crypto Punks. Generative Art make up a lot of the PFP’s (profile pictures) you see all over twitter and discord. Currently, it seems like there are 5 or more of these a day popping up. Name an animal and its probably been done 3 times already. They can vary in collection size, with the standard being 10,000, and others as low as 3,000 or less.
Everyone of these NFT’s is unique and comes with its own pros and cons. Some of these projects will rocket up in value instantly while others won’t. We will dive deeper into these projects in additional articles.
NBA Top Shot falls into this category. Top Shot sells “Packs” of Moments featuring NBA highlights that can be bought and sold on their marketplace. Think digital trading cards, but the card is an actual video highlight from an NBA game. Draftkings has just entered this market as well allowing you to purchase collectibles with your existing DK balance in what is a seamless integration to their existing infrastructure. VeVe is a platform that has signed on over 100 major IP’s and offers limited edition 3d models of your favorite super heros and movie characters. These can be viewed in a virtual reality environment on your phone or tablet.
This is where i am the most bullish and would prefer to allocate the largest percentage of my NFT investments. The video game industry generates Billions in revenues every year. With NFT gaming, YOU can invest and capitalize on this. For example, NFT’s can be used to represent in game characters, items, and even the very virtual land you play on. Play to Earn is the staple of blockchain gaming, allowing you to earn ETH or other tokens while playing that can also be sold and traded on the open market. This space will continue to grow with some well known developers starting to work on their own projects.
Zed Run allows you to own, race, and breed racehorses for ETH.
Chicken Derby is on my radar as a much more affordable game similar to Zed that utilizes Chickens for racing.
Axie Infinity is a Pokémon type game designed by former World of Warcraft players whos in game economy has generated income for a large amount of people in developing countries to survive during the pandemic. I will be doing more detailed articles on all of these and more.
In closing, we hope you decide to join us in this journey of this new and exciting world. This is not Financial advice, and as always, do your own research. Your time here in DFS Army should already have instilled in you a sense of proper bankroll management and the same rules apply here. We are on the forefront of a new and exciting economic landscape. Come hang out with us, learn, listen, ask questions. We’d be happy to help you navigate these new waters.