YOU’VE PROBABLY HEARD of nonfungible tokens (NFTs)—by this point, you may even be ready to stop hearing about NFTs. Beeple’s Everydays: The First 5,000 Days sold for more than $69 million in March 2021, sparking wider interest in digital artwork and sustained media coverage. WIRED senior writer Kate Knibbs sold one of her tweets as an NFT, and features editor Sandra Upson even profiled a few CryptoPunks.
The concept of digital ownership can be difficult to grasp, and with so many of the loudest voices heavily invested in NFTs, it can be hard to know who to trust. Our guide to the blockchain is a good place to start if you are looking for a more in-depth discussion of core topics, like Ethereum.
Use caution when wading into the world of NFTs. Financial investments can disappear overnight in rug pulls. Certain artworks may pose security risks, like exposing your IP address. Also, the energy consumed from blockchain transactions contributes to climate change. If you still want to buy and sell NFTs with all that in mind, here’s what you need to know.
How NFTs Are Bought and Sold
Before reaching for your debit card, it is important to understand that NFTs are purchased with cryptocurrency. Most of the transactions on OpenSea, the preeminent marketplace, are done with Ethereum and a cryptocurrency wallet is necessary to participate. Current competitors to OpenSea include SuperRare, Nifty Gateway, and Rarible. Two common cryptocurrency wallet options are Coinbase Wallet and MetaMask.
Get started by visiting the OpenSea login page and connecting your crypto wallet. Visit your Profile where collected NFTs can be seen by members of the community. Profile pages track your favorite NFTs and marketplace activity.
Now you’re prepared to browse through the marketplace and potentially make a purchase. Certain listings will feature a Buy Now option, while others allow you to place an offer to the owner. If you click Make Offer, choose the amount you are willing to pay and an expiration date. After the exchange is complete, the NFT is transferred into your wallet and appears under the Collected tab on your profile page. OpenSea takes a 2.5 percent cut from every marketplace transaction.
To put an existing NFT on the market, go to your Profile and click on the desired NFT. Then select the blue Sell button at the top right of the screen. Pick Fixed Price if you would like to sell it for a specific amount, or pick Timed Auction if you want people to bid on your NFT.
OpenSea charges an account initialization fee for your first listing. Ethereum transactions incur something called a “gas fee.” If a seller accepts an offer made on an NFT, then they pay the gas fee. For fixed price sales, the buyer is responsible for the extra cost.
Profile Picture NFTs Reign Supreme
Profile picture projects stand out as the most popular type of NFT collection. A series of digital artworks is created around a single subject like an ape or alien. The subject is often in the middle of frame and reiterative with an assortment of facial expressions, skin tones, and accessories.
Using CryptoPunks as an example, one NFT in the 10,000-piece collection may be unique for having a mohawk, pink lipstick, and 3D glasses, but the overall style is instantly recognizable as part of the larger project. In cryptocurrency circles on Discord and Twitter, NFT profile pictures from well-known collections are ephemeral status symbols.
One of 2021’s buzziest profile collections was the Bored Ape Yacht Club from Yuga Labs. The most expensive ape, #2087, last sold for 769 ETH (approximately $2.3 million) on the OpenSea marketplace. Token holders include Snoop Dogg, Logan Paul, and Stephen Curry. In addition to bragging rights, members get access to perks like a custom mobile game, private Discords, and parties in New York City.
As the floor price for membership rose, the team behind Bored Ape Yacht Club released the Mutant Ape Yacht Club in August. Owners of Bored Ape NFTs were given a serum to create grotesque replications of their NFTs; hefty sales of the artwork propelled this sister collection near the top of OpenSea’s trading charts. The floor price for a bored ape is more than $250,000, and the cheapest mutant ape is listed at more than $50,000.
Kashvi Parekh, a 19-year-old student from India, is a community manager for the World of Women project by artist Yam Karkai. You may have seen World of Women while scrolling through Twitter with celebrity endorsements from Liam Payne, Reese Witherspoon, and Shonda Rhimes. Parekh tells WIRED that the community’s emphasis on diversity, inclusion, and giving back to artists sets it apart from other profile picture projects. Bored Ape Yacht Club and World of Women are represented by Guy Oseary, who managed Madonna and U2.
Are the Marketplaces Safe?
Anyone who decides to spend money purchasing an NFT should use caution. Be discerning about whose advice you internalize. Kim Kardashian and Floyd Mayweather Jr. face a class-action lawsuit for their involvement with a blockchain project. The minimal regulation means it can be difficult to confirm when a celebrity is paid to promote anything.
“Only invest what you can afford to lose in NFTs. I know a lot of people who go all in without realizing what they are doing,” says Parekh. She does not advise people to make spur-of-the-moment buying decisions and encourages taking time to research whoever is behind a project.
OpenSea’s VP of product, Shiva Rajaraman, recommends newcomers get someone they know IRL to help pick out an NFT. He says, “Find a buddy, and go through this together. Rather than feeling like you need to do it in isolation.” When it comes to interacting with OpenSea, the company’s website provides a handful of suggestions for staying safe, like not sharing your secret recovery phrase and avoiding suspicious links.
Make sure any NFT listings are closed on the blockchain when you want to hold onto an item. Smart contracts that were not properly canceled caused owners to sell off NFTs on OpenSea at older, lower price points.
These marketplaces are where the digital art is bought, but many of the communities blossom on Discord. Be careful—even well-moderated servers can be a breeding ground for prospective scammers. Rajaraman says, “When you jump into these communities, turn off DMs from the server.” The advice to block server DMs is echoed in the announcements of OpenSea’s official Discord.
User safety within these marketplaces is important to address, but it’s only part of the equation. OpenSea is grappling with artist safety and not allowing copied artwork to be sold. Reporting from MEL Magazine by Quinn Myers highlights how digital artists can get massive amounts of work ripped off as NFTs.
RJ Palmer is an artist who focuses on creature designs and worked on Detective Pikachu. In the past, work of his on DeviantArt was copied wholesale, minted as NFTs, and listed for sale on OpenSea. In an interview with WIRED, Palmer said that the experience “gave me a sense of despair.” If he could give feedback to OpenSea, Palmer wishes there was an easier way to blacklist your artwork so that it never appears on the marketplace.
Rajaraman emphasized the nascent nature of OpenSea and the company’s commitment to effectively protecting artwork. He mentioned the potential for automation to remove duplicates and how improved search rankings could boost verified listings. Rajaraman also focused on using community signals to combat illicit projects.
He said, “You can copy my image, but can you copy my community? No. So, let’s use those community signals as a way of informing the way we rank and help you discover something.” A few days after Rajaraman’s conversation with WIRED, OpenSea revealed on Twitter that the company experienced widespread misuse of the free minting process.
With so much spam saturating the market, prospective buyers may want to slow down and double check things. Lofty promises of future returns and outlandish benefits are always red flags. OpenSea has an Airtable form available to help people submit IP takedown requests.
Facing a Crowded, Polarized Future
While specific NFT projects may involve rug pulls, general interest seems unlikely to disappear overnight. As cryptocurrency and Web3 projects become more mainstream, they attract a multifaceted backlash. The climate effects may alarm those concerned with sustainability. Many gamers have a negative reaction to the proposition of NFT incorporation. Elon Musk tweeted that the Twitter introduction of NFT profile pictures was “annoying.”
A widely shared post written by the former CEO of Signal, Moxie Marlinspike, calls into question the consolidating nature of platforms like OpenSea, Coinbase, and Etherscan. Marlinspike claims to have created an NFT on OpenSea that was taken down from the platform and disappeared from his wallet. He points out potential issues for crypto wallets relying on OpenSea to display NFTs.
Marlinspike writes, “All this means that if your NFT is removed from OpenSea, it also disappears from your wallet. It doesn’t functionally matter that my NFT is indelibly on the blockchain somewhere, because the wallet (and increasingly everything else in the ecosystem) is just using the OpenSea API to display NFTs, which began returning 304 No Content for the query of NFTs owned by my address!”
Despite the critics and tenuous stability of cryptocurrency, I expect OpenSea and other NFT marketplaces to be persistent. This may lead to artists and anyone who rejects blockchain projects to grow more forceful in their denunciation. While on the phone, Palmer said, “NFTs to me just feel like scams built on scams built on scams.”
After a breakout year in 2021, OpenSea’s future dominance is not yet inevitable. The company will battle to retain prominence in 2022 as Meta and other tech giants launch NFT marketplaces. Coinbase has a waitlist running for its upcoming marketplace. Even GameStop wants in on the NFT action.
Although you may want to buy NFTs to support artists you admire or to access private Discord servers, take time and do in-depth research. Make sure you understand what you are actually buying. It’s easy to get hyped up on speculative investments and financially in over your head.