There have been lots of hype on NFTs recently. It is not surprising given that the Beeple NFT digital art piece, ” The First 5000 days” was sold for a whopping 69 million dollars. It was purchased by a Singaporean, Vignesh Sundaresan (Metakovan), who have the conviction that it would be worth a billion dollars in the future. Fun Fact: Beeple has not sold any of his digital art for more than $100 before this auction.
The origin of NFTs could be dated back to 2014 where bitcoin minted the coloured coins. In 2017, Cryptopunks and Cryptokitties was the impetus to pivot the NFTs market.
To have a feel of the prices in the digital NFTs market, you could check out the 10 most expensive digital art to date.
Considering that CryptoPunks was a project by Larva Labs to create 10000 uniquely generated characters using the Ethereum network through an algorithm. Ethereum is the second most popular blockchain after Bitcoin and has been used for commercial contracts.
They gave out all the characters for free at its launch in 2017- in the NFT world, it is called an NFT drop. Now some of them are worth millions of dollars- what a joy to be one of the frontrunners and get a character of the Cryptopunks to call our own.
Source: Pexels
So what exactly is NFT?
The term for it is non-fungible tokens and they are unique by themselves, that is backed by a multimedia file. It could be digital art, video, music tune, sound recording, a tweet (Jack Dorsey first tweet sold for $2.9 million) or even a blog post, etc.
The difference between an NFT and a bitcoin would be bitcoin is fungible. There is no difference between one from the other and that makes it exchangeable; Bitcoin is like digital gold. As for NFT, most of them are currently minted in the Ethereum network, it is an original token or one of its kind.
Therefore, once we buy an NFT token, it is similar to owning a baseball card or being an owner of an original painting. Scarcity brings demand and hence possibly higher prices in the future if we choose the right NFT- must have an eye to find the next Monet, Miro or Dali of the digital art world.
Source: Pexels- Mona Lisa is now under Public Domain
But it is important to note that the copyright still belongs to the original artist or creator. According to copyright laws, the creator would still hold the rights 70 years after his death, after which the rights belong to the public domain- everyone can use it. From a company’s aspect, the copyright lasts 120 years from creation or 95 years from publication
So you could be the owner of the Picasso masterpiece- Guernica (1937)– but there could be others able to get an art print of it. There is no restriction on people downloading and printing the masterpiece. Any rights of use for commercial purposes would be attributed to the artist or creator; unless you have an agreement with the original creator with a share of the commercial rights.
Latest NFT Craze
The latest craze in the NFT market would be the Bored Ape Yacht Club (BAYC) by Yuga Labs– it is not related to the Bathing Ape brand. They came up with 10000 ape designs with some smoking a cigar or munching on a pizza and other creative whacky designs.
It was first launched on the 29th of April 2021, they were selling at 0.08 Ethereum a piece (Was around 180 USD then based on Ethereum conversion rate).
The owners of the ape not only have access to the commercial rights to their ape (BAYC owners still own the master rights) but they have access to their discord server to mingle and hang out which includes celebrities such as Stephen Curry.
It is akin to you buying into a special membership club.
Current prices in just 6 months are hovering around the floor of $100,000 to the higher end of 3.4 million dollars. These are stratospheric returns by any measure.
Where to buy NFT?
There are currently numerous marketplaces that are selling NFTs. These are the few popular ones:
For those who are just starting:
- Opensea (Biggest market place at the moment and BAYC and their spinoffs are traded here)
- Nifty Gateway (Beeple’s Crossroad was sold for 6.6 million on this platform)
- Rarible
For those looking for quality over quantity (These platforms will screen the sellers and are selective):
How to buy?
To buy the NFTs, you would need a crypto wallet where you can keep all your cryptocurrencies and also your NFTs. These 2 are the most commonly found in most of the platforms and they are:
- MetaMask
- Coinbase
Any other fees to take note of?
To complete a transaction, you would need to pay a gas fee (transaction fees) on top of the agreed price. This fee is for the miners to process your transaction through the blockchain network.
The typical fee would be below 100 dollars and it has to be borne by the seller too. To buy the cryptocurrency for your wallet, there is also a gas fee which is around 15 US dollars based on the last I check.
The gas fees could be exorbitant and could be more expensive for a transaction than the value of the NFT itself. The more complex it is, the more gas it requires, and the higher the fees.
An Experiment: To buy an NFT
We try our hands to go through the process of buying an NFT and we found hidden charges in terms of gas and admin fees are things newbies have to factor in.
The process of starting a Metamask wallet and linking it to the Opensea platform was a breeze. However, we need Ethereum to do anything meaningful.
 
Source: Metawallet App
We are looking into committing 500 Singapore dollars for our venture into the metaverse world of NFTs. We started with using the USD as our base currency and you could see the slippage is almost 6%- Etheruem is converted at $4877 and the spot price was around $4600.
On top of that, there is a total fee of $28.50. This brings the total expense of converting USD to Ethereum to be close to 13% for the Metamask wallet.
As we are based in Singapore, so we try to use SGD to convert to Ethereum instead. This time around the slippage is just 0.3% and the conversion rate is around the spot Ethereum price of 6188 SGD.
However, the total fees which are broken down in the last screenshot will be around 9.6%. The total expense of converting SGD to Ethereum will be around 9.6% since there is not much of a slippage.
10% expense for converting just into Ethereum doesn’t seem like a good deal to me. We have not factored in the gas fees when we are going to buy the NFT yet.
Therefore, we will explore using Coinhako to buy the Ethereum (they charge a 1% spread) and send it over to our Metamask wallet instead.
There will be fees involved but we will update in a later post if this method we are exploring would be more cost-efficient.
We have zeroed in on an NFT that have been launched but have not been sold out. From our research, NFT that have a community (10000 figures), a story and is towards the animal theme might do well. This NFT fresh mint would cost 0.06 Ethereum ( US276 based on current conversion rate) and we try to get from the source which is the creators.
Drum roll…, Ladies and Gentlemen, this is our pick for our first NFT venture: The Good Guys
Source: The Good Guys Home Page
I guess 280 US Dollars for a potential $100,000 seems like a no brainer for us. So the next step is to try to purchase it.
Source: The Good Guys Home Page
Oh, I thought there must be a typo or maybe not…..
The cost of 0.06 Ethereum is accurate but the gas fee (transaction fees) will cost 3.6 Ethereum that will bring the total cost of our first venture from 280 US dollars to 16870 US dollars.
That just does not make economical sense as I am not getting the well recognised Bored Apes collection.
We are finding the going tough to be a digital art collector but success does not come without a struggle, right?
Source: Opensea platform
We were so delighted when we found this steal with a nice hat and cool t-shirt in Opensea. It cost 0.02 Etherueum whereby the original that is freshly minted would have set us back at 280 US dollars. We are having this at just 90 US dollars.
If you have been through our journey so far, you would be wondering what is the gas fee to complete this transaction. We have no idea as our wallet do not have funds to move on to the next stage.
We reckon it would cost around 50-100 US dollars. So once we explore the Coinhako approach of transferring funds to our Metamask wallet, we are likely to get this as our first collection. Please do not bid the price up. 🙂
We will be sharing the actual purchase of this NFT if everything goes well in a later post.
Is NFT a possible alternative investment for me?
This is currently a wild wild west environment and the sector is just kicking off which have not reached mainstream status. Thus, you are not too late into the NFTs investment arena. However, gas fees and admin fees are kind of sky-high at this juncture.
NFTs would qualify as a speculative investment as it is not tested through time. Nonetheless, it has pivoted the digital art market where previously it is tough to sell digital art as provenance was an issue- not many collectors would pay good money for digital art.
There are still many concerns we have given the nascent stage of this market:
- How safe is my digital art in the crypto wallet?
- What are the NFTs worth investing in as there are many potential lemons out there?
- Have I missed the boat given the huge surge in recent times?
- How easy is it to offload the NFTs when I have liquidity issues?
To counter most of the issues on hand, we could look into established NFTs providers such as BAYC. They have come up with Bored Ape Kennel Club and Mutual Ape Yacht Club knowing that the initial apes are off the reach of normal collectors and investors.
Bored Ape Kennel is selling at less than $15000 (1-4 Ethereum) whereas Mutual Ape are selling at 3-6 Ethereum.
If we look into the apes, there are potential for companies such as APPLE, Samsung or Starbucks to buy some of the apes and use them in their marketing campaign and merchandise, as they have the commercial rights to the apes they bought.
So it would generate decent returns from a commercial point of view as compared to individual investors (We could have prints of t-shirts of our apes?), who have to hope for capital gains.
Also, Facebook is now going all-in for the metaverse, which is a virtual and augmented reality world by their name change to Meta. Digital assets could be really valuable in the future, where I could loan my digital art to the digital museum or hang my multi-million dollars digital art in my virtual office to impress my clients and friends.
Therefore, the possibilities are up to your imagination.
As with all investments, it comes with risks, and NFTs risks are much greater than the usual conventional financial instruments- Stocks, Bonds, Gold, etc.
So be prepared to lose it all would be a good mindset for this new frontier in alternative investment.
Happy NFTing.
Disclaimer:
The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. The content is not directed to any investor or potential investor and may not be used to evaluate or make any investment. Do note that this is not financial advice. If you are in doubt as to the action you should take, please consult your stockbroker or financial advisor.
