Three and a half million dollars for a picture of a monkey? You better believe it. Recently, a rare Bored Ape Yacht Club NFT sold for a record-breaking $3.4 Million. Headlines like this have everyone asking how to make money with NFTs.
If you haven’t heard by now, NFTs are all the rage. If people aren’t racing to snatch up a spot on exclusive whitelists, they’re busy dissing them on TikTok.
In this article, we’re diving deep into what NFTs are and how one NFT project promises to make someone a billionaire.
- Also learn about: How to Create an NFT (Ultimate Guide)
What are NFTs?
Before we start talking about how people are getting rich from NFTs, it’s essential to understand what an NFT even is. NFT stands for “Non-Fungible Tokens.†NFTs are unique cryptographic tokens that exist on a blockchain and cannot be replicated. Every NFT has a unique identifier, similar to a serial number, and can have attached data that can be used for many purposes, from access to clubs and restaurants to art and real estate and everything in between. So no, you can’t go around screenshotting NFTs and selling them as the original.
What’s the Difference Between Crypto and NFTS?
When people think of NFTs, they typically also think of cryptocurrency. Unlike cryptocurrencies, NFTs cannot be traded or exchanged at equivalency. Each NFT has its own value that fluctuates. Fungible tokens, like BItcoin and other cryptocurrencies, can serve as a medium for commercial transactions and purchasing NFTs. Many NFTs have already sold for millions of dollars.
Types of NFTs
Now, let’s go over the types of NFTs that exist currently. NFTs are “Tokenized” real-world tangible assets, making buying, selling, and trading them more efficient while reducing the probability of fraud. They can also function to represent individuals’ identities, property rights, and more.
There are two main categories of NFTs – collectibles, and utility. Keep in mind that some NFTs function as both.
Collectible NFTs
Collectible NFTs were the first and, to this day, the most common form of NFTs in trade volume and quantity. These include things like art, music, photography, and trading cards.
Collectibles are the most basic way to utilize NFT technology, which is why they’re getting so much heat on social, especially on TikTok. Almost anyone can create a collectible NFT, so sometimes, the value simply depends on how much someone is willing to pay.
But, what these TikTokers are missing is providence. Like with fine art, the custody chain is what confers value, proves rarity, and allows legal usage. We all know THE Mona Lisa differs from a print or photograph taken in the Louvre. No one is getting paid royalties from the picture they took while on vacation in Paris. There is only one original Mona Lisa painting.
The benefit of legitimate collectible NFTs is intellectual property and ownership with access to a royalty income stream.
Bored Ape Yacht Club is a great example of this. The Bored Ape’s are a series of collectibles that give owners exclusive access to members-only benefits. These real-world benefits are a utility of the NFT, which we will cover in a minute. If you own a Bored Ape, you’ll get access to online hangout areas, limited edition merchandise, real-world events, and free NFTs.
Utility NFTs
On the other hand, Utility NFTs are less known but are the most promising usage of this technology. Utility NFTs include gaming, investment, identity, and tickets to events and clubs.
A few NFTs are really shaking up the space with the utility they offer. A great example of this is a project called BilliDrop. This project utilizes multiple features of crypto and blockchain technology.
BilliDrop is disrupting traditional lotteries with a provably random draw system and prize wallets with winnings up to one billion dollars. Yes, you heard that right – one billion dollars. Now, if something sounds too good to be true, it usually is. The thing about this project, though, is the way they’ve built it makes a lot of sense, which we will cover later in this article.
They recently launched a series of NFTs that increase your chances of winning money in this lottery system. Their NFT has a huge amount of utility we haven’t seen in the space, including growing multiplier odds with a play-to-earn game called “Goat Farm.†Playing this game upgrades your NFT attributes, a little-known or utilized feature within the NFT space.
Their NFT called “The Herd†earns you money passively by emitting a token you can swap for Ethereum. This means you don’t have to sell the NFT to make a return on your investment.
Expect to see more of this type of functionality from NFT projects in the future. The market is still so young, similar to websites in the early 90s, that we are only beginning to see how they can be used. New ideas and experiments on how NFTs can work are emerging every day.
How to Make Money With NFTs
Now, let’s discuss the moment you’ve been waiting for: how to use NFTs to make money. Making money off any product typically goes something like this. You find something “good,†buy it and sell it for profit. This is generally the approach with NFT “investors†today. The great thing about buying and selling NFTs is that it’s quick and easy.
The preferred marketplace to find NFTs to buy and sell is called OpenSea, but we are starting to see new players enter the market. Coinbase and GameStop just launched their marketplaces as well.
Finding a Good NFT Project
So, how do you go about finding a “Good†NFT project? Like almost everything in life, it’s who you know, not necessarily what you know. To be a good investor in NFTs is about community, which means spending time in the NFT spaces, joining Discords of projects or creative groups, and getting early knowledge on what is launching and what the market feedback is. New projects are referred to as “The Alpha.â€
Joining an NFT Whitelist
Once you’ve found a project and you’re convinced that it’s going to the moon, what you need to do is lock in your spot early at a reasonable price. This is called Whitelisting.
Whitelisting allows buyers to reserve the right to mint at a period when minimal amounts of project information are available. The good news about whitelisting is that there is zero cost to you.
What whitelisting does at its core is gives NFT sellers a mechanism to gauge interest and build a community of early adopters.
As we mentioned, whitelisting does not cost anything, and you have no obligation to invest other than joining the community. It’s like making a reservation at that hot new restaurant. The reservation guarantees you a table instead of waiting hours in line and potentially being unable to eat there.
Now let’s go back to our earlier example, which was BilliDrop. They opened their first whitelist with minimal project information at 0.333 Ethereum. The whitelist was completely filled in less than two days.
The next thing they did was something we’d never seen before. The Round 2 whitelist opened at 0.456 Ethereum. Offering a more expensive Round 2 whitelist, this guaranteed everyone who made it onto the first whitelist had a profit before they even bought anything.
This is essentially gamification of whitelisting. The whitelist price increases relative to the amount of project information available. It’s up to you to wager the information available versus the escalating price. It’s a bit of a gamble but can pay off massively if the project takes off. A third and final whitelisting round for Billidrop is expected to open at a higher price point before mint day, July 30th, 2022.
You Have an NFT – Now What?
If you’ve been lucky enough to get your hands on a pumping project, the critical decision is when to sell. This greatly depends on the type of NFT you own, the community surrounding it, and the project roadmap.
The typical strategy for collectibles is to get in and get out as soon as possible while turning a profit.
For utility NFTs and projects with a long-term vision, when you decide to sell is highly dependent on what’s happening in the market. In the case of utility NFTs that can earn you money passively, like BilliDrop’s “The Herd†it might make more sense to sit and hold.
The Bottom Line
We hope this article helped de-mystify NFTs and how to make money from them. Let us know in the comments which NFT projects you’re currently excited about.
