Welcome, anon.
The purpose of this substack is to give you everything that you need to know to get up and running in the wild-wild-world of NFTs.
My focus is the NFT world on the Ethereum blockchain.
This first article is designed to give you EVERYTHING you need know to know to build a FOUNDATION of knowledge in the NFT world.
I am starting at 0 and assuming you know nothing about NFTs but have *some* experience with Crypto.
The parts of this article are as follows:
Part 1: What Are NFTs?
Part 2: Why Should You Care About NFTs?
Part 3: How To Buy Your First NFTs on Ethereum
Part 4: How To Source Good NFT Projects To Buy
Part 5: Conclusion
If you are experienced with NFTs/Crypto already, feel free to skip to part 4.
Now…
Let’s start at the start.
PART 1: What Are NFTs?
NFT stands for Non-fungible token.
That means every single NFT is its own unique token on the blockchain.
Each and every NFT owned out there in the world—from the mega-famous CryptoPunk to that dumpster fire rug that you bought yesterday—are completely unique.
There are no other tokens out there EXACTLY like them.
Which means they cannot be traded to another person easily, (like swapping $1 for another $1) because they are one-of-a-kind, making them…non-fungible.
On the opposite side of the spectrum we have fungible tokens.
Bitcoin for example, is fungible.
1 BTC = 1 BTC
There will only ever be 21 million Bitcoins ever made—but 1 BTC will always equal 1 BTC.
There is no difference between 1 BTC and any other 1 BTC.
Just like $1 USD is the same as any other $1 USD.
Your dollar bill may be dirty, it may have been stepped on, spit on, drawn on, and used for illicit activities…but if you bring it to a store to buy something, $1 is always $1.
That is because they are Fungible.
They are not unique and they are easily replaceable.
Get it?
No?
ngmi.
PART 2: Why Should You Care About NFTs?
NFTs are literally changing the world as we speak.
I’m not going to get too deep into this because that would take way too long and I know that the real reason why you’re here is to learn how to become a dirty, degen, nft flipper.
But just know this…
NFTS ARE GOING TO EAT THE WORLD.
In the future, everything important will be done with NFTs.
The deed to your house? NFT
Your passport? NFT
Your concert tickets? NFT
We are simply in the first inning of the Great Transition from Web 2.0 into Web 3.0.
Software has already eaten the world, you know that.
Soon (within 10 years imo) *nearly* everything you do will take place on the blockchain.
Whether you know it or not.
I’m not here to argue which blockchain that will be, because honestly I don’t think we know.
Most of the TITANS of the crypto industry that will end up becoming an integral part of our everyday lives and get taken for granted in the future like Google, YouTube, Spotify, Maps, and Twitter today DO NOT EXIST YET.
For now the BEST we have in my honest and correct opinion is Ethereum—therefore that is what we will focus on.
NOTE: If you would like to dive deeper into WHY NFT’s are IMPORTANT please read this thread by mega-big-brain 6529 below:
PART 3: How To Buy Your First NFT On Ethereum
In order to buy NFTs on Ethereum, you are going to first need two things:
1) A non-custodial wallet (I.E. METAMASK)
2) Ethereum
NOTE: If you don’t know how to do this I will break it down simply in a 5 step process below.
Download MetaMask on your browser
Setup your MetaMask wallet
Go to Coinbase or Binance or any other CEX and create an account
Purchase ETH (Ethereum) on the CEX of your choice
Send ETH from where you bought it to your personal MetaMask wallet
Here’s a quick video explaining how to do it for you visual learners out there:
(NOTE: When setting your MM wallet up…write your SEED PHRASE “SECRET PHRASE” down on a piece of paper. Never share it with anyone. They will rob you blind.)
Once you have your MetaMask setup and some ethereum in it, you’re good to go!
There are two main ways for you to purchase NFTs on ethereum.
The first way is to purchase your NFT from a digital marketplace like Opensea.
Since we’re working with Ethereum, OpenSea is quite literally your only option here.
They’ve got a hardcore monopoly on the market.
While you are at OpenSea, you look up the project you are interested in, or you click on Stats > Ranking to ogle at the Top NFTs in the world.
After you select the project that tickles your fancy, you’ll be brought to the collection page on OpenSea.
(NOTE: LOOK FOR THE BLUE CHECK MARK IN THE PROFILE PHOTO OF THE PROJECT. THERE ARE MANY FAKES OUT THERE. BE CAREFUL!)
Here, on their main page you can easily browse and find the perfect NFT that catches your eye.
After you find the NFT that you are interested in, click on it to be brought to that NFT’s product page.
To purchase, simply hit the big blue “buy now” button.
You will then be brought to a screen that is your purchase confirmation page.
If you have enough funds in your wallet, then you hit the blue “checkout” button to buy.
A box from MetaMask will appear, to confirm your purchase on the Ethereum blockchain.
Let’s pause here for a second.
This is where the dreaded “gas” price comes in.
Here’s how Ethereum works:
Ethereum ($ETH) is used to run the EVM (Ethereum Virtual Machine).
You can think of the EVM as a computer on the internet that processes ALL of the transactions that happen on the ethereum blockchain.
To get this computer to process your transaction, you need to pay a fee.
That fee is paid in ethereum and is called “gas”.
Much like a car’s engine needs gasoline to run; the EVM needs ethereum to run.
No ETH = No Gas = The computer will not run; just like a car will not run without gasoline.
Here’s a good website to track the current price of gas at any given time: https://etherscan.io/gastracker
Remember, the more people using the network at any given time = the more gas you will need to spend to use the EVM = the more $$$ it will cost.
You will be prompted with a “quote” on MetaMask of how much gas it will cost to process your transaction on the ethereum computer.
Your transaction (txn for short) being the purchase of this NFT.
Hit “ok” and you’re good to go.
Once the transaction goes through, your ethereum will be sent out of your wallet and to the sellers wallet, whereas the NFT that was in the sellers wallet will be transferred to your wallet in exchange.
Congratulations, now you know how to purchase NFTs on Opensea!
The second way to purchase NFTs is by minting the NFTs directly from a project’s website or contract.
This process is also quite straight forward.
You visit the website that is selling the NFT.
You connect your MetaMask wallet to that website.
(NOTE: MAKE SURE IT IS THE OFFICIAL WEBSITE OR YOU COULD GET ROBBED.)
There will usually be an option to choose how many NFT’s you want to mint. Select your number and hit “mint”.
You’ll then be prompted with another option to choose how much you want to pay in gas.
Select your gas figure and hit accept.
Once the transaction processes you’ll transfer your ETH to their contract and their contract will transfer you the NFT(s).
BOOM! You’re done!
Now go get em’ tiger.
PART 4: HOW TO SOURCE GOOD NFT PROJECTS TO BUY
Now you know:
What NFTs are
Why NFTs are important
How to Buy NFTs on Secondary Market (Opensea) or via the project’s website itself (Mint)
Now you are ready to understand what determines a good project in the NFT space.
There are 5 main traits that GOLEM looks for when deciding whether or not to invest into an NFT project.
Those 5 traits are:
HYPE
COMMUNITY
DEVELOPERS
PRICE ACTION / UNIQUE OWNERSHIP
ART
The BEST projects in the space are able to intertwine all of these different aspects together seamlessly.
1) HYPE
NFT projects live and die based on the hype surrounding them.
This also determines a project’s launch.
Projects that do this correctly will build as much hype as possible leading up to their initial sale.
Then they will continue to generate hype by releasing airdrops, engaging with their community and otherwise incentivizing new members into their project/ecosystem over and over again.
The projects that really maximize on the hype train are the projects that are continuously reinventing themselves and pushing the boundaries of what NFT projects do.
These projects are at the forefront of whatever is ‘trending’ in the NFT space, usually doing it first, seeing success, then seeing other projects copy them as they move onto the next thing.
A great example of this is THE DOGE POUND.
They launched in mid-July.
The initial launch was based off of the DOGE meme, which in the crypto world is a classic.
After spending August building up their community and hammering out the details of their first drop, at the beginning of September they launched DOGE POUND PUPPIES as a free mint for holders.
Each puppy is now trading at 0.85 eth each (~$3,000) at the time of this writing.
They were one of the earliest projects to launch successful “companion NFTs” for their main NFT, and saw massive success & hype based off of that.
Then what did they do?
THEY CREATED A LAUNCHPAD!
This was a genius move.
They give their community early access to dope projects
They make people want to HODL their nfts so they don’t lose access to the club
They help other projects launch which then creates a little army of NFT projects that are all somewhat linked with DOGE POUND
At the end of September they helped launch the project DEEZ NUTS giving all DOGE POUND holders the opportunity to mint 3x nfts in the presale.
This project has gone on to 3x from its mint price and has A LOT of value moving forward.
Things DOGE POUND is doing right:
A bunch of NFT collabs coming up
More & more celebrities/athletes are joining the community
New Drops (Free halloween NFT for OG + Puppy holders)
Developing their own $Coin for ecosystem
Each one of these things continues to build hype & keep the momentum train rolling forward and that is a beautiful thing to see.
Look for projects that are continuously reinventing themselves.
2) COMMUNITY
After the initial hype/launch of an NFT project it’s really the community that sets the tone and determines whether a project will go on to be a top NFT project or die an agonizing death.
Here’s a checklist you can match against any new project community you come across:
How many people are in their discord?
How many people are active in their discord?
Is it a nonstop shill/spam fest?
Are people having legitimate conversations & helping each other out?
Are people giving good suggestions about how to improve the project?
Are the mods legit?
Are the devs chatting with the community?
Can you see yourself making frens there?
Does the space give off good vibes and are you happy to chill out there?
Is there ‘good’ alpha being leaked/discussed
This is not indicative of EVERYTHING a good community will be comprised of, but it’s a good start.
Building & sustaining a good community might be one of the hardest things that a project has to do.
Coding is easy, humans are hard.
My number #1 advice for this is to actually join the discords of the projects you are interested in and start talking in their chats.
Get a feel for how everything is and if it feels like a cool place to be, chances are it actually is and the project is legit.
3) DEVELOPERS
The developers of the project are the ‘captains’ of the ship and are responsible for basically everything.
Good devs can make a meh project shine
Bad devs can make an amazing project die
When it comes to determining the quality of the devs behind a project there are a few things to look at:
Are they active? Posting daily updates, interacting with the community, etc.
Are they coming up with new, fun, exiting, innovating avenues for the project to go down?
What are they doing with the funds they made from mint?
What are they doing with the royalties they make from secondary sales?
Are their contracts coded well?
What is the roadmap? Are they following through with the roadmap?
Are they partnering with other projects & doing cool collabs?
Again this is more of a “feel” thing.
You can FEEL when devs really care about their project and are putting their all behind it.
And you can FEEL when devs are simply in it for the money.
Devs are important because they are the ones literally building the project and steering the ship.
They are the leaders and the community will often reflect the vibes that the devs & team are putting out there.
Pay attention to the roadmap.
While many people often disregard the roadmap, I think it is very important for two reasons:
1) It helps you to keep the devs ACCOUNTABLE for the project
2) It shows whether or not the devs are currently innovating, getting sh*t done, and what the outlook for the future of the project look like
Many roadmaps out there over-promise and under-deliver.
BUT…
When you find a project with an ambitious roadmap that is ACTUALLY DELIVERING on that roadmap?
That’s when you know that you have a special project in front of you.
Projects like oh, I dunno: @Treeverse, @Byopills, @Dogepound, @Veefriends, just to name a few…
If the devs are public, it’s a good idea to look them up and see what other projects they’ve worked on and what their track record is.
Usually successful founders/devs made or have worked on other successful projects.
If they are anon, that’s ok too. But you need to be watching the devs.
A project will thrive with good devs, a project will survive with neutral devs, but a project will die with bad devs.
Keep that in mind.
4) PRICE ACTION / UNIQUE OWNERSHIP
This one is a bit of a doozy.
Price action refers to a few things:
Mint Price vs. Current Floor Price
The average floor price of a project
The amount of ‘rare’ sales & the ATH sales of a project
The amount of sales & ETH traded on this project daily/overall
Below we see one of the darling’s of the NFT space for the past 2 weeks, CrypToadz.
It is sitting at 7.25 ETH Floor right now with roughly 45% unique ownership and a whopping 37,200 ETH (~$133 Million USD) traded since mint.
All great numbers.
If you click on the “activity” button to the right, you’ll get a breakdown of the average floor price of the project since inception.
Now let’s break this down one at a time.
1) Mint Price vs. Current Floor Price
Mint = 0.069 ETH (9/9/21)
Current floor = 7.25 ETH (10/11/21)
Over 100x increase in the past 32 days.
Incredible.
2) Average sale price
Today = 7.25 ETH
10/9 = 10 ETH
Last 7 Day’s = 17.21 ETH
Last 30 Days = 4.94 ETH
All Time = 2.78 ETH
Clearly we are on a bit of a down trend for the past week.
But this is OK!
Projects cannot continue to just shoot straight up without dropping back down.
NFTs are very different from crypto coins but at the same time, what goes up MUST come down.
The trick is identifying where the new support level will be established before the next leg up.
3) Amount of ‘rare’ sales and ATH of a project
If you go on Opensea and select “Highest Last Sale” from the dropdown you’ll get a good idea of what people are paying for the rarest NFTs in this collection.
This is a Whale’s game that you and I will not be playing.
However, the higher the numbers and the more of them you see is a good sign here. It means whales like the project and are heavily invested.
Again, look at CrypToadz…
The 10 highest last sales are…
420 ETH
300 ETH
175 ETH
150 ETH
140 ETH
135 ETH
125 ETH
119 ETH
100 ETH
99 ETH
Crazy money, right?
Great sign.
4) The amount of sales & ETH traded on this project daily/overall
This shows you how “into” a project people are at the moment and how much money this project has made over time.
It’s a good gauge for telling if a project is currently popping off, at its peak, in a down trend, in consolidation mode, or dead.
Again, you’re simply going to have to look at projects overall history and combined with all of the other factors make a judgement decision on where you think the project is.
Clearly Toadz is on a downtrend right now after its massive run up.
Whereas look at this chart for PUDGY PENGUINS below:
In my personal opinion Pudgy Penguins is in a HARDCORE consolidation phase right now that is going to POP at some point or another. (NFA - DYOR)
These are all metrics you should pay attention to and should check daily on your list of projects that you are keeping on your shortlist.
5) Unique ownership
Unique ownership refers to how many unique wallets hold the project.
If there are 10,000 NFTs and 3,300 holders, then the project has 33% unique ownership.
In the CrypToadz example above, we can see that there are 3.2k holders for 7k NFTs.
That means there is roughly 45% unique ownership.
(3,200 / 7,000 = .45)
This is very good.
In my personal opinion, 50%+ unique ownership is the Gold Standard when it comes to NFTs.
Once a project crosses the 50% unique ownership threshold, we’re getting into the “supply shock” phase, where most holders only hold 1 or 2 of the NFT in their wallets.
When people only have 1 or 2 of the NFT in their wallets, they are much more likely to be HODLing for the long term.
This means that the amount of available NFTs on the marketplace will drastically go down which will eventually lead to an EXPLOSION in price.
Yay, economics!
Projects with less than 30% unique ownership are getting into sketchy territory where Whales or a small amount of wallets hold the keys to the kingdom so to speak.
We don’t like projects with less than 30% unique ownership because that means a whale could theoretically crash the whole project by listing a large % of the NFTs all at floor price.
While it is impossible to not have any whale influence on a project (you actually do want whales to buy in) you don’t want whales to have a stranglehold on a project.
Regardless, unique ownership is very important.
Do not forget to pay attention to it.
5) ART
Last but certainly not least is the art of a project.
While having “meh” art won't kill a project, having “great” art won’t necessarily make a project a success.
But it won’t hurt!
Art is kind of a wildcard here.
Beauty is certainly in the eye of the beholder and more often than not, dollar signs will cloud everyones judgement.
This is why I don’t advocate people to judge a project SOLEY on its art.
It really comes down to personal preference and therefore it will vary widely based on your…personal...preference.
I for one, am an Otaku at heart, and love anime/Japanese aesthetics, so this is why I believe CAPSULE HOUSE has some of the best art in the game right now.
You may disagree, that’s cool.
You’re entitled to your opinion, even if you’re wrong. :)
Something I have noticed however is that UNIQUE, CUTE, and/or COOL art usually does the best.
Art that is eye-catching usually gives a project a “leg-up” in its early days and the early days of a project usually are the most critical time.
I expect as this space matures, we will have higher & higher quality projects come out with better and better art.
PART 5: CONCLUSION
Phew. We made it to the end. Thanks for sticking with me, anon.
In this post you just learned:
What NFTs are
Why NFTs are important
How to Buy NFTs on Secondary Market (Opensea) or via the project’s website itself (mint)
How to source good NFT projects to buy
This is all information that took me WEEKS of fumbling around in the darkness to even begin to grasp when I first got into the NFT world.
I know that this was a lot of information to read and to digest.
Take a few days and let it soak in.
The purpose of this article was simply to lay everything out on the table and build a FOUNDATION of knowledge for you in your journey of NFTs.
Now we can really get into the good stuff :)
Future articles will cover:
How to FIGHT & Win Gas Wars
How to mint directly from the contract (bypassing website)
Upcoming projects I think will blast off (& why)
My personal thesis for NFTs
How I believe the market is going to play out moving forward
And more!
If there are any topics/areas you would like me to cover or if you have any questions/comments, please don’t hesitate to reach out to me on Twitter @BowTiedGolem or simply add a comment to the bottom of this article.
Don’t forget to SIGN UP to the SubStack to get articles first and join our little community here.
WAGMI!
good
Great primer. The post to interact directly with contracts can't come fast enough!