The short version
- NFTs offer a pathway to making money and finding new audiences for artists outside of the notoriously hard-to-break-into traditional art world.
- Whether you're creating and selling your own NFTs, or simply buying them, you need a crypto wallet and an account with an NFT marketplace.
- In addition to selling and buying NFTs, you can also hold and stake NFTs for a bit of passive income.
- NFTs are still an unproven and entirely speculative asset — never invest more than you can reasonably afford to lose. And never make it part of your long-term finance strategy.
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How to make money from NFTs
NFTs are the latest trend in the investment world. And while they can be confusing when you first learn of them, they present an opportunity to make money. In fact, some have sold for millions of dollars! There are three primary ways to make money with NFTs:
- Creating & selling your own NFTs
- Investing in NFTs made by others
- Lending or staking your NFTs
Below, we take a closer look at each of these strategies.
1. Create & sell your own NFTs
One of the reasons NFTs have become so popular is because of the opportunity they’ve opened up for artists. The traditional art world has been difficult to break into, partially due to the existence of gatekeepers that make it challenging for new artists to make a name for themselves.
But with NFTs and the blockchain, artists don’t have to go through those gatekeepers. Instead, they can produce art and offer it directly to the public. Not only can they more easily break into the art world, but they can also keep more of the profits from their work when they aren’t sharing them with agents, gallery owners, and others. And the best news is that the process of creating and selling an NFT is far easier than many may think.
Step 1: Set up a crypto wallet
NFTs operate using blockchain technology, which is also the case for cryptocurrency. As a result, rather than being able to use your normal payment methods for NFT transactions, you’ll need digital currency and a cryptocurrency wallet to store it in. Because most NFTs are on the Ethereum blockchain, be sure to choose a wallet that is compatible with Ether.
More: Find your wallet here
Step 2: Choose an NFT platform and link your wallet
The next step in creating and selling your own NFTs is finding the right platform to do so. The NFT platform is essentially the storefront where people can find your art. Listing your art on an NFT platform is like listing your handmade items on Etsy.
There are plenty of NFT platforms to choose from, but one of the most popular is OpenSea. Starting on this platform will give you access to the website’s many visitors, meaning you won’t have to find inventors on your own. Once you’ve created your OpenSea account, you should link your cryptocurrency wallet to it.
Step 3: Create your NFT collection
On OpenSea, your NFTs are stored in what’s called a collection. Your collection is like your private storefront on the NFT platform, and the place where all of your artwork is listed for sale. When you’re setting up your collection, you’ll have to upload a logo, featured image, banner, collection name, and more. You can also designate a royalty percentage, which is the amount you’ll earn from each sale when an investor resells your artwork. The benefit of royalties is you don’t just make money the first time you sell your art — you make money anytime it’s sold.
Step 4: Add your art to the collection
Once your collection is set up, you can start adding the artwork that will become your NFT. Here’s the good news: Nearly any digital file can become an NFT, including a JPG, PNG, GIF, SVG, MP4, WEBM, WAV, and more. Plenty of popular NFTs are simply images or GIFs.
Step 5: List your NFT for sale
Once you’ve added your NFTs to the collection, it’s time to list them for sale. For each piece of art, you can set the price of your item. You can either set a fixed price or allow people to bid on the asset, with the item going to the highest bidder.
2. Invest in NFTs
Don’t worry — even if you can’t make your NFTs, you can still make money from them, just as you can from any other art investment. Rather than earning money for your work, investing in NFTs allows you to make money when the asset appreciates during the time you own it. Eventually, the goal is to sell the asset for a profit, which means you’ve received a return on your investment. If you're new to the world of NFTs, then you may not even know where to start investing, but we’re here to break it down for you.
**Step 1: Set up a crypto wallet
Just like when you create and sell NFTs, you’ll need cryptocurrency to purchase NFTs. Because most NFTs are on the Ethereum blockchain, be sure to choose a wallet that is compatible with Ether.
More: New to ETH? Here's what you need to know
Step 2: Choose an NFT marketplace
There are several NFT marketplaces where investors can buy and sell digital assets. As we mentioned, OpenSea is currently one of the most popular NFT platforms, but a quick internet search can help you find others that might better suit your needs.
Step 3: Research the NFT you want to buy
Once you’ve landed on an NFT marketplace, you can start shopping for NFTs. You can usually browse assets by category, or you can simply shop for whatever new and noteworthy NFTs the platform is featuring.
Step 4: Buy a cryptocurrency
As we mentioned, you usually need cryptocurrency to buy NFTs rather than a typical debit or credit card. Be sure to buy enough to cover the cost of whatever NFT you’re interested in. the cryptocurrency you buy will then go into your digital wallet.
Step 5: Buy the NFT
Once you’ve purchased your cryptocurrency and have it in your digital wallet, you can make your NFT purchase.
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3. Lend or stake your NFTs
A final way you can make money with NFTs is by lending or staking your NFTs. These forms of passive income have become a popular practice with cryptocurrency, and they aren’t actually all that different from ways you can make money in the traditional world of finance (with a high-yield savings account, for example).
When you stake or lend your NFTs, you transfer them into a locked-up account, where you’ll earn a yield on the contract for as long as you leave the NFT there.
When you stake or lend your NFTs, you transfer them into a locked-up account, where you’ll earn a yield on the contract for as long as you leave the NFT there. In some cases, you’re lending your NFT to a specific individual (or individuals), who are essentially renting it from you. You put your NFT into an escrow account, where the other party deposits their collateral. In return, they receive the NFT for the duration of the contract, while you’ll receive the specified rental price.
This type of earning is completely passive for the NFT owner and is beneficial for a couple of different reasons. First, it allows you to make a bit of money for something that would likely otherwise just be sitting there. And if you’re short on cash, it allows you to access the funds you need without selling your NFT. In either case, you get the short-term benefit of the earnings from the lending or staking, as well as the long-term benefit of any appreciation of the NFT.
Keep in mind that NFT staking or lending is still a relatively new concept — even newer than NFTs in general. As a result, this process will likely change and advance moving forward. Additionally, there aren’t many platforms that allow you to earn this type of passive income from the NFTs you own. A couple of examples include ReNFT and NFTX.
More on staking and lending:
More: Everything you need to know about crypto staking and lending
More: Best crypto staking and lending platforms
How much Does it Cost to Make an NFT?
The process of actually creating an NFT can be completely free, but there is a cost to list it for sale on an NFT platform. OpenSea, for example, charges what’s called a “gas fee” to cover the cost of the function on the blockchain. The cost of this gas fee can vary depending on the number of people transacting on the network at the time.
What happens after you own an NFT?
At this point, you might be wondering what happens next. Owning an NFT is similar to owning any other type of investment. The goal is to eventually sell it for more than you paid for it, so you’ll want to hang onto it and hope its value rises. And if you decide you want to sell your NFT — either because its value has increased or you simply don’t want it anymore — then you can sell it on the same NFT marketplace where you originally purchased it. It’s important to note that while the concept of investing in an appreciating asset might be similar to stock investing, the two assets are very different. When you invest in a stock, its price is largely based on two factors: the current market and the company’s performance. But with an NFT, the performance isn’t tied to a particular company’s performance. As a result, changes in its value can be somewhat arbitrary. Additionally, because there isn’t a proven track record of NFT performance as there is with the stock market, it’s impossible to predict what will happen with your investment moving forward.
How much can you make creating and selling NFTs?
There’s no limit to the amount you can make creating and selling your own NFTs. Plenty of popular pieces have sold for hundreds of thousands — or even millions — of dollars. And while that level of profit may not be attainable for all artists, you can still make a decent amount of money. Additionally, if your art is valuable and is resold several times, you may earn royalties with each subsequent sale, which can create an additional source of passive income.
The risks of NFT investing
Whether you’re trading NFTs or creating your own, there are some serious risks to consider, especially if your goal is to earn a profit from your NFT investments.
First, for artists, know that creating and selling NFTs isn’t a quick win. There are countless artists selling their work online, and the unfortunate truth is most won’t become wealthy by selling NFTs. In fact, many may not make any money at all. In addition to your art creation, it’s important to have a plan for marketing your NFTs as well.
There are also risks associated with publishing your work on an online forum. Unfortunately, many artists have had their work stolen by others who attempt to sell it as their own. And in many cases, platforms don’t have a procedure in place to protect artists. In fact, Opensea recently admitted that over 80% of the items that had been placed on its platform via its free minting tool were fakes or scams.
This theft also presents a risk for investors buying other people’s art. Because it’s far too easy for someone to steal a piece of art and sell it as their own NFT, you run the risk of buying a digital asset that’s fake or plagiarized.
And the potential of buying a plagiarized NFT isn’t the only risk to individual investors. Unlike other asset classes, there’s no proven track record of NFT performance. As a result, investors should put a significant portion of their money into NFT investments. If anything, consider using “fun money” in your budget to support artists you’re interested in or dabble with an asset class that’s exciting to you. However, don’t rely on these investments as a part of your long-term financial plan.
More: How to spot an NFT scam
The bottom line
Before you put your money into NFTs it’s important to understand the risks associated with them. As a new asset, it’s impossible to know how NFT investments will perform in the future. Rather than putting all of your money into these digital assets, set aside just a small portion of your portfolio and invest in them only with money you can afford to lose.
More on NFTs:
- 3 reasons you should buy an NFT (And 1 big reason you shouldn’t)
- Are NFTs securities?
- How to buy and sell NFTs
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