Beginner’s Guide To NFTs (gas fees, minting, and more)
At the time that I had written about NFTs in Forbes earlier this year, I had only been able to be a fan from afar. It was a culture that I was fascinated with, but hadn’t yet formally gotten into because of my larger bullishness on Ethereum and the liquidity there. I wanted to wait for the majority of the Ellen Degerenes-type money grabs to wash out, so I remained patient.
It wasn’t until three days ago that I finally pulled the trigger on a project, Koala Intelligence Agency (KIA), after news broke of Visa buying a CryptoPunk for $150,000. Within 24 hours, my investment had already generated 10x in unrealized returns, and I was part of a community of just under 4,000 unique holders. I grew my Twitter following with likeminded Koala fanatics, and I watched Gary Vee, Andy Milonakis, and FaZe Banks join in, buying Koalas for as much as 23 ETH ($73,913.23 USD) within 24 hours of the reveal.
I learned a lot in the 48 hours it took me to research, prepare my wallets, and mint my first NFTs, and I wanted to share the process as simply as possible after getting inundated with similar questions over and over.
How to find NFT Projects
This is definitely one of the hardest things to do, and I’m by no means an expert, but here’s how I have evaluated projects historically.
- Avoid Ja Rule. I’m as big a fan of “Put It On Me” as anyone, but when it comes to projects you want to avoid pumpers and shillers as much as possible. The larger NFT community is very savvy and sniffs out scams, get-rich-quick schemes, and paper hands very quickly.
- Get on Twitter. It’s fairly easy to find NFT Twitter, given that everyone in the community has changed their profile picture to a Punk or some type of animal.
- Find art & projects that speak to you. When I was looking at the Koala sneak peeks, I noticed that every single one of the pieces looked like it had rare qualities, which was a testament to the art and would certainly draw more than more front-loaded drops. I figured if this went to $0, it was a cheap and funny piece that I could hang on my wall to mock my hubris. I also love koalas and have always wanted to hold one.
- Find utility. One criticism of NFTs today is that they hold little real-world utility. It’s difficult to put them on display, and outside of the small, burgeoning community most people don’t understand their inherent value (if I had .05 eth for every time I heard “what if I right-click then save your jpeg?”). I am bullish that successful NFT projects in the future will be able to used in real life, whether it’s as access to clubs and events, real life drops (as is the case with Koalas), or a significant charity component (as is also the case with Koalas).
- Join the Discord. This is obvious in terms of information seeking and updates, but the more critical step here centers around evaluating the community surrounding the project. Even before the project drops, you will be able to evaluate how strong the bond is, how long-term focused the buyers are, and who you will be relying on to increase the project’s value. You can see if the group is full of flippers that won’t stick around, or experienced bulls that know what it takes to create a blue chip community.
Why koalas?
Some of the best advice that I had when I used to run an options trade alert service was to only buy what you believe in, that way if you were wrong you were at least wrong on your own terms, as opposed to someone else’s. That’s not to say that you shouldn’t seek guidance and even validation from others, especially in this space.
I found KIA on Twitter after the regret was flooding my feed from people who had missed on the six figure Punks and Bored Apes. My original goal was to wait until more utility was apparent like in Zed Run, but the euphoria around this asset class was simply too juicy to pass up. I knew that I needed to capitalize this week.
Someone had seen the Visa news and wanted to know what undervalued projects existed so that they could get involved. The first tweet underneath mentioned KIA and noted that the founding team was solid, art was incredible, and the community was already vibrant. I joined the Discord and immediately noticed how active people were, despite the fact that the project was still days away. I got to work.
How to prepare for the drop
So you picked your project, now what?
Check the project site
If you can’t navigate through Discord, every project has an information-rich website with the project’s road map, launch date, cost to mint, and minting procedures. Bookmark the project site, because this is where you’ll need to go on the day of the launch to mint your brand new NFTs.
Grab some Ethereum
At a later date we could get into Solana and other currencies, but for now we’ll keep it simple. I already had Ethereum on Coinbase, so I used some of my existing holding for the KIA drop.
Get a MetaMask Wallet
MetaMask is needed to use Ethereum to buy and mint NFTs. If you want to learn why, you can Google it, but it doesn’t really matter.
- Click on Install MetaMask as a Google Chrome extension.
- Click Add to Chrome.
- Click Add Extension.
After you go to sign up and create an account, click Reveal Secret Words. There you will see a 12 words seed phrase. This phrase is the key to your account, and this is by far the most important step (and something that you should certainly do immediately).
Store your 12-word seed phrase in a cold location (meaning write it down on paper), make a copy, and do not put it in a password manager or cloud service. In fact, I’d even store it in multiple places as fragments, just to be safe. If you lose this code and your account becomes compromised, there is no getting it back, and this has happened to many people. Don’t let it be you.
If you want more information on security, I recommend reading this. You can never be too safe.
Deposit Funds
The final step is depositing funds, which you will do from the browser extension. You can buy on Coinbase or deposit what you already have. This is a fairly easy and intuitive process, but I’d recommend sending a very small amount to the wallet initially, just to be sure that you aren’t making a massive mistake.
Copy your wallet ID from the MetaMask browser, put it into “Send” on Coinbase, and you’ll be off to the races in no time.
MetaMask is important because it will connect your wallet to Web3 sites, allowing you to use your Ethereum to do whatever your heart desires. As long as you pay attention to security measures and keep your information secure, you should have no problems holding onto your assets.
Create an OpenSea Account
This is fairly intuitive as well, but you can go here to get more detailed instructions for how to link your OpenSea to MetaMask. As with any MetaMask interaction, you just need to click on the Chrome extension to connect to the site. It’s that simple.
Note: If you want to make an offer for any NFTs on OpenSea, you will need to wrap your eth, which is very simple and riskless to do (if you don’t want to buy you can always exchange 1:1 for regular eth)
Time to Mint
The day has finally arrived. You’ve blocked off the time in your calendar, told your family they’ll be unable to reach you for several hours, and have prayed to Satoshi that you will “make it.”
Gas
Before we go any further, I think it’s important to get an understanding of gas fees. Gas fees are payments made by users to compensate for the computing energy required to process and validate transactions on the Ethereum blockchain.
The person willing to pay the highest gas fee will get their transaction prioritized, but when there are a bunch of people crowding into a buy, these fees can get extraordinarily high. You can check etherscan to know what gas fees are in that point in time, but know that during drops this will likely spike aggressively. I recommend watching a few drops to see what happens to gas fees over time. Now that that’s out of the way…
It’s time
As the countdown approaches 00:00, you’ll want to have the website of the project pulled up, as that’s where you’ll mint.
Once you hit “Mint,” MetaMask will pop up with the default settings input. Immediately hit “edit.”
You’ll then click “fast” and then save.
For big drops, this will not be nearly enough to get the order to fill. You’ll need to manually increase the gas. For most projects, 50–100 gwei should be fine, but if you’re finding that your transaction is still not filling, you might need to increase it even further. Make sure you DO NOT TOUCH THE GAS LIMIT.
Make your calculations beforehand and recognize your maximum willingness to pay for a project. There are plenty of times that you can find drops on secondary for less than the total mint+gas fees, especially on a heavily hyped drop. If all goes well, you should see this confirmation below:
So what now?
You now own a beautiful and hopefully rare NFT, and exactly what it is will be revealed 24 hours later.
You are part of a community that is only ~200,000 people strong, and you are, despite what you might feel, fairly early to a community that is changing digital scarcity and social proof. Don’t let expectations cloud your judgment or frustrate you; most of these will likely go to $0 the same way most people didn’t make money on Beanie Babies.
My take is that many people aren’t getting involved in this culture because of the opacity and friction associated with jumping in. There are plenty of scammers, and a lot of mistakes can’t be undone. Hopefully this simple and easy process will make it easier to make the jump into the world of NFTs when you finally decide to do so.
Some definitions, tips, and parting advice
There’s a lot of lingo involved in NFTs, and I thought I’d make it easier so you’re not running to Urban Dictionary every 5 seconds.
Definitions
- The floor — For this project, the floor represents the cheapest listed Koala for sale, and is representative of the value of the entire project. If your Koala is more rare or has certain attributes that make it more valuable, then you can comfortably assume that its value is above the floor price.
- WGMI — We are gonna make it, used to essentially say this project is a success. This is the opposite of…
- NGMI — Not gonna make it, used to dictate that because of paper hands, the quality of the project, or the strength of the community
- FUD — Fear, uncertainty, and doubt. NFTs are an emotional rollercoaster akin to trading options, and there will be massive surges and freefalls in price. The key is to deeply understand the strength of the community around you.
- HODL, or HODLers — Hold on for dear life. The floor only rises or falls based on what holders are willing to sell them at, and this is where the collective strength and conviction of the community comes into play.
Tips
- Find community within community. For this project, I immediately joined a group chat that held Koalas with rare-ish tracksuits, and I have already enjoyed connecting with them creating value around the tracksuit holders. This not only creates even more commonality between us, but also increases overall value of the project, as well as creates inherent social pressures to prevent early selling.
- Go touch some grass. Similarly to selling options, you’ll drive yourself nuts if you spend all of your time tracking the floor and counting your paper gains. Get some sleep, go outside, and don’t quit your job until you have real money.
- Don’t risk more than you’re willing to lose. This market is insanely hot right now, and most of the euphoria you’ll see on Discord and Twitter comes from a very select few projects that have generated exponential returns for their holders. More often than not, these end up being very expensive jpegs. Make sure you’re still at least thinking about a diverse portfolio.
Parting Advice
I don’t claim to know everything. In fact, I think I got pretty lucky that this was my first NFT project and that I grabbed several Koalas on first mint. That said, I think my background in behavioral economics and my obsession with community gave me the proper heuristics with which to evaluate the risk inherent in this project.
What might not be fully apparent here is that I’ve had an absolute blast participating in this culture. This will not be my last project, and I plan on holding these Koalas for a long time. Who knows, I might even build my own community one day.
If you’d like to stay up to date on what I’m thinking about regarding the Metaverse, NFTs, gaming, and the creator economy, you can find me on Twitter.
