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Trading 101: How to sell your first NFT

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Trading 101: How to sell your first NFT

Last updated: Wednesday, 16 February 2022

Creating an NFT is as simple as uploading your files, inputting your collection’s description and making your profile, determining your royalties and completing your listing. If this sounds daunting, follow our five steps below to get started.

How to sell your first NFT in 5 steps

1) Do your market research

2) Create your NFT

3) Mint your NFT

4) Launch your NFT project

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Step 1) Do your market research

You might be thinking that selling an NFT is easy.  All you have to do is upload a JPEG onto a marketplace, and then you can lay back on your chair, sip some iced tea, and watch your laptop take off as hundreds of bidders have a feeding frenzy over your digital creation. But it’s not that simple.

It’s not 2017 anymore, and new projects without clear, purpose-driven motives are not going to succeed. You should think of creating an NFT project like starting a clothing brand. There’s literally millions of brands out there, similar quality, similar style, but yet people choose certain ones. Why? 

There’s a couple of reasons. The first is quality: maybe your hoodie, or NFT piece, has a unique, creative quality. Maybe you're an exceptionally talented artist, and your work has genuine artistic value in of itself. That’s great.

The second reason, and the one that is more accessible to people not blessed with artistic genius, is community. Say it again — community. Building a successful NFT project, and getting even one buyer, is dependent on how well you can initiate, cultivate and spread that one word. C-O-M-M-U-N-I-T-Y. 

Now, even if you are an exceptional artist and your stuff is bona fide creative genius, you are still going to need to consider community: harnessing a group of people to appreciate and talk about your work.

NFT market research tips

But wait, what does an NFT community even mean in this context?

What is an NFT community?

Some might think an NFT community just means setting up a discord, or creating a Twitter account. Those are good ideas, but if you want to really drive interest, you're going to have to tap into more specific parts of the NFT community as a whole. 

An NFT community is where a culture has been created around a project, which then drives a following who talk and spread the idea of the project. These people tend to have similar interests and motives, and are all intent on making the project succeed. You can compare an NFT community to a clothing brand community.

Think about Dickies, for example: it started out as a skateboard brand which cultivated a community of, you guessed it, skaters, who wore their clothes because it represents their lifestyle. The idea spread and it became super popular. Most clothing brands tend to be related to lifestyle, whereas NFTs can relate to anything from sport, music, world views, or political and ideological initiatives. 

So find your niche. Find the group of people who will dig what you create. To look at an example, Bored Ape Yacht Club (BAYC), isn’t just 10,000 JPEGs of different apes. It was launched with a vision. 

BAYC created a community, or exclusive club, that people could only join by buying their NFTs.  This attracted everyone from NFT enthusiasts to major celebrities like Snoop Dogg, Eminem and Gwyneth Paltrow. BAYC’s commitment to their vision and community has driven continuous value — the community was the appeal, not the art itself.

So many people make the mistake of creating a project, launching it and then only afterwards considering who’s it for. Know who your NFT project is before you start, and those people are far more likely to become immersed.

NFT Community tips

Step 2) Create your NFT

So you've got your purpose down. You know who you are creating for, and you have a plan. Now it’s time to create the thing.

Since your project is mostly community driven, the actual art doesn't have to be crazy-creative. Of course, the better quality and more creative it is, the better, but there have been NFT projects that see success that when you look at them from a purely aesthetic perspective, you wonder how they did it. 

If you yourself have graphic design experience, then just go for it. If you have a vision but lack the graphic design skills, don't be afraid to outsource those skills from an expert. You'll find hundreds of willing people selling their services on freelancer websites like Fiverr or Upwork.

So, let's say you have a vision to create 100 pandas playing different sports. Let’s call it: ‘Pandas Playing Sports’. Get yourself a basic duck template, and start putting sporty objects on them. Maybe they're playing baseball, soccer, or tennis. As mentioned, if you lack the graphic skills to create it, get someone else to do it. This project might be targeted towards a wildlife conservation community, committed to ensuring the wellbeing and safety of pandas. The message is serious, but the art is fun. 

Once you have your designs finished, you’re all set to start minting.

Create your NFT

Step 3) Mint your NFT

For NFT newbies, you can think of minting as another word for ‘creating’. This is the part where you take the art you’ve created in step two and list it on one of the NFT marketplaces. Now, you can find way more detail about choosing a marketplace on our ‘How to Mint your first NFT article’ here, so for now I’ll just talk about OpenSea.

OpenSea is the largest and most popular NFT platform, and is a perfect place for beginners in the space to launch their project. It runs on the Ethereum blockchain (which means you have to pay annoying gas fees).

To create, or mint, an NFT on OpenSea, you’ll see a large ‘Create’ option in the top right hand corner. Click on this and it will take you a page where you complete your listing. Add details like the name of the project, the names of individual NFTs and of course, upload the NFT in whatever format it comes in (ex. JPEG, MP4). 

Another detail you need to add is the royalty rate. This is the amount submitted within the smart contract that determines the percentage of sales you will take from further sales. The percentage for this is usually between 10-15%.

For a more detailed guide on how to mint your first NFT, see our full article.

Mint your NFT

Step 4) Launch your project

Your project is complete. Now it’s your job to promote it to the world. If you were smart, you would have already had your launch strategy sorted.

NFT launches are all about building excitement and focusing on community. The more hype around your NFTs, the more people will flock to them. 

Here are some key tips that successful NFT projects have done in their launch:

  • Establish social media channels (Twitter and Discord seem to be the primary main areas NFT heads spend their time, but it’s also worth using Instagram and Reddit).
  • Reach out to  influencers (who resonate with your target customer) and consider gifting NFTs to them for support.
  • Engage with the community in comments and posts.
  • Create a professional-looking website (that doesn’t crash on launch day).
  • Create a presale sign-up form and mailing list.
  • Add your project to the NFT calendar.

Now, we know this article was about selling your first NFT, but what’s the point of starting a project to sell just one? Your goal should be to sell out. It’s the NFTs that sell out fast that make headlines, capture the attention of NFT enthusiasts, and increase in value. 

Launch your project

Where to sell your NFT

When it comes to choosing where to sell your NFT, you have multiple options. OpenSea is the biggest and most popular marketplace, with over 600k regular users all hunting for new and innovative projects. 

You’ve also got Rarible, another platform that uses the ETH blockchain. It’s community-driven and offers its users RARI tokens for using their platform.

Other popular ETH blockchain marketplaces include Nifty Gateway (eco-friendly platform), SuperRare, Foundations and Mintable. Your best best is to scope them all and see what you think suits your vibe best. 

You also have Solonart, which caters to NFTs on the Solana (SOL) blockchain. This has the advantage of being less saturated (and therefore low gas fees, which will be talked about later), but you sacrifice having less traffic and eyeballs on your project.

What about gas fees when selling NFTs?

To mint an NFT on the ETH-blockchain, you’ll be encountered with a gas fee. This is because minting a token on the blockchain means including the information about the smart contract of the NFT and its metadata on a block in the blockchain. Gas fee prices fluctuate depending on how busy the market is, but usually the price is significant. Keep this in mind before you mint, and make sure you have some Ethereum in your wallet.

If you're minting on Solana, you don't need to worry about this as much. Still, you’ll need to connect your wallet to your platform and have some crypto in there, just to be safe.

What is a gas fee?

Can you sell an NFT for free?

When you list an NFT for sale, most marketplaces don’t charge any fees but some do charge service fees right away. Others charge this fee when the NFT is sold, along with the gas fees needed to pay for completing the sale.

A few marketplaces follow the model where the buyer pays the gas fees when you sell an NFT at a fixed price. When you auction off the NFT, most marketplaces require you to pay the gas fees to accept the highest bid. Some marketplaces like OpenSea cover the gas fees for you for auctions and only require you to pay the service fees to the platform.

All in all, gas fees are there but the amount to be paid or who will pay it will vary for marketplaces. So, before you decide to sell on a marketplace, it’s important to understand how they operate. 

So, in short, you can’t really sell an NFT for free. There is always some kind of fee involved.

Do you pay tax on selling NFTs?

Yep. You reckon Mr Beeple who sold his NFT for 69 million didn’t have to pay any tax on that? Think again.

NFT tax is a little tricky. In general, selling a digital asset like an NFT is subject to Capital Gains Tax on any profit you make from it.  However, if you’re the artist, this might be interpreted as income and subject to Income Tax instead.

In most countries, this rule will apply regardless of whether you’re selling your NFT for crypto or for fiat currency. There are a couple of exceptions to this rule, like in France, so check your country’s crypto tax rules

See below the basics of NFT tax rules in your country.

Tax on selling NFTs

NFT tax USA

The IRS hasn’t issued specific guidance for tax on NFTs just yet, but in summary:

  • Buying an NFT with fiat currency: Not taxable.
  • Buying an NFT with cryptocurrency: Capital Gains Tax.
  • Selling an NFT for crypto or fiat currency: Capital Gains Tax.
  • Swapping an NFT for another NFT: Capital Gains Tax.
  • Minting an NFT: Not taxable.
  • Farming NFTs: Could be subject to Capital Gains Tax or Income Tax.
  • Gifting an NFT: Not taxable if it’s under $15,000.

The IRS hasn’t yet clarified whether NFTs would be taxed at the higher Capital Gains Tax rate of 28% that collectibles are subject to, rather than the usual maximum 20% Capital Gains Tax rate.

Find out more about how crypto is taxed in the US

NFT tax UK

HMRC hasn’t issued specific guidance for tax on NFTs just yet, but here is a quick summary of what you can assume:

  • Buying an NFT with fiat currency: Not taxable.
  • Buying an NFT with cryptocurrency: Capital Gains Tax.
  • Selling an NFT for crypto or fiat currency: Capital Gains Tax.
  • Swapping an NFT for another NFT: Capital Gains Tax.
  • Minting an NFT: Not taxable.
  • Farming NFTs: Could be subject to Capital Gains Tax or Income Tax.
  • Gifting an NFT: Capital Gains Tax (unless gifting to your spouse in which case it’s tax free).

If you want to find out more about how crypto is taxed in the UK, check out our extensive guide, updated for 2022.

NFT tax Australia

The ATO is one of the few tax offices that has issued guidance on NFTs. The ATO says the tax treatment of NFTs follows the same tax treatment as cryptocurrencies. In short:

  • Buying an NFT with fiat currency: Not taxable.
  • Buying an NFT with cryptocurrency: Capital Gains Tax.
  • Selling an NFT for crypto or fiat currency: Capital Gains Tax.
  • Swapping an NFT for another NFT: Capital Gains Tax.
  • Minting an NFT: Not taxable.
  • Farming NFTs: Could be subject to Capital Gains Tax or Income Tax.
  • Gifting an NFT: Capital Gains Tax.

It’s important to note that if you’re selling NFTs as a business (like an art dealer) this would be subject to Income Tax instead.

If you’re interested in discovering more about how crypto is taxed in Australia, see our detailed guide.

NFT tax Canada

The CRA hasn’t yet issued any specific guidance on tax on NFTs. However, it’s safe to assume that like most other tax offices, NFT tax will follow existing crypto tax rules. 

Canada is a little different than other tax offices, however. Crypto is subject to either Income Tax or Capital Gains Tax, but it all depends on how you’re trading and at what scale as to whether you’re taxed at a lower Capital Gains Tax rate or at your normal Income Tax rate. The CRA decides this on a case by case basis, but if you’re trading NFTs to make money, there is a good chance you’ll pay Income Tax instead of Capital Gains Tax.

This said, for those trading, the tax rules on NFTs in Canada are:

  • Buying an NFT with fiat currency: Not taxable.
  • Buying an NFT with cryptocurrency: Capital Gains Tax.
  • Selling an NFT for crypto or fiat currency: Capital Gains Tax.
  • Swapping an NFT for another NFT: Capital Gains Tax.
  • Minting an NFT: Not taxable.
  • Farming NFTs: Likely subject to Income Tax.
  • Gifting an NFT: Capital Gains Tax.

Find out more about how crypto is taxed in Canada.

How Koinly helps you deal with NFT Tax

Koinly is a crypto tax calculator that simplifies crypto tax. All you need to do is import your crypto transactions and it calculates your capital gains, losses, income and expenses in one simple tax summary. 

Koinly imports NFTs (ERC-721) automatically for most EVM-based blockchains such as ETH, BSC, FTM, AVAX, Poly, Cronos etc. We are still working on support for ERC-1155 NFTs as well as NFT support for other chains, such as SOL, WAX, XTZ and more. To add your unsupported NFTs to Koinly, please see how to manually add NFT trades.

Once you’ve imported your NFT transaction(s), Koinly calculates the proceeds, gains or losses and adds it to your tax report.

You can download specific tax reports for your local tax office in Koinly. For example, the IRS Form 8949 and Schedule D for the US, HMRC Capital Gains Summary for the UK, or the ATO myTax report for Australia.

Get your crypto tax report today!

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