The Beginner’s Guide to How to Price Your NFTs
The internet is on fire debating whether NFTs deserve to die or not. The concept of NFTs and the economic sense of ownership around them is a great idea, but most projects need more legitimacy and utility. Well, we will leave it to the world to sort this out!
When you have understood accurately what an NFT is, you need to decide on your purpose for selling. What is the reason behind why you do what you will do? You will need to think long-term. Many collectors in the NFT space are looking for NFTs with utility.
A purpose, or something valuable that the NFT can do for the buyer, the ability to use it long term in any context or application. Thus, any NFT you create must have some form of utility. An artist could offer merchandise alongside a sale or profit share with NFT holders. Access to exclusive events and items is often a part of it, as are giveaways and giving to charity.
How to price your NFTs?
Once the artwork intended to be an NFT has been created with the “right intent and utility”, you must consider how you will price it.
Your pricing must consider the costs of selling an NFT, your artwork’s perceived value, and your end goal in selling NFTs. You will need to consider whether you are looking to sell the NFT quickly or want it to become a blue-chip NFT someday. You may be choosing to give to charity. All of these will need to come into consideration for the artist in their pricing.
Many marketplaces will have a “Buy Now” option for NFTs, which works to sell NFTs quickly. However, auctions and bidding may allow higher prices to accumulate into a more significant total of funds in the longer run. Deciding on the methodology and understanding the unique nuance of pricing NFTs is essential, and the different methods available for pricing should be understood. So, to start with, consider the following.
1. Owner Price: This is the value that an NFT is considered to be worth, based on what the owner of the NFT believes it to be.
2. Current Listing Price: This is the value of the NFT listed on a secondary marketplace.
3. Buyer's Price: This is the value a potential buyer is willing to purchase an NFT for on a secondary marketplace. This may sometimes be higher or lower than the Owner's Price, and some marketplaces allow the buyer to make an offer.
4. Actual Price: This is the true value of an NFT as purchased during an auction on a secondary marketplace.
Utilities should also come into the decision since this will help you understand the comparisons and differences between your project and the other types of NFTs available and help you properly consider the best price for your work in the future. Utilities are an article entirely of their own, and it would be impossible to discuss them all in the space of this one.
Types of NFT pricings
How about we price your artwork? There are multiple ways and methods of doing so, and these are a few.
- Fixed Price: A fixed price will allow collectors to purchase artwork using a “Buy Now” option on a marketplace without negotiating or bidding on a piece of work. Some marketplaces will allow buyers to send an offer to the seller, which you can accept or decline.
- Auction: An auction allows collectors and enjoyers of art to bid on your crypto-secured artwork. Oftentimes, the auction begins with the first bid and ends after 24 hours have elapsed. Some marketplaces allow you to list both an auction price and a fixed price, and it is a good idea to set the auction price lower than the buy now, as it allows artists to get their work at a discount.
It is indeed a superior pricing strategy for NFT sales with the auction choice if you are selling 1/1 artworks because the potential for it developing into a bidding war is relatively high for such exclusive pieces of art.
If you sell work as editions, whether 5/5, 10/10 or 100/100, a fixed and affordable price would be far more ideal for buyers.
Another essential factor for NFT creators to decide on is their targeting.
Affordability is essential, primarily if you sell editions or a high volume.
Many of the most significant NFT projects with 10,000 different tokens are easier to trade or gift and usually have a lower starting price for buyers. Many such works will merit a starting price of 0.02 $ETH.
Luxurious art, specifically unique, 1/1 edition artworks, are sold only for a limited time. Because such works are so unique and limited, such works merit a higher starting price, perhaps around the 0.1 $ETH or even 1 $ETH mark, depending on the quality of the art and how well-known the artist is.
The final thing to consider is the costs of listing an NFT on the marketplace. You will also need to consider these things when setting the price you will sell your NFT, as you may risk ruining your profit margin due to such costs.
The following section will lay out these costs in more detail.
NFT Listing Fees
Once you have created and determined how to price your NFT, your next step is to list the NFT on your chosen marketplace. This is a simple process; however, cryptocurrency costs are often involved in doing so, as stated in the previous section. It is essential to understand these, lest you risk cutting into your profit margin with the costs involved.
1. Minting Fees: To generate the digital certificate for an NFT, an NFT needs to be minted on the blockchain. With some marketplaces, this involves a minting fee. OpenSea is notable in that it does not require such fees. It could cost an average of $30 to $50 for the minting process alone.
2. Listing Fees: A fee gets collected on most marketplaces when an NFT becomes available. eBay, for example, has a similar process for listing products on their marketplace and NFTs in this way are no different. Listing an NFT could cost between $60 to $100.
3. Commission Fees: Many marketplaces have a commission fee when an NFT is sold on their platform. For example, Foundation has a current commission fee of 15% and selling an NFT for $300 could hit you with a fee of $45.
4. Escrow Fee: It usually requires cryptocurrency payment when withdrawing or depositing cryptocurrency into a wallet. Depending on the platform, this fee could cost anywhere between $30 to $55.
All of these costs combined add up to around $250. Considering an NFT sold for $300 again, if you managed to sell an NFT at $300 and the fees cost you $250, your profit would only be $50. This does not include the cost of taxes to be paid either.
Keeping these total costs in mind during the price-setting phase of your strategy could prevent you from running into the negatives. It is important to ensure your profit margin is managed well and you avoid falling into the negatives by misunderstanding the costs involved.
Such costs could cause a low-profit margin where almost 80% of the revenue from a sale goes onto fees while only 20% of the revenue is profit for the artist. Instead, you should flip your fortunes around and multiply it by 2x or 3x the costs.
If you chose to sell the same NFT at 2x the cost of $600, the total costs would be $295, and your profits from the sale would sit nicely at $305. That would be a 148% increase in profit simply by upping the price of your NFT by 2x.
While it may appear daunting, this online sphere for artists and creators is only getting started, with many artists, photographers, and collectors already diving. Many artists are being seen, and art is purchased worldwide in ways they have never experienced. If you consider yourself somewhat of a traditional artist, perhaps you might like to try something new. NFTs are a good starting place; you might find some incredible success in ways you never have before. Good luck!
