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I sold my first NFT. Beware of these associated costs

Artist Peter Erickson on why the brand-new practice of selling digital art as nonfungible tokens is "a game changer — but there are also serious drawbacks."

Peter Erickson's "Spacetime Crystal" sold as an NFT. (Courtesy image)
This is a guest post by Peter Erickson, a digital artist based in South Philadelphia. A version of it originally appeared in his newsletter and is republished here with permission.

If you follow the latest trends in art and technology then you might’ve heard of NFTs, or nonfungible tokens. It’s a new craze where artists, celebrities and influencers are minting unique digital artworks and selling in online marketplaces — sometimes fetching millions of dollars for a single digital image.

The whole thing is powered by blockchain, which is the technology behind Bitcoin and Ethereum.

Recently, I’ve been getting a lot questions about NFTs. So I figured I might as well try it for myself. I minted one of my more popular images, “Spacetime Crystal.”

I listed it on Rarible for 0.15 ETH or about $250 at the time. Within two hours, I got a bid for asking price from a collector interested in “Astral Travel. Programming. Conspiracies.” You can see the listing, sales history and new owner of the artwork here.

Never in my career as an artist have I sold a digital artwork in this way. I’ve sold prints of digital images, I’ve been commissioned to make digital images and graphics, but I’ve never sold a digital collectible item until now.

In some ways this feels like a game changer. But there are also serious drawbacks.

After all of the fees, I only made about 0.05 ETH. Yes, I paid about $160 worth of Ethereum in order to sell an image for $250. I was paid in WETH (wrapped Ethereum) as opposed to standard ETH tokens, which costs another fee if you want to convert to any other currencies. The 0.1 ETH used to mint was originally purchased years ago at a lower value, so the IRS is owed tax on the realized gains as well as the profits of the NFT sale.

Artists know there is no shortage of gatekeepers and middlemen looking to take a cut of their sales. In this case, most of it was paid to a decentralized computing network. A portion was also paid to Rarible, the marketplace I listed on. Anything owed in taxes cannot be paid in ETH to the IRS, possibly requiring a conversion to USD if the cash is needed.

After all of the taxes and fees, I didn’t gain very much ETH. As long as those proceeds stay in ETH, the value could go up or down, or could be lost entirely if not stored securely.

NFTs have a lot of associated costs! I guess that’s part of what makes them valuable?

But the value in saying I sold my first NFT?

That’s priceless.

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