Introduction
“NFTs” are searched more frequently on Google than “crypto”. Your favourite celebrity has bought an NFT or is getting involved in the space. You’re intrigued by all the hype and wondering how you can pick one up yourself. In this article, we touch on how you can buy your first NFT, where you can buy NFTs from and things to lookout for.
What is an NFT?
Non-Fungible Tokens or NFTs for short are crypto tokens that are unique and represent a non-interchangeable set of metadata that’s stored on a blockchain. Fungible tokens, on the other hand, are interchangeable. Tokens such as Bitcoin and Ethereum are examples of fungible tokens. 1 Ethereum = 1 Ethereum and users are indifferent between the exact bitcoin which they are purchasing or receiving. Each NFT is uniquely identifiable and in most cases users would care about the exact NFT that they are purchasing or receiving. At the core, NFTs are a way to have tokenized representations of ownership over any asset, both physical and digital. This creates new ways of distribution, verification of authenticity, value accrual and community building. There’s multiple emerging use cases for NFTs including but not limited to: Art, Gaming, Music, Sports collectibles and Access Passes.
How are NFTs Created?
NFTs are created by a process known as minting. Minting is essentially the act of creating the token on a blockchain. Artists can easily mint their own NFTs containing their artwork on marketplaces like OpenSea and Rarible. Such platforms have easy to use and beginner friendly interfaces that simplify the process. It’s as easy as uploading the desired digital artwork, keying in the price, giving it a name and clicking create.
How to Buy an NFT
Necessary Setups
There are marketplaces such as, NBA Top Shot, that accept credit card payments but most NFTs are priced and sold in crypto. In order to purchase an NFT with crypto, you would need to have two things: a compatible crypto wallet and sufficient amounts of the relevant cryptocurrency.
Setting up a Crypto Wallet
A crypto wallet is a digital wallet where users are able to keep their cryptocurrencies in, similar to that of a traditional digital wallet such as Cash App for Venmo for fiat currencies. Currently, compatible wallets are blockchain specific and users would need to set-up a wallet that supports interaction with the specific blockchain and with the NFT marketplace. The most common wallets are: MetaMask for Ethereum and Phantom for Solana. Both wallets are browser add-ons and have mobile application versions. You might be worried about having a lengthy set-up process and needing to submit multiple documents. However, for crypto wallets, setting up is relatively quick and painless. There’s no need to submit documents and all you’ll need to do is note down the private seed phrase (recovery details for the account).
The set-up process mainly involves the following steps:
- Installing the browser add-on (Chrome, Brave, Firefox, Edge): MetaMask, Phantom
- Adding it to your browser extension
- Setting-up a wallet
Moving Cryptocurrency Into the Wallet
Now that you have a wallet set-up, you need to deposit the relevant cryptocurrency (ETH/SOL) into the wallet. For most people, the easiest way would be to create an account on a crypto exchange such as Binance, FTX or Coinbase, purchase it there and send it over to your crypto wallet address. Wallet addresses can be found at the top of the respective wallets and are usually a string of alphanumeric characters.
An alternative method would be to purchase cryptocurrencies from the wallets directly if the respective fiat on-ramps are available in your country. Clicking on “Buy” on MetaMask and “Deposit” on Phantom reveals the fiat on-ramp options. MetaMask partners with Wyre and Transak , Phantom partners with MoonPay.
Purchasing the NFT
Once you’ve done the relevant set-up, you can begin shopping! Connect your wallet to a NFT marketplace and browse through the various collections to find a collection or a specific NFT that catches your eye. You can either place a bid for the NFT or buy it at the listed price if there is one. Once you’re ready to purchase the NFT, confirm the checkout, approve of the transaction on your crypto wallet and the NFT should appear in your wallet in a couple of seconds.
Where to Buy an NFT?
NFTs can be bought from NFT marketplaces where artists list their collections on. Here’s a list of a few of the most popular ones:
OpenSea
OpenSea is the current leader in the space and it’s where most people start their NFT collecting journey. The platform allows users to buy/sell/create NFTs on Ethereum, Polygon and Klatyn. They’ve a wide range of NFTs: 1 of 1 art pieces, 10,000 Profile picture collections, Gaming, Photography, Music and the list goes on. OpenSea allows creators to easily create their own NFTs and it’s something to consider if you’re an artist looking for a marketplace to list your work on.
Rarible
Rarible is another popular marketplace that has a wide range of NFTs similar to that of OpenSea in terms of collection types and being creator friendly. The main difference between the two are the blockchains that they support and that Rarible is a community owned platform. Rarible supports Ethereum, Tezos and Flow and users who own their RARI token are entitled to vote on certain decisions that the team makes. Users are also able to buy NFTs using a credit card should they wish to do so.
LooksRare
LooksRare is the newest of the group and currently only supports Ethereum based NFTs. The platform is community owned and 100% of the trading fees generated on the platform are given to stakers of LOOKS tokens. Users earn LOOKS tokens whenever they buy or sell NFTs on the platform.
SuperRare
SuperRare is a marketplace that focuses on individual art pieces. You can think of it as a digital art gallery for digital artists to list their pieces. It currently only supports Ethereum.
Foundation
Similar to SuperRare, Foundation focuses on individual art pieces and only supports Ethereum.
There are plenty of other NFT marketplaces that weren't covered in the segment above but are worth checking out. NBA Top Shot for NBA match moments in NFTs, Magic Eden which is the OpenSea of Solana, Gem which is a NFT marketplace aggregator, Sound for music NFTs and countless more!
Read our guide on Best NFT in Marketplaces in 2022 >
How to View Your NFT After Purchase
The easiest way to view your NFTs would be via connecting your wallet with a NFT marketplace such as OpenSea and viewing your profile. All the NFTs in your wallet will be on display should the marketplace have support for the chain that the NFT is on. An alternative method would be to view the NFTs directly in your crypto wallets. Phantom wallet allows users to do so on both their mobile app as well as web extension version. MetaMask users aren’t able to view their NFTs on the web extension but can do so on the mobile app.
Considerations Before Buying
Before you make your first purchase, there are a few things that might be worth taking a look at before making that purchase decision.
Quality of the Project
While it is difficult to be completely certain about the eventual success of the project in the long run, we’ll cover a few key points to keep an eye on: The team, utility and strength of the community.
A good team is one that’s able to execute on their planned roadmap and make necessary adjustments along the way if needed. Building a long lasting NFT project is not an easy feat and it takes a strong, dedicated team to achieve that. Having a fancy roadmap is worthless if they are not capable of executing all that they have planned or have lackluster execution.
If a project has a capable team, the next thing to understand is the utility of the NFT. What is the NFT used for? An NFT that can be used in a game might be more valuable than a NFT that does not have any underlying utility.
Perhaps the most important factor is the strength of the community. This is typically the hardest thing to gauge as it’s highly subjective. A project with a strong community one that believes in the project and is focused on the long term success of it. Joining the discord, checking out the conversations on Twitter and being involved in the community are some of the ways to gauge the strength of the community.
On-Chain Data
On-chain data is the transactional data of the NFT project. It gives you further insight into who’s buying the collection and what are the current holders doing with the NFT. This allows you to make more informed decisions. NFT investing tools, like Nansen, provide such data in an easily understandable format, allowing our users to #JustNansenit before ape-ing in. If you’re interested in a more in-depth overview of the insights you can gain using Nansen, we’ve a full length article here.
Bored Ape Yacht Club Hodlers Dashboard
One thing to take note of before buying or visiting any links is to always ensure that you’re at the official websites for the respective collections. There are fake collections that appear from time to time. To avoid that, access the links from the project’s official Discord or Twitter page or check that the collections are linked back to the official social media channels of the project.
If you want more information on investing in NFTs, check out our deep dive on things to look out for when investing in NFTs.
Conclusion
NFTs give artists and creators a new way to distribute their work and extract value that they have created in the digital world that we live in today. There’s a ton of hype around NFTs and it can be daunting for newcomers to get involved. The best way to understand NFTs is to learn by doing and spending time in the various communities. We’re only at the beginning stages of what’s possible with NFTs and the NFTs of the future might look significantly different from the NFTs of today. If you’re looking to buy your first NFT, the best advice we can give you is to buy something you genuinely like, never spend more than you can afford to lose and always do proper research before purchasing.
