NFTs – you’ve most likely heard of them! These unique digital tokens are popular in the tech world, and soon, you could mint or buy NFTs on Instagram. Blockchain is the technology behind NFTs, powering their creation by deploying token standards that keep each minted token rare and unique. Also, the technology simplifies the process of verifying the authenticity of NFTs.
The history of NFTs can be traced back to 2012 with the concept of Colored Coins. This NFT collection proposed by Yoni Assia would consist of the rare Bitcoins (BTC) generated from the first-ever transaction known as the genesis block. However, NFTs did not go mainstream until 2017, with the launch of CryptoPunks and CryptoKitties collections. Both collections rank among the top NFT projects.
NFT sales surpassed $24 billion in 2021 alone. Despite the NFT hype train slowing down, these tokens are still a worthwhile investment for crypto enthusiasts. Are you looking to buy an NFT? This article offers you a comprehensive and concise guide to get you started.
Why Should I Buy NFTs?
Before buying NFTs, you may ask, why even buy them? Different people collect NFTs for various reasons. Here are some reasons that motivate collectors to buy NFTs:
1. Blockchain Utility
The fast-growing metaverse consists of virtual spaces that utilize NFTs for functionality. Many metaverse platforms offer items like virtual land, virtual real-estate, apparel, accessories, and many more items as digital collectibles. As such, anyone looking to join the metaverse and participate in virtual NFT games needs to buy the relevant NFTs for their project of choice. Additionally, users who hold NFTs issued on metaverse platforms can resell the tokens in the future to earn profit.
2. Status Symbol
Today, people spend more time online, and the younger generations highly value the digital environment. As such, many users consider the rise of digital art as a way to express their status online. More celebrities own NFTs of popular collections like the Bored Yacht Ape Club and CryptoPunks. Owning a piece of these expensive collections is a way for digital users to establish their high-status symbol online.
3. Trading for Profit
Another popular reason for buying NFTs is to invest in a new and volatile product with potentially high-profit margins. The volatility in the crypto market creates opportunities for earning profits through buying NFTs. You can leverage the difference between retail price and the true value of NFTs on markets to flip them for profit. In this process, a trader identifies and purchases collectibles whose list price is lower than their potential value in the markets. After holding the token for a short period, the trader relists and sells the NFT at a higher price. Traders can also buy the NFTs and later rent them out or stake them to earn an income.
4. Monetizing Art
Since NFTs gained popularity, many digital artists and musicians have opted to tokenize their creations and sell them as digital collectibles. Some creators have been successful, selling their art for millions of dollars.
For instance, EDM star Justin Blau, aka 3LAU, tokenized his album Ultraviolet and sold its 33 NFTs for over $11.6 million. Canadian singer Grimes also sold digital artwork NFTs for $6 million. Fans also have a reason to buy NFTs issued by their favorite creators, to connect and support them.
Notably, regardless of the reason for buying NFTs, collectors must remember that these digital collectibles are highly volatile. Therefore, the tokens may be considered riskier than less volatile assets since their prices are less predictable. Like traditional investments like stocks, NFTs also bear risks to traders buying them to flip for profit.
Step-by-Step Guide on How to Buy NFTs
The blockchain industry has an expansive collection of marketplaces – platforms for trading NFTs. These marketplaces list collectibles for sale and facilitate buying and selling between users.
Before buying an NFT, the collector decides and identifies the token they want to collect. This step is crucial as the collector ensures that the purchase is not rushed. Thus, the user limits potential financial risks in the future.
After exploring the different collections and selecting a token to purchase, you will need to set up a cryptocurrency wallet. Then, proceed to top up your wallet with cryptocurrency supported for purchasing the NFT(s). Ensure that your wallet and cryptocurrency of choice are compatible with the marketplace issuing the NFTs.
Here is a summarized checklist when planning to buy a collectible:
- Identify the NFT(s) you’d like to buy
- Identify the marketplace that lists or issues the NFT(s)
- Set up a crypto wallet and top it up with the cryptocurrency supported for the purchase
Checked all the above boxes? Now, you can proceed to purchase your favorite digital collectible. Follow these steps to complete your purchase (This guide uses the Bored Ape Yacht Club NFT collection, or BAYC for short, to illustrate how to buy NFTs):
Step 1: Open a Crypto Wallet
Many popular NFTs, including BAYC, is minted on the Ethereum blockchain. So, when buying an Ethereum-based NFT, you need a wallet compatible with Ethereum. MetaMask is the most popular wallet for Ethereum marketplaces.
- To create your wallet, visit the wallet’s website and select a download that is compatible with your device. Choose from the available downloads for Chrome, iOS, or Android device browsers.
- Then, tap the ‘Get Started’ tab and follow the prompts to create your wallet. Set your password when prompted. Afterward, click on ‘Create a Wallet’ to set up a new wallet. Otherwise, select ‘Import Wallet’ if you have an existing MetaMask wallet.
- Then, write down the generated secret recovery phrase comprising at least 12 random words, and keep the phrase safely offline as you will need it to restore your wallet and funds when you cannot access the wallet.
Step 2: Connect Your Wallet to the Marketplace
Next, you need to connect your wallet to the marketplace that issues the NFTs. Again, to illustrate, for the BAYC collection, we’ll opt for the OpenSea NFT marketplace. OpenSea lists BAYC, Meebits, CryptoPunks, Mutant Ape Yacht Club among other popular collections.
- To sign up for OpenSea with MetaMask, visit the marketplace’s website. On the page’s top-right, tap on the profile icon next to the ‘Create’ tab.
- The page that opens prompts you to connect your wallet (MetaMask is listed on top of the list and marked ‘Popular’). Proceed to tap ‘MetaMask’ and link your wallet to OpenSea.
- Click ‘Next’ to proceed and add your username, email address, and other details as prompted.
Step 3: Top up Your Crypto Wallet
Then, you need to buy crypto and send it to your wallet before you successfully buy an NFT. For example, when purchasing an NFT from the BAYC collection, you’ll need Ethereum’s native cryptocurrency, Ether (ETH).
- To quickly top up your wallet with ETH, click on ‘Buy ETH’ on the home page of your MetaMask wallet.
- Choose your mode of purchase from credit card, bank transfer on even Apple Pay (for US residents only). For MetaMask mobile users, you may opt for Transak to buy ETH using the Euro, US Dollar, GB Pound, or other supported fiat currencies.
- Proceed to purchase ETH by tapping on ‘Buy Now’. Your MetaMask wallet balance will reflect after a few minutes. After replenishing funds to your wallet, you can buy your NFT of choice and settle transaction fees. REMEMBER: Ensure you top up enough ETH or other cryptocurrencies to make a successful NFT purchase.
Alternatively, you could receive ETH or other supported cryptocurrencies from another wallet. To add funds from another wallet:
- Open the MetaMask app and tap ‘Add Funds’. A QR code pops up, and the sender can scan it to send you ETH.
- Also, the sender may copy your account address (available on the account name) and paste it in the ‘Recipient’ tab when sending you funds.
Step 4: Explore and Buy NFTs
Now, you can explore the NFT marketplace, browsing through collectible categories offered by creators and other NFT traders.
- On OpenSea, use the search bar at the top-center to explore items, collections, and accounts listed on the marketplace. For instance, enter ‘Bored Ape Yacht Club’ in the search bar and tap on the BAYC collection with a ‘verified’ blue checkmark.
- Browse the items available for bidding or sale on BYAC’s OpenSea page. Search items and filter the results based on your preferences. Access the filters on the left panel on the BAYC collection page. Some filters on the page include accessories of the apes, the status of the NFT sale, the price range of the item, the blockchain, and supported cryptocurrency payment.
- Afterward, select your preferred item, tap on it and click ‘Buy Now’. Depending on the type of sale, you can complete the purchase or make an offer to the NFT owner. You can also bid on an NFT.
- Then, check the box on the pop-up tab to agree to OpenSea’s Terms of Service. Proceed to complete checkout, and a MetaMask pop-up appears to confirm the transaction, including all applicable fees. For bidding, the NFT owner sets the time for the sale and a reserve price for the item. The NFT sale completes if the owner accepts a bid or a trader bids the reserve price for the item.
This core process on how to buy NFTs is largely similar to other NFT collections, marketplaces, and even blockchains.
Storing Your NFTs
Following your first NFT purchase, you need a place to store your valuable collectible. Like cryptocurrencies, NFTs are stored in crypto wallets. However, hackers may target NFT marketplaces to steal users’ collectibles. So, ensure you choose a good wallet to store your unique digital tokens.
As a beginner, storing your NFT on MetaMask is a safe option. The wallet is secured by a password and a 12 to 24-word seed phrase and is connected online so you can conveniently access and manage your crypto assets from any device and any place.
Conversely, if you plan to hold your NFT for a long time and need extra security, choose a cold wallet instead. Such wallet is offline (disconnected from the internet) and limits vulnerability to hacks from threat actors on the internet. For instance, you may store your NFT on a Trezor or Ledger cold wallet.
Deciding to Buy NFTs
The NFT ecosystem has millions of items to choose from. When buying an NFT, you need to select a collectible with a high potential for soaring in value over time.
Just like a physical art collection, take time to learn about the NFT creator’s background, the artist’s career status in the art scene, the significance and messaging of their work. Look for NFTs that carry a significant theme that you and many other collectors relate to. Such NFT collections are often popular in the crypto space and have a significant return on investment (ROI) as they are highly demanded.
Another factor to consider when deciding which NFTs to collect is the collection’s uniqueness. Unique digital art collections like CryptoPunks, BAYC, and CryptoKitties have an easily identifiable style that often accompanies a theme. Such narratives attract more users to demand items from the collections.
Although anyone can join an NFT marketplace and purchase these digital collectibles, you should remain alert to avoid being scammed. The NFT craze has also witnessed several fraudulent projects that collect users’ many only to fold after a short period. Such projects are known as ‘rug pulls.’
Besides OpenSea marketplace, MetaMask wallet, and BAYC collection of NFTs, there are several other NFT marketplaces, wallets, and NFTs to purchase.
Also, top NFTs include The Sandbox, Decentraland, NBA Top Shot, Art Blocks, Cool Cats, and FLUF World. Each of these top collections has a narrative that makes it popular among collectors.
NFTs have sold for top dollar, the highlight being digital artist Beeple’s $69 million sale of ‘Everydays: The First 5000 Days’. Collectibles are also available on blockchains like Solana, WAX, BSC, Polygon, Flow, and TRON.
In conclusion, buying NFTs is simple but requires you to carefully research the item before purchasing it. The NFT marketplaces have helped decentralize how creators and fans interact. Through buying NFTs, collectors support the works of their favorite artists while standing a chance to make a profit when they resell the token. Additionally, collectors can apply these NFTs to metaverse platforms, buying virtual land or property, accessorizing their virtual pets, or playing online games.
The motivation for buying NFTs varies from one person to another. Even then, collectors should ensure they understand how to buy NFTs. Also, collectors should research the potential for value growth of the NFTs before deciding to buy the digital collectibles.