A beginner’s guide to buying NFTs
So how, exactly, does something that few people had ever heard about in 2020 become the Collins Dictionary Word of the Year for 2021?
Simple. It just has to hit the headlines with the sheer force of the non-fungible token following a multi-million dollar digital art sale.
That’s exactly what happened after a digital artwork by an artist called Beeple, real name Mark Winkelmann, was bought by an investor for $69.3 million in March 2021.
What really made this newsworthy, apart from the huge sum involved, was the fact that the buyer had nothing physical to show for their money, simply a digital image and a certificate to prove its uniqueness and authenticity.
It also introduced the concept of the NFT to the general public, even if many found it as hard to comprehend as the blockchain technology that lies behind it.
But, for those who have grasped the concept of the non-fungible token simply being digital and incontrovertible evidence of an asset’s provenance it has opened up a whole new world of acquisition and investment.
For those who are keen to climb aboard the NFT bandwagon, the obvious first question they need to have answered is on the process of buying an NFT. The good news is that this is a fairly simple four-stage process.
Acquire some cryptocurrency.
Although there are exceptions such as when you are buying a pre-owned NFT, the buying and selling of NFTs is generally done using cryptocurrency. Of the countless different kinds available, it’s Ethereum that is the most usual choice.
As one of the biggest cryptos, along with Bitcoin and Tether, it’s a relatively stable currency as well as one that was established with the aim of using the blockchain for numerous purposes.
To buy some Ethereum for yourself you will need to do this either through a currency exchange or a broker like Coinbase or Kraken.
Open a crypto wallet.
You’re going to need somewhere to keep your currency, as well as a safe place to store your NFTs once you start to acquire them. That place is called a crypto wallet and, if you have chosen Ethereum, then the obvious choice is one called MetaMask. This has been specially developed for the cryptocurrency and opening one of these wallets is a quick and easy process.
You just need to download the software from the website. Once installed, a little fox logo will appear in your browser. Click on this and you will be taken through a few steps including one that will create a password.
It will also automatically generate a twelve-word recovery phrase that you’ll need to keep somewhere safe. If you ever forget your password using this is the only way you’ll be able to get into your wallet again.
Link your crypto wallet to a marketplace
NFTs are generally sold in online marketplaces. Some are for specific kinds like Rarible that specializes in digital artwork. Others like OpenSea are far more general. So, just like shopping on a site like Amazon or eBay you’ll be able to search by category.
To use these marketplaces you’ll need to first register your digital wallet with them, then you’ll be ready to go.
Start acquiring your NFT portfolio
That’s it, you’re all set up to start buying NFTs in your chosen marketplace. It’s generally as easy as buying on any other marketplace and there are three ways that the NFT you want to buy could be priced.
The first is with a “buy now” price. This is exactly what it says. As long as you pay the price that is being requested, it’s yours.
Alternatively, some sellers are open to offers so you decide on what you think is a fair price and put it to them. Then it’s up to them whether to accept it or not.
Finally, there’s the timed auction that most of us are used to participating in by now. And, just like all of these auctions, a good strategy is not to be too hasty in placing bids. Wait until the auction is due to end and then pounce. That way you’re less likely to get tied up in a bidding war and pay more than you originally intended.
Choosing which NFTs to buy
When it comes to selecting what kind of NFT to buy, the world really is your oyster. But one essential step before you do anything is to do as much research as you possibly can into the creator(s) and the vision for their brand. They will probably have a website and are also likely to be very active on Twitter.
As soon as you’re convinced that everything’s in place to make it a good investment – go for it and look forward to the next steps in becoming an NFT expert.
