Non-Fungible Tokens (NFTs) have captured the attention of collectors, investors, and digital art enthusiasts. Whether you’re more interested in digital art, virtual real estate, or a video game collectible, trading NFTs can be intriguing and sometimes confusing. The concept of NFTs may seem complex – but buying one doesn’t have to be. Here’s how to make buying an NFT a whole lot simpler.
Before you buy, think about storage
NFTs, just like traditional, physical possessions, need a home. A Web3 wallet that’s built for blockchain-based assets like NFTs and Ordinals is where you can store your collection. These wallets allow you to interact with blockchain apps, and trade and store digital tokens like Bitcoin, Solana, Ethereum, and Polygon. Most NFT marketplaces require you to have a Web3 wallet before making any purchase.
Popular wallets are user-friendly and easy to set up. They work seamlessly with browsers, making your NFT transactions smoother than you might think. Setting up a wallet involves creating an account, securing your private keys, and storing them safely. Web3 wallets can be a bit like digital bank accounts, except there’s no “forgot password” button. So make sure you store your key in a secure location that’s resistant to both digital and physical mishaps. Certain wallets offer more security features, so look for one that prioritises security.
Understand what you’re buying
NFTs can represent just about anything digital, from art and music to virtual land or gaming items. Remember owning an NFT doesn’t necessarily mean you’re acquiring the copyright or intellectual property rights to that piece of work. Purchasing an NFT of an artwork might mean you own a digital proof of ownership for that specific copy, but you don’t have the legal right to reproduce or monetize the original artwork unless specified.
It’s a bit like buying a limited-edition print of a famous painting. You own that particular print, but you don’t own the image itself. This distinction can sometimes be confusing, so it’s important to read the fine print – well, the smart contract – when making a purchase. Be sure you know what rights (if any) are transferred with your purchase.
Learn about gas fees
It’s important to know about gas fees (sometimes called transaction fees). Gas fees are costs paid to miners to process and validate your transaction. It’s like a service charge, but it can fluctuate wildly depending on the network’s traffic. The fees can sometimes cost more than the actual NFT, so it’s a good idea to check the current rates before buying.
Ethereum is the most popular blockchain for NFTs, but notorious for its high gas fees. If gas fees seem intimidating, you might want to investigate alternative blockchains that offer lower fees, like Solana or Polygon. These networks also support NFTs and can prove more cost-effective, especially if you’re a new trader looking to make smaller purchases.
Research the marketplace
Knowing where you’re shopping is important. Some marketplaces cater specifically to certain types of NFTs, while others support a broad range of digital assets. OpenSea is one of the largest and most popular NFT marketplaces, offering everything from digital art and collectibles to virtual real estate. Other marketplaces like SuperRare or Foundation focus on high-end digital art. Some marketplaces operate on specific blockchains, so if you’re using a particular Web3 wallet, or you’re concerned about gas fees, this might influence your choice. Some wallets such as the Magic Eden Wallet are built so you can collect across multiple chains like Bitcoin, Solana, Ethereum, and Polygon.
Make sure to verify the authenticity of what you’re purchasing. Some marketplaces do better at curating and verifying creators than others. You don’t want to end up buying what you thought was a rare piece, only to find out it was someone else’s copy. Pay attention to the seller’s credibility, the contract address, and the platform’s reputation.
Look beyond the hype
While there are opportunities for collectors and investors, there’s no shortage of hype. Not every NFT will turn into gold. One strategy for staying level-headed is understanding the difference between speculative purchases and long-term investments. Some people buy NFTs purely as speculative assets, hoping to sell them later for a higher price. Others are passionate about NFT artists, community, or the utility that the NFT provides. If you’re buying for these reasons, you’re more likely to enjoy an NFT, regardless of its future value. On the other hand, if you’re buying with the sole goal of making a quick buck, remember that the NFT market can be volatile, and prices fluctuate.
A word about blockchain
Since NFTs are tied directly to blockchain technology, it’s worth understanding a little bit about how it all works. In simple terms, a blockchain is a decentralized digital ledger that records transactions across many computers. This structure ensures that the data (in this case, NFTs) are tamper-proof and transparent.
Before blockchain, digital assets could be copied infinitely, but an NFT represents a unique item with verifiable ownership that anyone can check. It’s this rarity and proof of ownership that gives NFTs their value, particularly when tied to art, collectibles, or digital experience.