Most of us had never heard of a non-fungible token before March 2021. That was when an artwork by the digital artist Beeple reached a staggering $69.3 million at auction.
Suddenly the world wanted to know all about this innovative new form of investment, and many people wanted to know how to get in on the action themselves.
In actual fact, the concept of the NFT – a unique digital asset at cannot be replicated or destroyed – had been in existence for at least seven years before Beeple’s cash avalanche. The original came in 2014 when artist Kevin McCoy created Quantum, a pixelated image of an octagon that is today valued at around $7 million.
While it is artistic NFTs that have hit the headlines, they come in many forms now ranging from avatars to use in video games to unique clips of memorable sporting moments and the market is conservatively estimated to be worth around $40 billion a year.
If you are also interested in amassing a portfolio of NFTs the good news is that learning how to buy NFTs can be a fairly simple process and one which consists of four main stages.
- Set up a digital wallet
Before you even start to think about your first purchase, the initial step will be to create a digital wallet. This is where you will both store the cryptocurrency needed to buy NFTs when they are new and it’s also where you will be able to securely store them once purchased.
So even though it is possible to buy pre-owned NFTs using standard currency, you’re still going to need to have a digital wallet. There are many to choose from, but many people go for MetaMask as this has been designed to work with Ethereum, the most commonly-used cryptocurrency for NFT purchases
- Choose your blockchain and buy some cryptocurrency
It’s not essential to use Ethereum in NFT purchase, so you might want to look for some alternatives.
Whichever you choose, you’ll need to acquire it either through a broker or a crypto exchange and there is a wide choice of these available.
One thing to keep in mind is that the charges different currencies make when buying and selling NFTs can vary greatly. So it could be well worth going for one with the lowest fees.
- Pick which NFT to buy
This is where things become a little more tricky. Not only is there a a huge range of NFTs available out there, not all will be quite what they seem.
Generally, they are sold through marketplaces with the biggest of these being Opensea.This has a general selection of categories that include art, music, trading cards, virtual worlds, and more.
Before you commit to any NFT purchase, however, it’s important to do as much research as you can into its creator, or creators and what their aims and ambitions are. NFT creators also tend to have considerable social media profiles, particularly on Twitter. So make sure you follow them and also check out the brand’s official website.
It’s reckoned that between 20 and 40 hours’ research is needed before you make a decision on which NFT to buy. It could also make all the difference whether the one you are intending to invest in will deliver the results that you want.
- Buy your NFT
Obviously, the fourth and final stage is to complete the purchase. The marketplace in question should make this a simple and straightforward process. Then it’s just a case of transferring it to the safety of your digital wallet and, hopefully, seeing its value steadily rise.
Some aspects to consider
Anyone considering dipping a toe into the world of NFTs should also be aware of a few important facts that may, or may not, influence decisions. Let’s call these the three Fs.
Fees
You need to be ready for the fact that there will be fees attached to all purchases. Their level will depend on a number of factors as we’ve already briefly touched upon. These range from the cryptocurrency that you’re using and even the level of congestion on the network at the time of purchase. The marketplace will also probably take their cut.
FOMO
With so much excitement and impetus built up around NFTs it can seem like the world is rushing ahead without you. But fear of missing out is never a good reason to plunge in regardless. This underlines the importance of doing your research thoroughly before making a move.
Fraud
A large part of your research must also be to ensure the legitimacy of the NFTs that you’re planning to buy. As you’d expect from such a vibrant market, there are plenty of tricksters out there passing off copies of original NFTs.
So hopefully you’re now fully prepared to start your NFT portfolio – and long may its value continue to rise.
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