How to Buy Your First NFT - Beginner Series

Introduction

NFTs (non-fungible tokens) are unique cryptographic assets that exist on a blockchain. Unlike traditional cryptocurrencies, which are interchangeable and can be divided into smaller units, NFTs cannot be divided or exchanged for other assets.

NFTs have been rapidly gaining in popularity as a way to buy, sell, and trade digital assets such as art, music, and video games. In some cases, NFTs can also represent physical objects, such as tickets, loyalty points and even real estate.

While traditional cryptocurrencies like Bitcoin can be used to purchase items like goods and services, NFTs are often purchased more for their intrinsic value. For example, someone might purchase an NFT-based work of art or in-game item for its rarity or uniqueness, rather than using it to buy something else.

Two Options to Buy NFTs

There are two methods by which investors can purchase non-fungible tokens. If the NFT or collection has not been minted yet, they have the following options:

1. Primary Market

These are the markets where NFTs are sold for the first time. These markets can be either of the following:

Creator’s Website – e.g. bayc.com, larlavalabs.com, nbatopshot.com, moonbirds.xyz
Dual Marketplace – a secondary marketplace that has the option to create NFTs. In this case, the secondary market also acts as a primary market: e.g. Opensea, Rarible, Solsea, Foundation, HicEtNunc.

When the NFT art or collection’s initial offering has concluded, the only option to buy the tokens is via a secondary market.

2. Secondary Market

Secondary markets are online venues where you can purchase NFTs from people who have bought from the initial offering. The options for secondary markets depend on the blockchain used to mint the NFT. These are the major marketplaces:

Opensea – OpenSea trades NFTs that were minted on the Ethereum, Solana, Polygon and Klaytn blockchains
Foundation - Foundation is both a primary and secondary marketplace. It is solely for Ethereum-based NFTs. It is also an invite-only marketplace. New creators have to be invited by existing members before they can mint NFTs.
Solsea - Solsea is for Solana based NFTs
Bloctobay - Secondary home for NBA Topshots NFTs as well as other NFTs in the Flow Network
HicEtNunc - Primary and secondary marketplace for NFTs in the Tezos Network
Objkt - Secondary marketplace for NFTs in the Tezos Network

How to Buy NFTs

1. Create a Wallet

Non-fungible tokens are bought and sold using the cryptocurrency of the blockchain on which the NFT is minted. Hence, the first step is to set up a crypto wallet, which can convert fiat currency to ETH and other cryptocurrencies.

There are many websites that offer crypto wallets including eToro, MetaMask, Coinbase and Binance. It is important to select crypto wallets that can connect to the NFT Marketplaces that interest you. Some marketplaces accept only specific wallets. There are also physical wallets for cryptocurrency like Trezor and Ledger Nano X. Physical wallets are superior to digital wallets when it comes to security.

2. Connect Your Wallet

Connecting a wallet enables you to transfer funds from your wallet to the marketplace. Linking a crypto wallet to an NFT marketplace takes place through the user’s marketplace account. The process is simple and takes no more than five minutes to accomplish. Once connected, you can begin transacting in the marketplace.

3. Browse the Marketplace

With an active and funded wallet, the next step is to browse for NFTs that interest you, either based on your interest in the art as a collector, or the value as an investor. Buyers should exercise due diligence and research before committing to a purchase. This is especially true if you are buying NFT collections as an investor.

Selecting NFTs

As mentioned earlier, there are two reasons why people decide to purchase NFTs. Most make purchases for the token’s intrinsic value as an art piece. Others, however, purchase non-art tokens as an investment. It’s important to understand the business aspect of non-fungible tokens before investing in NFT collections.

To find the NFTs that have potential for long-term sustainability, buyers should consider the following criteria:

1. Online presence

NFTs should have a strong online presence to help build brand awareness and interest in buying the NFT. NFT collections should have a Twitter account, Discourse server and, ideally, a website. A tangible Internet presence builds trust and relationships between the developer / artist and prospective buyers.

2. A “Doxxed” team

Doxxed means that the team behind the NFT is known and reputable. Collectors and investors will want to know the people behind the token before they buy. A well-documented management team is a sign of honesty and transparency. Are they visible on Instagram or Twitter? Do they have a Discord channel where the investors can reach out to them? NFT creators who provide little information about themselves and their projects may not be trustworthy.

3. Utility

NFT collections benefit from providing some utility such as providing access to a venue. This greatly benefits the token’s value and longevity. Investors must have a tangible return for their investment, though it is not necessarily monetary in nature. Potential investors need to read the developers’ white papers to understand what their long-term utility plans are for the token.

4. Roadmap

The roadmap is a detailed outline of the developers’ plan for the NFT. The roadmap indicates what milestones the developers have identified that can raise the value of the collection, and how they plan to achieve those milestones. A good roadmap demonstrates the developer’s commitment to the project’s longevity, which drives the value of the tokens.

Conclusion

Non-fungible tokens can be great investments both for their intrinsic value as art and their potential to be long-term stores of wealth. As with any investment, due diligence is required. For NFT investments, always check the magic four: online presence, management team, utility and the developers’ long-term plans expressed in their roadmap.

We welcome comments and questions in the discussion area below.