Complete Guide 2022
Now that you know what an NFT is, you are probably interested in getting involved. The simplest way to join the NFT world is to buy some. Buying NFTs is one of the newest, edgiest forms of art collecting, with a lot of the procedures very much the same as those that come with purchasing fine art.
Sounds great, but how exactly does it work? Let us walk you through it. Don’t worry- it is not rocket science. It just helps to know a few details about the ins and outs before you dive in head-first.
- 1 Buying NFTs In a Nutshell
- 2 Step-By-Step Guide for Beginners
- 3 How Does an NFT Auction Work?
- 4 How to Buy NFT Art Successfully (Five Tips)
- 5 Final Thoughts on How to Buy an NFT
Buying NFTs In a Nutshell
- Almost all NFTs are only purchasable using Ethereum cryptocurrency.
- Most purchases are by auction only.
- You must have a compatible digital wallet set up before buying.
- It is best to shop around on different platforms based on your interests.
Step-By-Step Guide for Beginners
If you have never bought an NFT before, this beginner’s guide has all the information you need to get started on a successful token collecting journey. It is actually a pretty simple process, but you need to have a few things prepared in advance.
Here are the five steps of how to buy non-fungible tokens.
Step 1: Open a Digital Wallet and Set Up an Exchange Account (If you Don’t Have One Already)
If you already have an account on a crypto exchange site and a digital wallet that accepts Ethereum, you can skip this stage. Otherwise, you need to get both. Crypto exchanges are platforms where you can buy, sell, and exchange various currencies at your leisure.
There are many different platforms to choose from. Coinbase and Binance are two of the best-known options for buying Ethereum- both of which are excellent choices. eToro is another user-friendly option, which is great for beginners. What one is best really depends on what payment method you want to use and how much you want to buy.
When choosing an exchange, always check the fees and spending limits. You should also make sure they allow you to withdraw to a digital wallet that works compatibly with the Ethereum currency.
Speaking of digital wallets: you need one. A MetaMask wallet is the most straightforward option if you are looking to buy NFTs, but there are others out there. Assuming you want to take the easy road and get on to the buying part as soon as possible, simply download the MetaMask software and set up your wallet.
This wallet is essentially a crypto bank account where your funds are securely stored. You are given security keys and access codes when you create a wallet- do not lose them! Without them, you cannot access or use the currency stored within.
Step 2: Get Yourself Some Ethereum
As we have already mentioned, Ethereum is the predominant currency in the NFT world. Non-fungible tokens are usually created on the Ethereum Blockchain network, so it makes sense to shop using Eth coins.
Once your digital wallet is ready, you need to purchase some Ethereum cryptocurrency to fill it with. You do this on whatever exchange you decided to go with during step one.
Log on to the platform of your choice and enter how much Ethereum you want to buy. Then, put in what currency you want to buy it with. If you are using USD, then you can pay via card or bank transfer (on most exchanges). Users on eToro also have the option to buy via PayPal.
Please bear in mind that bank transfers can take several days, sometimes more than a week, to go through, so only use this option if you are not in a hurry. Using a card is instantaneous, although it carries higher fees.
Confirm your purchase and wait for notification of a successful transaction. You can then withdraw your newly-purchased Ethereum into your digital wallet that you prepared earlier.
Step 3: Connect to an NFT Marketplace
Ok, you have the funds waiting; you have the storage space; now you need somewhere to shop.
NFT marketplaces are essentially online stores where artists, traders, and collectors display their tokens for sale. Some platforms are highly eclectic, offering a little bit of everything. Others have a niche market, be it sports cards, memorabilia, or specific character art.
You don’t need to stick to one marketplace, of course. Connect to as many as you want to broaden your collecting horizons. Enter your wallet details to link up with the sites you are interested in for easy transfers, both for funds going in and NFTs coming out.
To get you started on your search, here are a few of the most popular NFT marketplaces and what you can expect to find there.
Opensea is arguably the most famous NFT marketplace of them all, with more than 100,000 weekly users. It is connected to the Ethereum Blockchain and offers an incredible range of tokens in all sorts of shapes and sizes.
You can log in using your MetaMask name and password, giving you instant access to the multi-million dollars per week industry.
- NBA Topshot
Interested in basketball? Look no further. NBA Topshot is a specialist marketplace that sells licensed memorabilia and digital playing cards. Think of it as upgraded card swapping, where the scruffy old basketball cards are now entirely digital files that can sell for thousands of dollars.
- Larva Labs
One of the most famous (and valuable) NFT collections is CryptoPunk. Even if you are completely new to the concept, you have probably heard of it, considering that multiple tokens in the collection have sold for six figures!
Larva Labs is the company behind CryptoPunk, and there is plenty of other artwork available to browse through.
As the name suggests, the artwork shared here is pretty unique. It functions like a social media platform for people to share new work, discuss tokens, and buy and sell NFTs. If you want to find something totally different, SuperRare is a good place to start.
- Nifty Gateway
Nifty Gateway is connected to Gemini, a well-known currency exchange. What makes it a little different from the competition is the separate marketplace for reselling NFT artwork. You can often find some good deals shopping this way, but the main marketplace is just as exciting. Another great thing about Nifty Gateway is the possibility to pay with a card.
Step 4: Fund Your Account
Most marketplaces ask you to set up an account with them and become a registered member. By doing so, you gain far better access to the channels and have more opportunities to buy the NFTs you want.
When you register, there is an option to add funds to your account. Basically, you transfer over some Ethereum from your digital wallet onto the platform under your name so that it is readily available as soon as you want to make a purchase.
It is up to you how much you want to put into your account on each marketplace, although some have a minimum deposit. You can withdraw funds without any extra charge from most marketplaces, but always read the conditions before pouring in too many funds.
Step 5: Start Shopping
The wallet is ready, the account is registered and funded with the correct currency, you have found a marketplace that suits you perfectly, and you are ready to go. Now, all you need to do is browse.
Some marketplaces are more user-friendly than others, with filtered categories and multiple sections. You can look as much as you want on as many platforms as you want until you find the piece for you.
In most cases, you buy by auction, meaning you need to bid on the artwork you want. Most NFTs have a display beside them letting you know how much longer the auction is open, what the current high bid is, and sometimes you can see how many others are interested.
You can bid in as many simultaneous auctions as you want and keep track of how things are going by logging into your account. As a beginner, it is best to avoid bidding in too many places at once, as you may forget to check on one and lose out. The ability to run various bids on multiple platforms all at once comes with practice, but there is no need to get ahead of yourself.
Shopping is the easy part, as long as you have everything set up properly before you start. Follow these five easy steps and you are well on the way to becoming an NFT collecting master.
What Happens Once you Win a Bid?
You may now be wondering what happens next? It is not enough to just know how to buy an NFT: you need to know what to do once it is yours. When an auction ends, the highest bidder pays the price and has the NFT transferred into their ownership.
If that highest bidder is you, you need to release the funds from your account (some sites take them automatically to avoid failed purchases) and pay for your prize. As soon as the payment is confirmed, all the necessary data and codes are moved over to your user account within the marketplace.
That process is called settling, and it is the final piece of the puzzle when buying an NFT.
How Does an NFT Auction Work?
In case that last bit was a touch confusing, here is a very brief but informative overview of what exactly to expect during an NFT auction and what actions you need to take if you end up with the winning bid.
- An artist uploads their NFT to a marketplace, setting a reserve price and an auction length. The reserve price is the minimum bid the piece can sell for and the auction length is how long people have to submit their offers.
- Potential buyers view the art, the auction time, and the current leading bid. If they want to make a higher offer, they do.
- People continue to bid for the NFT until the time runs out and a winner is shown. It is worth being prepared for the possibility of time extensions on some auctions if the seller or artist desires.
- The winner is notified that they won, at which point they must confirm the purchase and settle the payment. When they click to claim the NFT, funds are taken directly out of their marketplace funds account and sent to the seller.
- After settling and paying, the NFT ownership transfers to the winner. It shows in their collector’s account, where it remains until they decide to do something else with it.
How to Buy NFT Art Successfully (Five Tips)
1: Know Your Budget and Stick To It
First things first, you should always stick within your means when making any purchase, crypto or otherwise. Even if you feel like splurging a little, know how much you can spend before you start looking.
It is easy to get caught up in a live auction for a token you really want when the price just keeps getting higher. Do not fall for it: another awesome artwork is never far away. No investment is worth breaking the bank!
2: Decide if you are In It for the Art or the Profit Potential
The two do not necessarily need to be mutually exclusive, but it is worth knowing what is more important before you start buying. If it is purely about the art for you, then shop based on your tastes and interests, just as you would if you were buying a piece of art for your home.
On the other hand, if you plan to purchase NFT art as an investment for long-term profit, you need to consider a few other things. Collecting for the sake of collecting is all about what you like and enjoy looking at, but collecting to make money further down the line is about monitoring costs, trends, and potential returns.
3: Consider Saving Up for Blue Chip Tokens
While we are on the topic of making money from buying NFT art, the most lucrative (as it stands) are blue-chip tokens. Getting their name from the blue chips in poker, which carry the highest value, these NFTs are considered the cream of the crop. As you may expect, they are not the most affordable options.
All the headline-making, record-breaking NFT sales come from blue-chip artists, with staggering price tags of six, seven, and even eight figures! We are not suggesting you try to aim for those largely unobtainable heights- unless you have a secret stash of millions tucked away. The other end of the blue-chip scale, however, is more accessible. You are still looking at $1000 plus, but a few semi-decent tokens can add up to just as much.
If it is a reasonable goal, why not hold off on some of those tempting low-price pieces and save your funds for one really great blue-chip token. The value appreciation on these NFTs has untapped potential, with many players finding great success in this area.
That said, always remember the risk involved in any investment. No token is guaranteed to bring in profits. Still interested? Check out this Crypto Bulls Club review of some of the best new blue chips for NFT art buyers to be excited about.
4: Beware of Hidden Gas Fees
Too many people jump in head first to NFT art buying without properly understanding the costs. Gas fees are the unfortunate smudge on the canvas of NFT art but are unavoidable in most cases.
Gas fees are basically costs to cover the computing juice it takes to create, buy, or sell an NFT on the Ethereum Blockchain- the biggest market for tokens right now. Sometimes the seller pays, sometimes it falls to the buyer, but either way, people can lose money if they don’t pay attention.
The fees vary from site to site, and they also fluctuate throughout the day, which can be very confusing for new buyers. Actually, it can be confusing for experienced buyers! There are a few ways to control how much gas you end up paying. Here are a few simple tricks you can use.
Try to buy and sell at strange hours when demand is lower- and the traffic is less frequent. There are some sites you can use to help you monitor this.
Some Blockchains do not require any gas fees- the World Wide Asset Exchange, for example. This choice may be more limited but at least you don’t have to worry about being hit with premium profit-hindering costs.
Set a gas limit on your account stating how much you are willing to pay. Doing so stops any transaction from going through that exceeds your spend limit. Be careful if you are handling a time-sensitive transaction- it may be delayed if the gas fees are high at the time.
5: Only You Can Decide When to Hold and When to Sell
Lastly, don’t let anyone else dictate what you should do with your NFTs. There is a lot of excellent advice out there from crypto experts, financial wizards, and NFT pros, which you can use to your advantage if you choose to do so. However, every art collector is different and has their own individual goals. If you feel like selling because there is something else you want to buy, don’t let the financial analysts who say long-term holding is the smarter investment choice hold you back.
Art is a highly personal thing. Make your decisions based on your personal goals and priorities. Listen to people who know the ins and outs of the industry. Take their opinions on board, but don’t take them as law. The NFT community is full of helpful and passionate experts looking to guide newbies and increase the industry’s mainstream profile, but they have their own goals in mind as well.
Buying NFT art has a lot of layers. The more insight you have about the industry before you begin, the better equipped you are to succeed. Learning curves are essential, and making mistakes is how we grow, but that doesn’t mean getting a few hints to help smooth the road isn’t a smart idea!
Final Thoughts on How to Buy an NFT
Overall, it is not very complicated. It doesn’t take a crypto genius to figure out how to do it, but it makes a huge difference to have a walkthrough, no matter how much or little you plan to buy.
The most important thing to remember is not to dive in on the first, aka, rushing to bid on NFTs you don’t love because you just want to have one. Patience is a valuable asset- as is a website that takes you right through to all the answers you need.