NFTs have been making quite the noise lately. Every major corporation and brand is beginning to implement NFTs in some way, shape, or form. But what is an NFT?
An NFT is a one-of-a-kind digital representation of an asset such as a product, loan, service, or any other digital or physical asset which is verifiable on a digital public ledger. Also, NFTs have the ability to execute transactions and changes automatically without the need for an intermediary.
Still don’t understand what an NFT is? No worries, in this article I am going to break it all down for you.
What is an NFT?
A non-fungible token (NFT) is a digital representation of assets that can not be replicated due to its metadata and cryptographic hash contained within each NFT. NFTs are minted on the blockchain and are generally auctioned off on an NFT Marketplace. NFTs can also contain unlockable content such as a physical product, good, service, or a combination of many things.
So what does this all mean? The easiest way to explain the value of an NFT is by using this analogy. Say you go to Barcelona, Spain to see some of Picasso’s original artwork. You snap a photo of Picasso’s work on your phone, does that mean you now own that piece of art? Not quite. You have just acquired a copy.
That’s the significance of an NFT. It can’t be replicated and it’s not interchangeable. When you own an NFT, you own the hash which states you own its associated goods, similar to a contract in the real world.
Is an NFT digital or physical?
Technically speaking, an NFT itself is a digital asset that lives on the blockchain (a digital public ledger). However, an NFT can represent both digital and physical assets and simply acts as proof of ownership of the asset that it represents, similar to how a piece of paper can represent a car via the title. So really, anything can be turned into an NFT.
Also, since an NFT lives on the blockchain, anyone can view an NFT’s entire transaction history. From the very moment when an NFT is minted (created) on the blockchain, to where it currently is held today, the blockchain is completely transparent.
What are NFTs used for?
An NFT is used to prove ownership of both digital and physical assets. Before, we’ve never had a way to prove ownership of a digital asset, because technically it didn’t exist. But with NFTs, we have the ability to prove ownership of things like in-game items, a blue checkmark on social media, and even content creators produce.
Why would we want the ability to prove ownership of something digital? It’s simple. The world already valued digital assets before they even existed. If you have ever bought a video game item like a Fortnite skin, or have ever wished that you have a verified checkmark on your social media account, then you understand the value that something digital could have.
And as we move towards a more digitalized world, we need a way to prove ownership of our digital goods. However, NFTs aren’t just for proving ownership of digital goods, as we’ve already discussed, they can be used to transparently prove ownership of nearly anything and everything.
How are NFTs bought?
When it comes to buying and selling NFTs, they aren’t generally bought and sold using traditional methods such as a credit card or cash, however, there are some NFT marketplaces that allow you to purchase NFTs using a credit card.
A majority of NFTs are bought using a cryptocurrency such as ETH. The reason NFTs aren’t generally bought using traditional methods like a credit card is because traditional methods don’t support the decentralized aspect of NFTs. Cryptocurrency is decentralized, so it only makes sense to purchase NFTs—which are also decentralized—with a decentralized currency.
With many of the blockchains, particularly Ethereum, anytime you transact you will have to pay what’s called a gas fee. Essentially, this is a fee that is paid to the people who operate the computers to complete a blockchain transaction. This includes buying, selling, trading, and minting NFTs.
How to buy an NFT?
Buying an NFT is a new experience for most people. It’s not super difficult, but the process is likely nothing you have ever experienced. So, how do you buy an NFT?
Follow these four simple steps to buy your first NFT:
1. Choose your web3 wallet
The most popular wallet for buying NFTs is Metamask due to its ease of installation. However, there are other wallets that you can use such as Coinbase NFT and Rainbow Wallet. For the most secure NFT wallet, use a hardware wallet like the Ledger Nano X.
Your wallet is used to store your cryptocurrency, like ETH, as well as your NFTs. A good wallet for if you’re just getting started is MetaMask. But, if you want the most secure wallet on the market, the Ledger Nano X is your best option. You can learn how to set up a Ledger Nano X wallet in this article.
2. Decide which cryptocurrency you need to buy NFTs
A majority of NFTs are traded on the Ethereum blockchain, which means you will need to purchase some ETH from a cryptocurrency exchange like Coinbase. Most web3 wallets are compatible with ETH and the Ethereum blockchain.
3. Deposit your cryptocurrency into your web3 wallet
After buying some ETH, you will need to transfer your funds to your web3 wallet. For example, I purchased ETH on CEX.io with a debit card. Once the transaction is approved on CEX.io, I simply transfer my ETH to my Metamask wallet.
You can also purchase your cryptocurrency directly on Metamask.
I’ll show you how to use CEX.io since that is the crypto exchange platform I used. With that being said, most of the crypto exchange platforms are very similar in terms of buying and transferring your crypto to your web3 wallet.
NOTE: This article has been updated for accuracy. My preferred crypto exchange is Coinbase. CEX.io will still work fine. However, if you want to try Coinbase, the steps are nearly identical to the steps outlined below.
Step 1: Create an account with your preferred cryptocurrency exchange. When dealing with any crypto exchange account, expect to send a copy of your ID and bank card for verification purposes.
Next, go to the Buy/Sell section and choose how much cryptocurrency you’d like to buy.
Step 2: Enter the exact amount of USD you are converting into cryptocurrency. This is where you will also enter your bank card information.
NOTE: When purchasing cryptocurrency with your debit card, your bank might block the transaction. If you find yourself in this scenario, call your bank’s 1-800 number and speak with the fraudulent department. They can approve the transaction for you if requested.
Step 3: Enter your name and your wallet address. Your wallet address should be readily available in your wallet profile. Your wallet address is a 42-digit address that is linked specifically to your wallet. Below is an example of where you can find your wallet address when using MetaMask. Simply tap your Account to copy your wallet address.
This is an example of my wallet address found in my MetaMask wallet. This is the 42-digit address you will enter anytime you are sending money or NFTs to your wallet.
Step 4: After you finish entering your wallet details, you are ready to send your cryptocurrency to your wallet. Hit send, then your crypto will be on its way to your wallet. Remember, because you are sending crypto to your wallet address which is stored on the blockchain, you will have to pay a gas fee. Also, the transaction might take a few minutes to arrive in your wallet, so be patient.
To view and verify all your wallet’s transactions if using MetaMask, go to Activity. Here you will find all the transactions of your web3 wallet including, purchases, sales, incoming, and outgoing NFT, and crypto transactions.
You are now ready to buy an NFT!
4. Connect your wallet to an NFT marketplace
Now that you have your web3 wallet stocked with some crypto, you are ready to buy your first NFT. Assuming you are using ETH to buy NFTs, there are many NFT marketplaces where you can browse for NFTs.
Below are some of the best websites for buying and selling NFTs:
- OpenSea.io (best for beginners)
- Niftygateway.com (premier marketplace for unique NFTs)
- SuperRare.co (the high-end NFT marketplace)
Opensea.io is one of the most user-friendly NFT marketplaces for buying and selling all types of NFTs, hence why it remains the most popular NFT platform today. However, if you’re looking for something more specific or just want to explore more marketplaces, then check out the 9 best NFT marketplaces for buying NFTs.
Have fun shopping!
How to view your NFTs after purchase?
To view your NFTs, go to Assets in the web3 wallet that you used to purchase your NFTs. If you don’t see your NFT in your wallet, don’t worry. Not all NFTs will appear in your wallet immediately after purchase. You can always view all your NFTs and transactions using Etherscan.io (the Ethereum blockchain explorer.)
To view your NFTs using Etherscan, all you need to do is copy your wallet address into the Etherscan search bar. From there you will be able to view every single Ethereum-based transaction from your wallet.
To view your NFTs specifically, choose from the different Token Txns. Depending on the type of NFT you bought, you will see different Token Txns available to view.
Another option to view your NFTs is to check your collection on OpenSea. To check your NFT collection using OpenSea, sign in to your OpenSea account, go to the Menu, and then go to My Collections. Here you can easily view most of your NFTs as well.
Where are NFTs stored?
NFTs are stored on the blockchain and can be viewed by the public. Contrary to popular belief, NFTs aren’t actually stored in your web3 wallet, your wallet simply holds the information required to control your blockchain address and all the assets stored at your address.
That’s why if you buy an NFT and you don’t see it appear in your wallet immediately, it’s okay.
Should you buy an NFT?
Now that you better understand what an NFT is, what it can be used for, how to buy one, and where it’s stored, you might be wondering if you should buy one of your own NFTs.
You should buy an NFT if you are curious to learn more about the potential of the technology, to make a profit, or because you like what an NFT might have to offer you. Some NFTs are collectibles, others are investments, or perhaps a product or service. It’s up to you to decide if an NFT is right for you.
Below are some of the main reasons people buy NFTs:
- Utility (product or service offered)
- Collectability (if you enjoy collecting things)
- Support a brand or community (invest in the brand)
- Exclusivity (VIP membership or access to an event)
- Investment opportunities (flip your nft for a profit)
- You like it (a piece of art or a product you enjoy)
Ultimately, the type of people who buy NFTs can be collectors, investors, flippers, fans, or traditional consumers. From celebrities like Gary Vee to your everyday working-class citizen. If you enjoy purchasing goods from your favorite brands or supporting different communities, then you might be someone who would enjoy buying an NFT.