Acquiring your first digital collectible can be complex. This is especially true if you don’t clearly understand what an NFT represents and the factors contributing to its value. Depending on your interest in a specific project, there are various methods to purchase a unique digital asset. In this article, we aim to outline all the essential information you need before purchasing an NFT.
What does an NFT mean?
The acronym NFT corresponds to non-fungible tokens and refers to a type of digital asset that is available only online. While they can possess monetary value similar to traditional assets, NFTs do not fall within the category of cryptocurrencies. Cryptocurrency possesses fungibility as well. If you hold one coin, you can trade it for any other coin.
NFTs maintain distinct identities and cannot be freely swapped with one another, drawing a similarity to collectible trading cards. In essence, NFTs function as digital assets, conferring sole ownership upon an individual.
Why is it called “non-fungible”?
NFTs earn their “non-fungible” label because they lack interchangeability with other assets of the same kind. Each NFT represents a distinct data unit with no identical counterpart, rendering it irreplaceable.
Unlike cryptocurrencies, which are fungible, NFTs possess unique identification. The term “non-fungible” signifies that NFTs are not interchangeable with other digital collectibles.
What are the different categories of NFT?
Now, you should possess a general grasp of what constitutes an NFT. To enhance your comprehension, you can apply this knowledge to the distinct categories of NFTs highlighted below:
The most prevalent form of NFT is collectible art. As a result, art stands out as the highest-performing category in digital collectible sales. The advent of NFTs presented a significant opportunity for artists to market their premier creations online, emulating physical art sales. Art NFTs can be further categorized into several types:
Profile Pictures (PFPs)
These often manifest as collections featuring apes, cats, penguins, rocks, punks, and similar themes that you may have come across.
This involves the creation of distinctive artwork through algorithms adhering to a specific artistic style, as seen in platforms like Art Blocks.
This category closely resembles traditional art, where artists craft one-of-a-kind pieces that are then minted as NFTs. The renowned instance is “Everydays: The First 5,000 Days” by Beeple.
This category should be self-explanatory in its scope and nature.
Another category of tradable collectibles that seamlessly integrates with NFTs involves in-game items. Companies are not marketing entire games as unique digital assets. Instead, they are vending in-game assets such as skins, characters, and various items.
The world of blockchain-based games and metaverses is expanding, offering opportunities to purchase characters, items, and even virtual real estate. Notable examples include Decentraland and Axie Infinity.
Think of NFTs as digital collectible cards. Like valuable limited-edition baseball cards selling for high prices, the digital asset market operates similarly. People purchase and trade virtual versions of these cards, just like physical cards.
Moreover, the market isn’t limited to trading cards alone; companies can sell various collectibles on this platform. If an item holds collectible value, it can find its place in the market.
Music, for years, has been a tradeable item, finding its way onto records, cassettes, CDs, and digital platforms. Recently, musicians and DJs have embraced NFTs, earning millions within hours through sales.
In the music industry, artists often get fractions of their earnings due to streaming platforms and record labels taking a cut. In contrast, NFTs let musicians keep almost all their profits, which is why many are drawn to this approach.
The wave of digital collectible enthusiasm has also extended to domain names. You can now register and auction a domain name on the NFT market, reaping specific advantages. Ordinarily, domain name management requires engaging a third-party company.
However, by procuring a domain name from the NFT market, you secure exclusive ownership rights, eliminating the need for intermediaries.
How do I choose an NFT?
After you’ve arranged your setup for NFT purchases, the significant query is navigating through the extensive range of accessible NFTs. The sheer abundance of categories and styles might be bewildering, just like in the online casino industry, so let’s delve into some considerations to help you choose a legit asset to purchase just like playing at the legit Bet999 online casino.
While scarcity plays a significant role in value, it alone won’t determine an NFT’s worth.
Many available NFTs replicate existing valuable collections, missing the essence. Seek out digital tokens that exhibit originality, cleverness, or humor.
Beware of NFTs resembling blockchain versions of clip art images or lesser. These attempts to jump on the trend tend to have low value, as evident from their sales history.
Similar to classic art, trends in painters and styles affect NFT art valuations. Anticipate upcoming trends rather than simply following existing fads.
NFTs often belong to collections centered around specific traits, expressing thematic coherence. Each digital token has a distinct blend of these traits, similar to Pokemon characters or collectible cards.
Buy what you love
There are many things to buy with crypto or NFTs. A valuable tip is to follow your interests and purchase what you genuinely enjoy. As a newcomer, your chances of choosing highly valuable digital collectibles are akin to winning a lottery ticket. Prioritize something that brings you joy and enhances your understanding of the process.
Set a budget
This is a perfect online gambling strategy. Establish a clear budget beforehand to avoid inadvertently entering higher price ranges. Having parameters prevents overspending.
Just because an NFT has a sales history doesn’t mean you can buy and resell it at a profit. Opt for enjoyment over speculation, as NFT valuations might plummet, resulting in substantial losses.
What is required to purchase an NFT?
To buy NFTs, you must own a crypto wallet, a software application for storing your digital collectibles and cryptocurrency.
Two types of wallets exist: custodial (“hosted”) and non-custodial. Unlike custody-based wallets, which are managed by a third party, non-custodial wallets are autonomous.
Custodial wallets resemble using a storage facility for your valuables, whereas non-custodial wallets equate to safeguarding them in your home safe.
Consequently, custodial wallets demand less accountability but involve third-party risks. Non-custodial wallets grant complete control but necessitate added vigilance. Hardware and software wallets are both viewed as non-custodial wallets.
A software wallet is a piece of software that can be found on your computer or on your web browser. This feature renders software wallets a favorable choice for swift and convenient activities such as NFT and cryptocurrency transactions.
On the other hand, a hardware wallet takes the form of a physical device you connect to your computer. Since it’s not always connected to your computer or browser, it’s an excellent choice for secure, long-term storage. However, it’s somewhat less convenient for fast or frequent transactions.
Different wallets accommodate distinct blockchains, and not all are conducive to NFTs. Here are several NFT-compatible wallet options:
- Coinbase Wallet
- Trust Wallet
- Bitget Wallet
- Phantom, and so much more
How do you buy an NFT?
You can purchase unique digital assets through two primary methods: on standalone project websites or via NFT marketplaces.
When buying NFTs from independent project websites, you engage directly with the creators and their dedicated platforms. Conversely, these marketplaces serve as broader platforms where various collectibles from different creators are available for purchase. These marketplaces facilitate ease of access to a wide range of NFTs, promoting convenience for both buyers and sellers.
- To initiate your journey, you’ll need an Ethereum-compatible crypto wallet and some ETH (Ethereum’s cryptocurrency). You can obtain ETH from exchanges like Binance or Coinbase and transfer it to your wallet. Download any supported wallets mentioned in this article, available on Apple’s App Store, Google Play, or as browser extensions.
- After installing your wallet or plugin, set it up by adhering to the simple setup guidelines. Your wallet serves as a storage space for your crypto, a means to send or receive it, and your gateway into the expanding realm of crypto applications.
- There are many markets, spanning Rarible to OpenSea. Other markets also cater to digital currencies like Solana, BSC, Cosmos, and Arbitrium. For this article, let’s focus on the Ethereum NFT marketplace, which functions like a decentralized eBay.
- To begin, link your wallet to the marketplace by visiting the website’s URL and clicking Sign In. You’ll get notifications and guidelines on how to link your wallet.
- After signing in through your wallet, explore the extensive NFT collections. Prices for NFT items range from practically free to several hundred thousand dollars or possibly more for uncommon items. Some products are up for auction, while others have a “Buy Now” button that makes them instantly accessible.
- Remember that even if an NFT is inexpensive or free, you still need to cover transaction fees. Operating on the Ethereum blockchain, which levies a “gas” price for transactions like NFT sales, all digital artifacts on the market are digital. Gas prices fluctuate based on network activity.
- After browsing, select an NFT you fancy and ensure you have extra ETH to cover fees. When you buy a digital object, you can access it via your cryptocurrency wallet until you decide to sell it.
What is minting?
Minting an NFT involves recording a digital item onto the blockchain, creating an unchangeable record of its authenticity and ownership. It is totally different from crypto mining. Minting from a project makes you the inaugural owner of the NFT, as this occurs during its blockchain inscription.
For creators, minting their creations enables them to establish undeniable scarcity and confirm ownership. NFT ownership is publicly accessible and beyond dispute, empowering creators to form exclusive communities and offer benefits to NFT holders.
Benefits of NFTs
NFTs offer several benefits, and some of them include:
- Proof of Ownership: NFTs make it possible to confirm who owns assets, whether they are digital or physical. Ownership records are stored on a blockchain, facilitating straightforward confirmation of asset ownership.
- Enhanced Liquidity: NFTs are tradable on diverse marketplaces, improving the liquidity of their assets. This flexibility allows digital collectible owners to sell their assets if needed.
- Reduced Fraud: NFTs, being unique cryptographic tokens, are immune to replication, significantly reducing the risk of fraud.
- New Revenue Streams: NFTs open novel means of making money for artists, musicians, and creators. They can directly sell their creations to enthusiasts and collectors, bypassing intermediaries like galleries or labels.
- Innovative Content Monetization: It offers fresh avenues for content creators to monetize their work. For instance, musicians can sell limited-edition digital albums as NFTs, while gamers can market in-game items as NFTs.
- Enhanced Transparency: Utilizing blockchain technology within NFTs enhances transparency in transaction and ownership records.
- Emerging Investment Opportunities: NFTs present new investment prospects for collectors and investors. These unique digital or physical assets can potentially appreciate over time.
Drawbacks of NFTs
Before purchasing unique digital collectibles, it’s crucial to invest some time in familiarizing yourself with strategies to safeguard your information, cryptocurrency, and NFTs. Several common pitfalls prevalent in the NFT industry include:
On social networking channels, misleading links and pop-ups touting said new NFT projects and drops are common.
NFT drops and collections are promoted on fake marketplace websites, fake social media profiles, and celebrity impersonators.
Building hype around an NFT or collection to inflate its price, followed by swift sell-offs by high-tier investors, ultimately leaving lower-tier investors with valueless assets.
Certain individuals may attempt to pass off other creators’ work as their own original pieces for sale.
You already know what NFTs are, how they work, and how to buy them if you’ve read this far into the post.
After acquiring your NFT, your attention should shift towards deriving enjoyment from its ownership, just as you would with any other artwork you’ve purchased. You can display it within a digital frame, adopt it as a personal avatar, or contribute it to an online gallery.