64 days ago
A guide to buying, selling, and trading NFTs for beginners
Disclaimer: this is not intended as trading advice, nor should it be read as such
In recent years, the world of digital art has exploded in popularity, and with it, the rise of NFTs (non-fungible tokens), which offer a new way for artists and collectors to buy, sell, and trade digital art.
In this post, we'll provide a beginner's guide to NFTs, covering everything from what they are to how to buy and sell them. We'll also discuss the risks involved in investing in NFTs, so you can make an informed decision before you get started!
What are NFTs?
NFTs, or non-fungible tokens, are digital assets that are stored on a blockchain. Each NFT is 'non-fungible,' meaning that even if two NFTs look identical, they have unique identifiers (think of these as barcodes) that help differentiate the two. These "certificates of authenticity" are cryptographic evidence that the possessor of an NFT is the legitimate owner of this digital asset.
By utilizing a public blockchain, NFT ownership is authenticated and recorded from its creation, enabling users to trace the lineage of any NFT all the way back to the beginning.
NFTs are created via a process called 'minting', which involves uploading a digital file to a blockchain and then generating a unique token that represents that file. The digital collectible is stored on the blockchain solely after the NFT has been minted. Understanding the content that is stored during the minting process is crucial as it can either be the complete artwork, resulting in the storage of the entire NFT along with its metadata on the blockchain, or it could simply be a link to off-chain information that is stored using a tool like IPFS.
Once an NFT is minted, it can be bought, sold, or traded on a secondary market.
Fun fact: while the origins of the first ever NFT are disputed, from Colored Coins, to Quantum, most agree that CryptoKitties was the first widely-recognized implementation of NFTs.
The success of subsequent collections such as Crypto Punks and Bored Ape Yacht Club (BAYC) propelled blockchains to invest further in the development of NFT infrastructure.
Their popularity can, in part, be attributed to the fact that for many understanding NFTs is simpler than understanding cryptocurrencies- which have far more technical complexities.
Buying an NFT
If you're interested in buying NFTs, the first step is to find a marketplace that suits your needs. There are many options out there, each with its own strengths and weaknesses. Some popular NFT marketplaces include OpenSea or Rarible, among others.
Once you've chosen a marketplace, you'll need to create an account and set up a digital wallet.
This will allow you to store and manage your NFTs, as well as make purchases and sales. Many marketplaces support a variety of cryptocurrencies, so you may need to purchase some crypto (such as Ethereum) in order to buy NFTs.
Factors to consider while buying NFTs:
Seller’s Reputation: When buying NFTs, always verify the seller's authenticity. Legitimate sellers on platforms like OpenSea often have a blue verification checkmark, but this is still not a guarantee. If the checkmark is missing, confirm the seller's credibility by examining their social media presence and sales history
NFT Uniqueness: Unique NFTs with rare attributes can create a huge impact on its value. Before purchasing, verify their uniqueness by checking the properties of NFT
Future Potential: Before buying NFTs, assess their long-term prospects. Research the project and community to gauge their potential for future growth and value appreciation
Platform Transaction Fees: Platform fees should be considered before buying NFTs because they can impact the total cost of your purchase as some platforms also charge buyers on top of the NFT price
If you own an NFT and want to sell it, you can list it for sale on a marketplace or auction site. Again, be sure to do your research and set a realistic price based on the item's market value and your own expectations.
When creating your listing, be sure to include high-quality images and a detailed description. You can also set a reserve price (the minimum amount you're willing to accept) and a time limit for the auction.
Once your item sells, the marketplace will take a commission (usually a percentage of the sale price) and the rest will be transferred to your digital wallet. From there, you can choose to keep the funds in cryptocurrency or convert them to fiat currency (such as USD).
Be sure to check the percentage that the marketplace is taking, for example: OpenSea takes a 2.5% fee from sales, while Rarible charges 1% from both buyers and sellers for every sale.
You can also use decentralized exchanges such as Uniswap or Sushiswap for this purpose.
Factors to consider while Selling NFTs:
Platform Choice: Pick the right marketplace for selling your NFT, keeping in mind your target audience and the platform fees
**Pricing: **Determine a competitive price for your NFT based on market trends, the rarity and uniqueness of the asset, and the reputation of the creator or project
Marketing: Promote your NFT effectively by utilizing social media, involve yourself in online communities to gain inspiration and to make potential buyers aware of you
You can think of this as being similar to trading cryptocurrencies: You can exchange one or more NFTs for others, or for cryptocurrency. NFT marketplaces offer trading features that allow you to buy, sell, or trade NFTs with other users.
So there you have it! Our comprehensive guide to NFTs and how you can get started on your journey buying, selling and potentially even trading!
As you start your journey, always remember to DYOR (do your own research), and keep in mind that the NFT market is volatile so only spend what you can afford to lose and don't expect quick profits- focus on investing in high quality pieces from projects or artists you believe in.
To create your own NFT, check out our tutorial!
Reminder: this article is not intended as trading advice, nor should it be read as such.