Want to get started buying, selling or trading NFTs but not sure how? We will lead you through the process of how to go about it.
NFTs – A Web3 World Of Possibilities
NFTs have exploded over the last couple of years and despite predictions of their demise, they are as strong as ever. Many of them take the shape of digital art. Projects like CryptoPunks and the Bored Ape Yacht Club have already posted sales in the billions. But the reality is NFTs are much more than just an expensive jpeg. Already they are being used for everything from memberships of exclusive clubs to adding functionality in live gaming. The possibilities are endless and NFTs stand to become one of the most important and dynamic inventions of the 21st century.
1. What are NFTs?
NFT stands for Non-Fungible Token. Fungible means “replaceable” or “interchangeable” hence an NFT is a non-replaceable token that is one of a kind. It is a crypto asset used to authenticate ownership of a unique digital asset such as a work of digital art or perhaps a video or sound recording. But NFTs are also being used to authenticate ownership and verify transactions for physical assets such as real estate, a car or potentially anything at all. Like cryptocurrencies, NFTs can only be bought and sold on the blockchain. The hysteria around NFTs has been fuelled by the market for collectibles. This has been led by digital artwork, sports cards and memorabilia, videos and music clips. But it is all just the tip of the iceberg.
2. Examples Of Successful NFT Projects
Axie Infinity is the biggest NFT project in terms of sales, which have gone north of $4b. The game uses a play-to-earn model (P2E) meaning the more you play, the more cryptocurrency you can earn. CryptoPunks were inspired by the 1970s London punk scene and were free when they were launched in 2017 as one of the world’s first NFT projects. But they quickly appreciated, with one selling in February, 2022 for 8000 ETH or $23.7m! The Bored Ape Yacht Club comprises 10,000 unique tokens of very bored looking apes but gives owners membership rights to an exclusive club offering events, concerts and the chance to meet fellow owners.
“Immutable” means not being able to be changed. In terms of the blockchain, it refers to one of its characteristics which makes it so impervious to fraud. When a new transaction or record is entered on the blockchain, it is by nature immutable. It is permanent and irreversible. Immutability is one of the cornerstones and foundations of the blockchain. In the new world of Web3, trust is no longer needed because of blockchain’s immutability. Most original NFTs are immutable but there is growing demand for mutable NFTs.
“Mutable” means “able to be changed”. By definition, a blockchain is immutable. Or is it? Some things disappear or expire on a blockchain. A smart contract may end a service which is no longer being paid for. That, in effect, is mutability. That concept is being explored with “mutable” tokens. They are tokens that may be updated offering new functionality or with different characteristics over the course of time. This brings unlimited potential to their use.
5. What is Metamask?
MetaMask is a cryptocurrency wallet exclusive to the Ethereum blockchain. The wallet allows users to store Ether and other ERC-20 tokens (for smart contracts). It also gives them access to the enormous number of decentralized applications (dApps), opening up a vast range of opportunities on the world’s most diverse blockchain. Once installed, you merely click “Get Started” to create your Ethereum wallet where you can begin storing Ether and other ERC-20 tokens to spend on various dApps or NFTs.
6. How To Create A Wallet
The quickest and easiest way to create one is to opt for a hosted wallet on a crypto platform or exchange like Binance or Coinbase. You’ll simply need to create an account and then buy crypto with your bank account or credit card. But for greater security, especially when dealing with large sums of cryptocurrency or potentially valuable NFTs, it is recommended to use a hardware or “cold wallet”.
7. What Are Primary And Secondary Markets?
Every blockchain has its own cryptocurrency which must be bought or acquired to use it. You may be faced with a choice of using a primary or secondary market when considering the purchase of an NFT. A primary market is one where the coins of that cryptocurrency are initially issued straight to the user. You deal directly with the artist and on most occasions, what you pay for an NFT when it is minted is the cheapest time to buy. A secondary market is one where those coins or tokens can be exchanged for other cryptocurrencies or sometimes fiat money. You’ll probably have to pay a premium but you’ll get the exact NFT that you want. There is greater security and less chance of being scammed when buying from an established project via a reputable exchange.
8. How to Find NFTs
To buy and sell NFTs, you need to head to an NFT marketplace. There are many marketplaces on the blockchain, most specializing in a particular type of NFT. Do your research and read online reviews about the marketplace and its safety and security record before opening up an account. Once you’ve found the right one to explore, you’ll need tokens. Some support a wide range of tokens while others trade only in one kind. You’ll need to fund your crypto wallet with the right tokens before making any purchases.
9. NFT Marketplaces
Some of the biggest and most popular NFT marketplaces are:
OpenSea – leader in NFT sales with a wide range of digital assets
Rarible – another massive marketplace but requires its own Rarible token to use
NBA Top Shot Marketplace – the NBA’s own marketplace where video clips and highlights can be purchased
Axie Marketplace – specific to the video game Axie Infinity where NFT owners can use them within the game
Nifty Gateway – trades in digital art and music, retains purchased NFTs on their own platform and allows sales to be made in fiat currencies (eg USD)
10. Risks Associated With NFTs
NFT markets are still very much an emerging and evolving industry and there are still many pitfalls for would-be investors. Take all the common sense precautions you can to keep your cryptocurrency and your NFTs safe. That means transferring your investments to a cold wallet for safe keeping, using two-factor authentication. It also means being on the lookout for scams that are common to the environment such as:
Phishing scams – any fake links or pop-ups on social media promising new NFT drops, designed to deceive you or gain access to your wallet.
Catfishing scams – celebrity impersonators or scammers gaining access to celebrity accounts, pointing up fake marketplaces or NFT drops.
Pump and dump scams – Influencers create hype around an NFT collection, raising its price, before dumping it for a handsome profit, leaving the remaining investors with a worthless token.
Counterfeit NFTs – as it sounds, NFTs falsely sold as the work of someone else’s.
Want To Know More About How To Get Started With NFTs?
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