The rapid expansion of cryptocurrencies brought another exciting digital asset to the limelight–NFTs. You can buy and sell NFTs from most marketplaces that support blockchain transactions. There’s not much of a learning curve if you are wondering how to invest in NFT. Here are the essential things you should know about NFTs.
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What are NFTs?
NFT means non-fungible token. It is a digital representation of a real-world item like music, videos, and art. Every NFT is non-fungible because it is unique to the object it represents. NFTs opened the market for people who like to collect items like season tickets, Pokemons cards, art, etc. Although NFTs are digital ownership tokens for physical assets, many prominent NFTs represent digital assets.
People who trade NFTs rely on cryptocurrency blockchains for processing their transactions. Although Bitcoin is the first cryptocurrency, most NFT transactions happen on the Ethereum network. Other networks that deal with NFTs include the Binance Smart Chain, Cardano, and Solana.
How to invest in NFT’s in three steps
The NFT market can be confusing for beginners. There are many marketplaces where you can buy NFTs. However, one of the most confusing parts is choosing an NFT to buy.
Step 1: Find available NFTs.
If you’re getting your feet wet in the NFT space, the first thing to do is prioritize the ones with an upside value potential. You can find the popular NFTs on Twitter or Google. Alternatively, you could use websites such as NFTcatcher.io or Rarity.tools to find upcoming Solana and Ethereum NFTs. The best way to invest in NFT is to get in on the ground floor if you want the most significant value increase.
To choose an NFT, check when the sale will happen, how much cryptocurrency they cost, and how many tokens are on sale. These factors will give you an idea about the NFT’s scarcity. There are several considerations for choosing an NFT to buy, including:
- The NFT’s provider: you may pick a team if the team behind it can help increase its value.
- Is it on- or off-chain? Off-chain NFTs use centralized servers. If the servers go down, the NFT could get lost. Moreover, the custodian of an off-chain NFT must be trustworthy for you to buy the asset.
- The potential value increase: After you narrow down your list of attractive NFTs, you should try to predict their value increase.
Step 2: Choose an exchange or brokerage to buy your NFT
You need to have some cryptocurrency to buy NFTs. Ethereum is usually the most common crypto for buying NFTs. If you don’t have any, you might want to head to a crypto exchange to buy some crypto. You can buy crypto at a marketplace or brokerage. Some of your options include Coinbase, Binance, Robinhood, or Kraken.
Step 3: Choose your preferred NFT marketplace
The market is where you can buy and sell NFTs. Marketplaces for NFTs are not crypto exchanges. However, they only take payment in cryptocurrency. Therefore, after registering and activating your account, you need to connect your crypto wallet to be able to buy NFTs. Marketplaces sell NFTs at predetermined rates or auction them.
Some frequently used marketplaces include:
- Axie marketplace
- Larva Labs
- NBA Top Shot Marketplace
Before buying NFTs, be aware that you will incur charges in addition to the cost of the NFTs. The fees could include commisions for transferring cryptos, conversion fees if your crypto is not the one required at the marketplace, and gas fees.
Gas fees are the fees that bitcoin miners get for their computing power, which record and verify transactions on the blockchain. The price listed on NFTs is not the final price you will pay. If you are unfamiliar with how to invest in NFT’s, keep in mind that gas fees could increase your final payment substantially. For instance, if an NFT has a value of $40, you might pay $150-$200 in Ethereum.
Seven things you didn’t know about NFTs
NFTs have evolved dramatically since their inception around a decade ago. In 2015, people did not know how to invest in NFT’s. The first ones were sold for dirt cheap. However, NFTs have changed people’s perceptions of digital assets. They hold the key to the future for collectors and artists. The following are some crazy facts about NFTs you might not have known.
1. Every NFT is unique
Unlike cryptocurrencies, every NFT token is a unique asset whose value is as much as people are ready to pay.
2. There are no counterfeit NFTs
Unsurprisingly, analysts predict that half of all fine art in circulation is fake. However, you don’t have to worry about how to invest in NFT. There is virtually no chance of buying a fake one because NFTs enable creators to establish a chain of ownership using a blockchain’s ledger.
3. NFTs empower artists to reach new audiences
The market NFTs serve has many traditional investors. However, NFTs are giving artists a new way to sell their products to customers they would never find using traditional methods.
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4. The process of creating NFTs requires minting
Minting is when your collectible, artwork, film, or other asset is added to the blockchain. Minting adds your assets to the cryptocurrency’s ledger so that you can sell it or exchange it with other assets. Your Resource For Everything Finance
5. You can convert almost anything to an NFT with smart contracts
You can turn most digital assets into NFTs. A lot of focus has been aimed at selling collectibles and digital art as NFTs. However, the versatility of the NFT system allows you to tokenize almost everything.
6. The NFT market saw an 18,000 percent increase in 2021
In the first half of 2020, 13.7 million dollars worth of NFTs were sold. However, one year later, in the first half of 2021, the NFTs sold totaled $2.5 billion. This phenomenal growth might eventually level off, but people looking for how to invest in NFT are still in the rapid growth stage.
7. The high gas prices of Etherium might reduce after Ethereum 2 is rolled out
The fees involved with trading Ethereum have increased dramatically with the increase in the crypto’s value. These fees are mostly due to Ethereum’s proof-of-work principle. However, Ethereum 2.0 will feature a proof-of-stake architecture which will likely reduce gas prices significantly.
NFTs are not very new to the crypto industry. However, they took longer to become as popular and high value as cryptocurrencies. Their impressive growth potential drives many people to investigate how to invest in NFT.