NFTinformer
If you’re wondering how to invest in NFTs, you may also be concerned about the pros and cons of NFTs. You need to know the proper steps to NFT investing or whether NFTs are a good investment after all. We’ve got answers, so let’s get started.
What Is an NFT?
NFT stands for a non-fungible token, and every token is unique—that’s what non-fungible is (money is interchangeable or fungible).
Real-world digital art, music, videogames, or app purchases become NFTs with blockchain technology, and when NFTs get sold, the buyer’s data is embedded in the token to prove ownership.
Where Are NFTs Kept?
As NFTs got more popular and transactions sped up, some owners managed NFTs as they’d always done with cryptocurrency. For example, they used mobile apps for web-based cryptocurrency exchanges like Coinbase Global, Inc., Binance, or FTX.
While managing NFTs on a smartphone is easy, it’s also more convenient for scammers to hack into these sites and steal NFTs.
Always Use a Secure Wallet to Hold NFTs
Buyers and owners of NFTs need either an online or hardware wallet to hold their works, with some experts preferring hardware wallets to store NFTs offline.
Digital utility providers like Metamask, Coinbase Wallet, or AlphaWallet use secure protocols, including long passwords called seed phrases. They also act like master keys to authorize transactions, but since it’s online, cyberattacks are still possible.
Pros of NFTs
Blockchain technology ensures that every NFT using its cryptocurrency is authentic and its ownership is easily verifiable. Here are other benefits of NFTs:
- NFT smart contracts allow quick ownership transfers once the buyer and seller meet specific conditions.
- NFT creators or sellers often get actual value for their works, and they can collect royalties because their information gets embedded in the token’s metadata.
- Buyers have a variety of liquidity options because of different NFT assets.
Cons of NFTs
The NFT craze is still relatively new, and with that comes a degree of uncertainty.
Here are some risks of NFTs:
- As with many new technologies, NFT prices can be high or even prohibitive.
- It’s impossible to confirm if NFTs will hold their current values long-term.
- When NFTs aren’t stored securely, there’s always a risk of cyberattacks.
- Buying and selling NFTs may also come with hidden fees—we explain this more in the next section.
Steps to Invest in NFTs
Investing in NFTs is easier and more secure with the following four steps. We suggest that any NFT investor should follow these steps in order.
1. Do Your Research
Google searches for NFTs will present you with a mind-numbing amount of information! But it’s always best to know more than less about any investment.
Twitter can also provide reliable information on NFTs because of their active creator, collector, and fan community. Other platforms like Discord or Telegram offer chats on people’s feelings about specific NFT projects.
Finally, search for “Rarity Tools” or “NFT Catcher IO” for upcoming NFT listings released on the ETH or SOL blockchain.
Note when sales are taking place, what cryptocurrency is used, and the number of NFT sales scheduled—this helps to gauge current and future values and the rarity of a particular NFT.
2. Buy Your Cryptocurrency
Many NFT platforms use Ethereum (ETH) as their primary cryptocurrency, but notable exceptions exist.
Cryptocurrency is sold through online brokerages like Coinbase, Kraken, Robinhood, Gemini, or Binance (US).
3. Set Up Your Digital Wallet
You require a “wallet” to store cryptocurrency and NFTs, and as we discussed, digital or hardware wallets are available.
You always require adequate cryptocurrency to complete transactions. This amount includes purchases and transfers or converting cryptocurrencies.
Although some NFT marketplaces like OpenSea are trying to find ways around the increasingly high fees for the electrical power needed to record blockchain transactions, gas fees can still be an issue.
Always review an online utility provider’s safety standards carefully for how they secure wallets online. Some NFT investors prefer hardware wallets offline for greater security.
4. Select a Platform
After funding your wallet with cryptocurrency, prepare to go shopping for NFTs!
The following NFT marketplaces are currently the largest and most popular:
OpenSea, using Ethereum, Polygon, and Klatyn cryptocurrency
Software developers Devin Finzer and Alex Atallah created OpenSea in 2017. They claim it’s “the first and largest NFT marketplace” for everything from digital real estate to The Weeknd’s sound loops. OpenSea filters their NFTs by price and rarity.
There’s a tab on OpenSea that resembles a stock market ticker, and it ranks sales volume, average prices, and numbers sold. NFTs are sold at fixed prices or through auction bids, with offer records stored on every user profile.
Rarible, using ETH and RARI cryptocurrency
The Rarible marketplace sells NFTs ranging from gummy bear GIFs to animated video commemorations of undefeated Floyd Mayweather Jr.’s 50-0 boxing record.
Rarible’s layout resembles Spotify, and you scroll through stacks of columns for top sellers, hot collections, or live auctions. In addition, a governance token called RARI gives Rarible’s most active users the ability to vote on platform upgrades and other decision-making.
The Sandbox, using SAND cryptocurrency
This videogame platform allows players to monetize their experiences on the Ethereum blockchain. The Sandbox uses SAND as a game fee and utility token.
Creators on The Sandbox use 3D voxel modelling technology called VoxEdit, and they publish their digital works to the website’s marketplace for sale. These works get edited into virtual land parcels, altering the game through scripted behaviours.
Are NFTs the Right Way to Invest?
There are definite opportunities to create wealth through NFT investing, and it’s more accessible and more secure, thanks to the benefits of tokens and blockchain technology.
Be careful when adding NFTs to your investment portfolio and limit any single-asset risks that could derail your wealth-building.
To summarize:
- An NFT ensures the digital work you buy is authentic and that you’re the rightful owner.
- When you buy NFTs, your investment can have various liquidity options considering the many available asset types.
- When you buy an NFT, make sure to be familiar with the creator, how rare their work is, and the ownership history.
The best way to invest in NFTs starts with researching, especially how much cryptocurrency you need and how to keep your NFT investments secure. Good luck in the NFT space!
