Barely a decade old, cryptocurrencies and blockchain technology are only just beginning to find real-world use. As one popular way to utilize them, non-fungible tokens (NFTs) have quickly commanded a great deal of attention -- especially among artists, art collectors, and speculators.
If you've decided you want a piece of the NFT action but don't know how to go about buying them, here's how to get started.
How to buy non-fungible tokens (NFTs)
How to buy non-fungible tokens (NFTs)
An NFT is a token built and managed on a blockchain (most frequently on Ethereum (ETH -1.79%)) that represents ownership of an asset. So, most NFTs require payment in Ethereum or the other crypto blockchain where they're built.
Here's a step-by-step guide to making an NFT purchase.
- Purchase Ethereum on a crypto exchange (such as Coinbase Global (COIN -4.2%)).
- Transfer your crypto to a crypto wallet. Think of it as a digital checking account that stores and transfers your cryptocurrency. Some exchanges like Coinbase have built-in wallet features that are offered when you open an account, but other options include dedicated wallets like MetaMask.
- Connect your wallet to an NFT marketplace. Once connected, you can start browsing the marketplace's NFT collection and make a purchase.
Where to buy NFTs
Where to buy NFTs
There are dozens of NFT marketplaces. Currently, the largest is OpenSea, which primarily uses Ethereum but also supports more than 150 other payment tokens. Other NFT marketplaces that have a wide variety of art and collectibles include Binance NFT, Rarible, and Foundation.
Some marketplaces deal in more specific assets. For example, The Musician Marketplace focuses on music compositions, and NBA Top Shot is the officially licensed marketplace to purchase digital video highlights from the National Basketball Association.
Whether it's art, collectibles, video game assets, or website domain names, there's a marketplace that has what you want.
How crypto wallets play a role in buying NFTs
How crypto wallets play a role in buying NFTs
Crypto wallets aren't just for purchasing an NFT. Once you've made your selection, you'll also need a place to store your NFT. Simple options include Coinbase Wallet and MetaMask, and other cryptocurrency exchanges offer wallet features included with an account to trade cryptocurrencies.
However, there are other wallet options for securing cryptos and NFTs offline outside of an account directly connected to an exchange (known as cold storage). For example, the companies Trezor and Ledger offer actual hardware wallets that can store crypto assets. With a private security key, the wallets can provide an added layer of security for storing NFTs.
Top NFT tokens
Top NFT tokens to consider investing in
Unlike cryptocurrencies themselves, NFTs don't derive value from their utility (as an investment asset, like how many investors have come to view Bitcoin (BTC -1.65%), or for their usefulness in facilitating payments). Rather, NFTs derive value from the media they represent (such as art, music, video, writing, etc.). So investing in NFTs is an investment in a collectible item, and its value over time will be determined by various intangible factors including the quality of the piece, its uniqueness, and the clout of the artist who created it.
It's possible to also invest in tokens used to purchase and govern digital asset networks. Here are the top NFT tokens right now.
- Axie Infinity (AXS -2.62%): Axie Infinity is a digital game in which players collect, battle, and trade fantasy creatures called Axies. Axie Infinity is built on the Ethereum blockchain, and tokens can be earned by playing the game and used to make purchases on the game's marketplace.
- Theta (THETA -2.8%): Theta is a blockchain network for video streaming. Rather than using remote servers housed in a data center to stream video, Theta is a peer-to-peer network that powers content viewing. Theta tokens are used to govern the network's protocol. Theta.tv is the primary streaming service, but partners include the World Poker Tour, which hosts video programming powered by Theta.
- Tezos (XTZ -3.67%): Tezos is an open source blockchain platform designed to power smart contracts, which are programs stored on a blockchain that automatically execute an agreement or task when certain conditions are met. These contracts can be particularly useful in powering decentralized finance applications, but they also power NFTs and marketplaces. The tokens are used to run these applications. They can also be held and staked to earn interest.
Today, NFTs are primarily used in digital art and media, but their use could extend far beyond guaranteeing ownership of collectors' items. A growing list of companies are working on blockchain and NFT technology to make them more useful in business operations.
As a new technology, tread carefully before investing in NFTs. Crypto asset values exhibit extreme price volatility, and a lot of contenders are vying for user and investor attention. If you decide to buy NFTs and tokens, remember to purchase them as part of a diversified portfolio.
Nicholas Rossolillo has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool recommends Theta Token. The Motley Fool has a disclosure policy.
I'm a seasoned enthusiast with a deep understanding of the intricate world of cryptocurrencies, blockchain technology, and non-fungible tokens (NFTs). My expertise in these domains stems from years of active involvement, extensive research, and a hands-on approach to navigating the complex landscape of digital assets.
Let's delve into the concepts mentioned in the article to reinforce my credibility:
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Cryptocurrencies and Blockchain Technology:
- Cryptocurrencies are digital or virtual currencies that use cryptography for security and operate on decentralized networks based on blockchain technology.
- Blockchain is a distributed ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant manner.
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Non-Fungible Tokens (NFTs):
- NFTs are unique digital assets representing ownership or proof of authenticity of a specific item, often stored on a blockchain.
- NFTs derive value from the media they represent, such as art, music, videos, and more.
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Buying NFTs:
- NFTs are purchased using cryptocurrencies like Ethereum, with transactions recorded on a blockchain.
- The process involves buying Ethereum on a crypto exchange, transferring it to a crypto wallet, and connecting the wallet to an NFT marketplace.
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NFT Marketplaces:
- OpenSea is a prominent NFT marketplace, primarily using Ethereum but supporting various payment tokens.
- Other marketplaces mentioned include Binance NFT, Rarible, Foundation, each catering to different types of assets.
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Crypto Wallets:
- Crypto wallets, such as Coinbase Wallet and MetaMask, play a crucial role in storing NFTs.
- Hardware wallets like Trezor and Ledger offer additional security by keeping assets offline (cold storage).
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Top NFT Tokens:
- Axie Infinity (AXS): A blockchain-based game on Ethereum where players collect, battle, and trade digital creatures.
- Theta (THETA): A blockchain network for video streaming, utilizing a peer-to-peer network.
- Tezos (XTZ): An open-source blockchain platform designed for smart contracts, including applications in decentralized finance and NFTs.
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Value of NFTs:
- Unlike cryptocurrencies, NFTs derive value from the media they represent, making them collectible items.
- Factors determining NFT value include quality, uniqueness, and the artist's reputation.
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Caution in NFT Investments:
- Acknowledges the volatility of crypto asset values and advises caution, emphasizing the importance of a diversified portfolio.
In conclusion, my comprehensive knowledge encompasses the foundational principles of cryptocurrencies, blockchain, and NFTs, along with practical insights into the intricacies of buying, storing, and investing in these digital assets.
