How to Buy NFTs? A Step-By-Step Guide
NFTs can be the digital version of any tangible asset. It can be a painting, meme, music, or virtual fashion- the possibility is endless. People are fascinated by the idea of creating or owning a virtual asset that could be worth millions of dollars. NFT sales in the year 2021 reached $25 billion.
Collections like CryptoPunks, Bored Ape Yacht Club, Doodles, Cool Cats, Art Blocks, and more have fetched considerable money in their sale. Buying an NFT is a great investment opportunity for interested individuals. The hype around non-fungible tokens is unlikely to die down soon. Follow our guide to learn how to invest in NFTs.
Pre-Requisites of Buying an NFT
To invest in an NFT, you need cryptocurrency to pay for the asset. You can buy cryptocurrencies from the numerous crypto exchanges available online. See the steps below to set up your crypto exchange account to buy ether or altcoins:
Select a crypto exchange platform:
A crypto exchange is an application that allows you to buy, sell, and exchange cryptocurrencies. You can use this cryptocurrency account to buy and sell crypto tokens or convert them from one blockchain to another (e.g., Ether to Dai or vice-versa).
You may also exchange crypto tokens for fiat money. Selecting a crypto exchange requires diligence and careful consideration. Different crypto exchanges have different security measures and fee structures.
So you have to ensure that the platform you choose guarantees affordability as well as the safety of your digital currency. It’s essential to evaluate the features and offers of all crypto exchanges before settling for one.
Most popular crypto exchange platforms include:
Set up your crypto exchange account:
You have to go to the crypto exchange website and fill up details on their “Create an Account” page to set up your account. You have to submit details like your email address, username, and password. Next, you must complete the KYC process to verify your details and establish your exchange account. For the KYC, you may need to upload documents for proof of identification (e.g., driving license or passport) and address (e.g., utility bills or bank statements).
Make a deposit:
Once your crypto exchange account has been set up, you need to make a deposit first. The minimum deposit amount varies from platform to platform. By paying a deposit fee, you’re essentially funding your account.
After funding, you still have to convert your money to buy cryptocurrency. Most crypto exchange platforms allow you to connect your bank account or debit/credit cards with it. Therefore, you can pay all the fees to the platform through a bank transfer or card payment.
There are different types of platform fees that a user has to pay in order to use a crypto exchange account. As a user, you should be aware of the different types of fees that can be levied on your account.
Trading fees refer to the amount of money a user owes to the crypto exchange to transfer funds to and fro from their exchange accounts. The trading fees depend on the trading volume. Generally, these platforms charge 0.20% on average. While some exchanges charge a fee for every transaction, others charge based on a combination fee schedule.
Deposit or withdrawal fees
Crypto exchanges charge their users a deposit or withdrawal fee. The deposit fee represents the amount a user has to pay to add money into their crypto account. This deposit fee is directed towards the payment gateway. A deposit fee is less common than withdrawal fees.
As for withdrawal fees, some crypto exchanges charge a flat fee regardless of the amount withdrawn, while others charge a dynamic fee depending on the country, amount, and type of withdrawal (crypto or fiat).
Liquidation fees are the additional amount levied to users who borrow funds from the platform. Crypto exchanges enable their users to acquire additional altcoins at an interest rate determined by the availability of supply funds. Moreover, if you’re on a low-volume exchange, you may pay a different amount than you expected if your acquisition doesn’t go through until the price has gone back up.
Place an order to buy cryptocurrency:
Once you pay the deposit fee (if there is any) and add funds to your account, you can now place an order for either or altcoins. On some exchange platforms, you can directly enter the amount of money you wish to trade for cryptocurrency and pay the current rate to purchase the tokens.
You can either place a market order or limit your order depending on which platform you choose. A market order indicates that the user wants to buy cryptocurrencies at the current market price. Alternatively, a user can place a limit order if they wish to pay a specific price for the altcoin. The cryptocurrency will be automatically purchased once it reaches that price level.
How to Buy an NFT Online?
Set up your crypto wallet:
You need a digital wallet service to conduct crypto transactions. The digital wallet is where you store your cryptocurrency. In certain wallet services, you can also securely store your NFTs. There are many digital wallet services in the market, including:
- Math Wallet
- Trust Wallet
- Enjin Wallet
Setting up a digital wallet is a straightforward process. Most cryptocurrency wallet services either have a web extension, mobile app, or both. You can go to the application and click on the “Create a Wallet” option. When you click on the button, the application will ask you to provide and verify basic details such as username, email address, phone number, password, etc.
After accepting the terms of service, the wallet application will provide you with a “Seed Phrase.” The seed phrase is a backup phrase that helps you recover your account if you forget your password. It is imperative to keep your seed phrase safe, as losing it will prevent you from accessing your account and funds. Once you follow all the instructions, your digital wallet will be ready for operation.
Transfer funds to your wallet:
Your digital wallet is ready to receive crypto tokens. You can buy cryptocurrency from the crypto exchange and transfer the funds to your digital wallet. You also have the option to buy tokens directly from the wallet. However, the transaction fees will be higher in this case.
The crypto exchange will ask you to add your wallet address when transferring funds to your digital wallet. The wallet address is a unique alphanumeric phrase similar to a bank account number. You can click on “Send,” and the exchange platform will send the token to your wallet address. Once the tokens reflect in your wallet, you are ready to make transactions.
Choose an NFT marketplace:
There are tens of NFT marketplace available online. Each marketplace has its own incentives, minting fees, commission charges, and featured NFT collections. Some marketplaces specialize in one category of NFTs, while others offer a wider variety of options.
When selecting an NFT marketplace, consider the following:
- Blockchain network (Ethereum, Binance, Polygon, etc.).
- NFT collections.
- User-friendly interface and advanced search options.
- Transaction fees, tax, and other charges.
- Wallet compatibility.
- Cross-device functionality.
- Network security.
You should compare the benefits and disadvantages of each marketplace. Consider every element on the list above and select one marketplace that checks all the boxes and fits your precise needs.
Connect the wallet to the marketplace:
After choosing an NFT marketplace, you have to connect your crypto wallet to the marketplace. Every marketplace will have a “Connect Wallet” option on its platform. Click on the tab and accept the following prompts. Once the wallet is connected to the marketplace, you can start buying or selling NFTs on the platform.
Decide on an NFT to invest in:
Most NFT marketplaces will have top NFT collections or trending NFTs to buy sections on their dashboard. You can scroll through and review their offerings to find something you like. It’s best to invest in pieces that are rare, popular, or currently going viral. These digital assets will likely grow in value and have a higher resale price on secondary marketplaces. Moreover, choose works from well-known and reputable NFT artists to ensure that your investment appreciates in the future.
Pay the selling price or place a bid:
Creators have the option to put their NFT collection for a direct sale or an auction. You should check whether the NFT you chose is up for sale or an auction. If it’s a direct sale, you can pay the asking price, which will be deducted from your wallet.
If it’s an auction, you have to bid to buy the NFT. The auction may be limited or unlimited. In limited auctions, bids are accepted for a specific time period. Once the time is over, the auction closes. In unlimited auctions, bids are allowed until the owner accepts an offer. There are no time limitations in this auction.
To place a bid, click on the “Make an Offer” button and mention the cryptocurrency amount you want to buy the NFT for. Remember that your bid has to meet or exceed the reserve price. If your bid gets accepted, you will have to transfer the agreed amount to the owner of the NFT.
Complete the transaction:
If your bid for the NFT is the highest at the end of the auction and is higher than or equal to the reserve price, the transaction will be completed automatically by the NFT marketplace. In certain circumstances, regardless of when the auction is set to expire, the seller can accept your bid at any moment. You acquire exclusive ownership of the digital asset after completing the transaction. You may either hold on to the NFT until it sells for a profit or keep it as part of your one-of-a-kind personal NFT collection.
Where to Buy an NFT Online?
You can buy NFTs from any verified NFT marketplace. UPYO is a verified top NFT marketplace that enables people to buy, sell, and trade in all types of NFT. Whether you want to buy sports collectibles, art, music videos, or game items, UPYO gives you access to the best NFTs from top creators of the industry.
Here is how you can buy an NFT from UPYO:
- Connect your crypto wallet to UPYO.
- Select an NFT from the platform.
- If it’s a direct sale NFT, click the “Buy” button.
- If it’s an auction, place a bid.
- Enable the transaction from your wallet.
- If you win the auction, NFT will be transferred to you.
- Check your UPYO collection and wallet to verify that the new NFT has been added.
Pros and Cons of NFT
As with any investment, there are merits and demerits associated with NFTs. When it comes to purchasing and trading NFTs, there are several pros such as:
- Physical valuables (such as paintings and property) have a long history of appreciation, and proponents believe that digital art might follow suit.
- Investing in NFTs gives you access to a larger pool of buyers and sellers, helping build and connect a community of creative minds and collectors.
- NFT artists can be compensated in the future depending on the usage and resale of their digital artwork using “smart contracts,” a series of programmed commands incorporated into the blockchain.
On the other hand, the downside of NFTs can be the following:
- Because most NFTs are immobile assets that don’t generate any money on their own, subjective indicators such as buyer demand are used to determine their worth. Consequently, sky-high evaluations may not sustain indefinitely. As such, NFTs may lose significant value in the future.
- Creating and selling NFTs is relatively expensive. The different fees, including gas money, minting fees, commission fees, etc., may quickly build up and exceed the NFT’s market worth.
- NFTs and the blockchain technology on which they’re based have a substantial environmental cost because they consume an enormous amount of energy to make and validate transactions.
Should You Invest in NFTs?
NFTs are a worthwhile investment as evident by their growing popularity. But it’s important to acknowledge that they can be as risky and speculative as cryptocurrencies since they are prone to dramatic ups and downs. Now, more individuals are buying ether for NFTs, which may be an excellent thing for investors banking on long-term growth in the value of Ethereum.
The expenses for purchasing NFTs, however, are a significant disadvantage. For example, on Ethereum, you may have to pay a few hundred dollars merely to complete a transaction. Furthermore, gas fees (costs paid to miners for verifying a transaction on the Ethereum network) have risen significantly as the number of transactions on the Ethereum blockchain has increased due to the NFT explosion.
If you wish to acquire an NFT, do it in a risk-free manner by investing just what you’re prepared to lose. Just like one observes the stock markets, you should also keep an eye on the emerging trends on the NFT scene. Being an informed investor will help turn a profit while reducing your outcome for losses.
Future of NFT
The future of NFT extends beyond digital ownership. Today, NFTs are being used to buy digital real estate in virtual worlds and even own, license, and produce next-generation music. Some analysts believe that NFTs will provide access to special deals or limited-edition items in the future. Due to smart contracts, NFTs can continuously be tracked to their original owners. This creates the possibility for owners to earn royalties from secondary or tertiary sales.
One of the most exciting areas for NFT growth is the $85 billion video gaming industry. Gamers are already used to buying digital game assets as part of their collection. Therefore, NFTs have the potential to become invaluable digital collectibles for the approximately 3 billion members gaming community.
Besides that, other tech and non-tech companies have also begun selling or trading NFTs. These non-fungible tokens might serve as building blocks for a next-generation digital world such as the metaverse.
Moreover, governments and lawmakers are taking an interest in the NFT market. There will likely be more regulations and taxation surrounding NFT and cryptocurrencies in the future. We can expect crypto-focused frameworks to come up soon. These laws will protect consumers and investors while fostering technological innovation.
Whether you wish to learn about NFT, Blockchain, Web3.0, Metaverse, or other emerging technologies, we have the vital resources that will enlighten and help you make an informed decision.
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