How To Buy NFTs – Forbes Advisor

A work of art called “The Merge” by artist Park sold for $91.8 million last year. To this day, the most expensive work of art ever sold by a living artist, “The Merge” is neither a painting nor a sculpture. This is a non-fungible token (NFT).

NFTs are digital assets that can represent real-world objects such as artwork or real estate. These crypto assets are bought and sold online, often using cryptocurrencies. Ownership information is protected and stored on the blockchain, a type of distributed ledger.

As the value of arts and sports NFTs soars into the millions, many investors are wondering if NFTs are a good investment. Let’s take a closer look at how to buy NFTs.

What are NFTs?

NFTs cannot be replicated and are the opposite of fungible.

The first known NFT, “Quantum,” was a video clip called Monetized Graphics. When created in May 2014, it finally sold for $4. Since then, NFTs have grown to his $1.8 billion market, according to data from CoinMarketCap.

But what exactly are NFTs? Perhaps the first thing to understand is how NFTs differ from fungible tokens.

Think of two separate $1 bills, they are the same thing. If I take your dollar bill and give you mine, we have the same. This means that the $1 bill is a fungible asset.

On the other hand, if you have a portrait painted by Pablo Picasso, exchanging that artist’s work for a painting done by a 3-year-old is not the same. That’s the basic premise behind NFTs.

Merav Ozair, a blockchain expert and fintech professor at Rutgers Business School, said:

Ozair defines interchangeable objects as things that are interchangeable or indistinguishable from one another.

Bitcoin is a fungible token on the blockchain, it doesn’t matter which specific token you own.

NFTs, on the other hand, are proprietary blockchain tokens and cannot be exchanged for other tokens found on that blockchain or any other blockchain.

Where to buy NFTs

The first purchase of NFT is called Mint.

Minting is not NFT creation. Rather, Minting activates an already-created smart contract and places an NFT at a specific location in the blockchain network.

As such, NFTs are a type of non-fungible cryptocurrency. NFTs have all the same features as other blockchain technologies. Certain her NFTs are immutable on the blockchain, allowing anyone to see the transaction, he says, Ozair.

You might consider building your own blockchain to create and create NFTs, but most users choose the NFT Marketplace to create their NFTs.

There are two types of NFT marketplaces: centralized and decentralized.

Centralized NFT Marketplace

The main difference between centralized and decentralized markets is that centralized markets impose certain restrictions on what you can do.

When marketplaces are centralized, Anthony Georgiades, co-founder of the Layer 1 blockchain Pastel Network, says, “Users are not necessarily watched to make sure they are not infringing copyright. No,” he said. Marketplace will take care of that for you instead.

Decentralized NFT Marketplace

On the one hand, anyone can virtually list anything on the decentralized marketplace. This can lead to piracy and illegal NFTs. Any of these factors could adversely affect your investment.

In addition to the suggested price of the NFT itself, you pay both the NFT and the gas fee when you first create the NFT.

A gas fee is an additional fee charged by a blockchain network for the use of computational resources.

Ethereum (ETH) is currently the largest network for NFTs, but there are other networks such as Flow (FLOW), Cardano (ADA) and Solana (SOL).

However, each blockchain that supports NFT projects has its own strengths and weaknesses.

Some networks also charge a gas fee for NFT creation. Among NFT-supporting cryptocurrencies, Solana gas prices are relatively low compared to most other cryptocurrencies.

When creating an NFT, the user should also check the network’s gas price.

How to purchase NFTs

Once an NFT is created, it is generally freely manageable by the user. Users can list their NFTs on the marketplace of their choice, exchange them with someone else, or transfer them for free.

Some NFT marketplaces, such as Nifty Gateway and NBA Top Shot, accept credit cards for NFT payments. However, many other NFT marketplaces may require cryptocurrencies for purchases.

However, any platform requires a crypto wallet to start purchasing NFTs.

A crypto wallet is where NFT keys are stored once NFTs are purchased. These wallets can be stored online or offline. Offline storage is generally recommended as it is considered more secure.

Once an NFT is created, purchased from the marketplace, or transferred by the NFT’s current owner, it will appear in your wallet.

When buying an NFT, it’s important to remember that “you’re buying a token ID to where that token is actually stored,” says Georgiades.

Of course, if your NFT is a work of art, you can print a physical copy of it or save a digital image of it, but the NFT you own is just a token ID. Unless the contract states ownership, we do not own any rights to the images or the original images themselves.

What is the value of NFTs

Like many things in this world, the value of NFTs is in the eye of the beholder.

This does not mean that NFTs cannot sell at high prices. For example, in addition to his $91.8 million price tag for “The Merge,” Beeple’s “Everydays: The First 5000 Days” fetched his $69.5 million at auction.

“Value extends from authentication and uniqueness,” says Ozair.

But not all NFTs come with a hefty price tag. Some are valued at less than $1. According to CryptoSlam data, his NFT sales of $647 million in July 2022 had an average price of $115.15.

As with paintings, the market itself determines the final value. Obviously, not all paintings will sell for his $1 million, but some believe some are worth it. So they are willing to pay the price.

Of course, NFTs don’t have to be art. There are also sports NFTs that include digital variations of trading cards and highlight reels. For example, a picture of LeBron James taken by Kimanio Keala sold for $21.6 million of him. The MLB Champions blockchain-based baseball game sold for $21.3 million, and a card signed by World Boxing Council (WBC) middleweight champion Jermall Charlo sold for $19.1 million.

The virtual land, which is the space of the metaverse, can also be sold as an NFT. However, after millions of dollars in purchases were made in 2021-2022, the value of virtual land is reported to have fallen by more than 66%.

However, in the metaverse, NFTs can also include accessories for a user’s virtual avatar, such as images and clothing, said Jerry Eitel, honorary partner and chief metaverse officer at global accounting firm Prager Metis. .

As the world becomes more and more digital, NFTs can even represent deeds to physical property, user medical records, proof of ownership, or proof of attendance. These things may not be easily transferable from one owner to another, but each may occupy its own space on the blockchain.

Of course, buying NFTs is different than buying stock or putting cash into an FDIC-protected account.

There is no guarantee that NFT prices will increase. This means that an investor needs to take the time to understand what they are buying when buying an NFT and what the value of his NFT will be.