The astronomical sale prices of some NFTs has garnered media attention worldwide and the term NFT is now a household name, but few truly understand the potential of this growing segment of the crypto market.
In our previous article we discussed what an NFT is.
The TLDR version is that NFTs are cryptographically unique digital tokens that can be linked to digital content or physical artifacts, proving ownership. Although they’ve predominantly been associated with artwork, they can be linked to any form of digital content.
There are many marketplaces to buy and sell NFTs and each cater to a particular niche in the NFT market. Depending on which marketplace you choose, you’ll be able to purchase different types of art or collectibles. Most of the marketplaces offer their own exclusive NFT drops (new NFTs being released for sale) as well as collections that are being resold by current owners – this is called the secondary market. Think of it as Craigslist for NFTs where you are actually buying the NFT directly from the owner. The platform facilitates the sale and brings the buyer and seller together only.
Choose your ecosystem and marketplace according to the type of NFT that interests you.
Art – OpenSea, Rarible, SuperRare, Nifty Gateway, Foundation
Sports – Flow, Chiliz
Music – Audius, Minty
Gaming – Axie Infinity, WAX, The Sandbox
Virtual World – Decentraland, Axie Infinity
Collectible Cards – Wax
Once you have chosen the marketplace you wish to use simply register, fund your account by connecting your ERC-721 compatible wallet to the platform. If you have ETH in your wallet then you ready to go! It’s that easy. But don’t ape in just yet! Let’s slow things down a bit and make sure you not getting caught up in all the hype.
Here is a list of available wallets you can use.
It’s important to think of any NFT purchase from the perspective of an investor. In order for a good return on your investment you need to buy smart and play the long game If you want the potential of rapid gains, it’s best to stick to pure crypto plays.
It’s always advisable to take a look at some of the recent sales on the platform to give you a good sense of what’s on trend. Once you have a feel for things then get to know some of the artists and their work. If you see an NFT you’d like to purchase then it’s time to do some research and find out as much as you can about the artist and the collection. A lot of info may be available to you with simple links on the artist bio page, if not, spend some time and Google them and find out what crypto twitter is saying about it!
Like tradition forms of art before it, valuing an NFT is not easy, but we can probably agree on some important criteria.
- an artists exhibition history
- sales history
- level of fame
- vastness of artwork
- followers / awareness
- Uniqueness / scarcity of work
- does the art resonate with you?
Clearly, some of the above criteria will have no reference when an artist crosses genres like when a pop musician mints a limited series of artwork. They may have zero sales history or past exhibits and yet the value of their art can still reach record prices due to their popularity as a musician and the scarcity of the art.
Understand exactly what you are buying. Checking the smart contract information is a good way to be sure that you are buying the correct NFT. Reach out to the creator if you need clarity on the smart contract and token ID, and make sure it’s the same as what you see on the NFT page.
Click the details of the NFT to reveal important information, such as:
- Contract address of the collection.
- Token ID of the particular NFT.
- Blockchain the NFT resides on, eg: Ethereum, Polygon/Matic, Klatyn.
- Whether the NFT metadata is centralized or locked (frozen)
Depending on the platform and the NFT artwork you may be presented with an option to Buy Now in which case simply follow the prompts in your wallet (always remember to have enough ETH to cover gas fees). Once the transaction is complete, the item will transfer to your wallet. If you are buying a newly minted NFT from a drop then often times the art won’t arrive in your wallet until the collection is sold out, or after a number days. This will be clearly communicated in details or FAQ section of the drop page.
Alternatively, the NFT may be in on auction and you may need to place a bid complete with an expiration date of the bid. Again, take a look at the FAQ section on the specific marketplace you are using to understand the requirements on making successful bids as some bids are required to be 5% higher than the previous. It’s also important to ensure that your bid is in the same currency as the previous bids.
Once you have begun your journey into the NFT space and have purchased a few pieces of digital art you may notice that an artist that you really like is having a drop – and you may want to get in on this. A benefit of purchasing an NFT from the primary marketplace or a newly minted drop, is the potential resale value directly after the product goes on sale. Supply and demand send the most anticipated NFT projects to the stratosphere. Not only are they sold out within minutes, resale prices are sent soaring.
These are the projects and prices you read about and make great headlines. However this is not the norm. The downside to buying NFTs on the primary marketplace is it’s hard to estimate the demand for the art. You may jump in and buy hot new limited edition NFT coffee mug only to find out that sales are lacklustre and interest in the project is nothing that you were hoping for. Or worse yet, it’s a complete rug pull and you lose your ETH and have nothing in return.
The secondary marketplace provides a safer environment to get your feet wet as it allows you to do some due diligence on the art, pricing and demand of the NFT.
So there you have it. Go signup to a few marketplaces and start poking around. Have fun and keep learning.