What is NFT, and how can you buy it?
Throughout 2021, non-fungible tokens (NFTs) rapidly moved from the fringes of the internet into the mainstream, with brands like Gucci and Burberry and celebrities such as Grimes, Snoop Dogg and Lionel Messi creating and buying up NFTs. New artists have also started minting NFTs with unimaginable levels of success while trading volumes have gone through the roof.
Traditional auction houses like Sotheby's and Christie's are now getting in on the action, and the fashion industry has also been using NFTs. For example, Nike patented CryptoKicks in 2019, a system that enables the authentication of physical sneakers by offering customers a digital version of the product. Meanwhile, the luxury industry is using NFTs to create digital collectables, one-of-a-kind or limited-edition pieces whose value increases due to their scarcity.
What is an NFT?
In economics, a fungible asset has units that can be readily interchanged — like money. With money, you can swap a £10 note for two £5 notes, and the value will be the same.
However, if something is non-fungible, this is impossible — it means it has unique properties, so it can't be interchanged with something else.
For example, if you download an image of a picture by Van Gogh onto your phone, you are effectively in possession of a reproduction of a famous painting. Or imagine that you go to the Louvre Museum, take a picture of the Mona Lisa, and post it on Instagram. Do you own the Mona Lisa? Of course not. Do you think you made the Mona Lisa less valuable because you took a picture of it? Of course not. The more famous the painting becomes, the more valuable it becomes.
So NFTs are similar in that sense. It is not about restricting people's access to see something. It is about proving ownership of it. Buying an NFT allows you to own the original digital representation of a Van Gogh or the Mona Lisa on the blockchain. In brief, an NFT is a digital 'asset' that is tracked through the blockchain, the distributed database system that underpins cryptocurrencies such as Ethereum.
Christie's sale of an NFT by digital artist Beeple for $69m (£50m) set a new record for digital art. The art in question does not have a physical presence the same way a painting or sculpture does. Instead, the token represents ownership — but not the work itself.
How to buy NFTs
There are many platforms on which to buy NFTs. If you're looking for a totally impartial take on where to find the best platform to purchase your first NFT, then you're in the right place! There are three big marketplaces where you can start browsing.
Nifty Gateway is an NFT marketplace owned by the well-known cryptocurrency exchange Gemini, which, in turn, is owned by the Winklevoss brothers.
Nifty Gateway describes itself as a high‐end marketplace that only sells top-notch digital NFTs, which they call "nifty" art. To ensure this is the case, artists need to apply and go through a very detailed vetting process to sell on this platform. The company also has
a secondary marketplace that permits collectors to resell artwork. The platform allows credit or debit cards, which opens up nifties to people not familiar with cryptocurrency.
Founded in 2017, Opensea.io is the oldest, and currently largest NFT trading platform. It covers digital art, encrypted collectables, game items, virtual land and domain names. OpenSea features 80 million-plus NFTs and has had more than 600,000 users to date. It is also the easiest to navigate and most user‐friendly platform for creating, selling or buying NFTs.
OpenSea is ideal for beginners who are just getting into the NFT game. However, depending on where you are in the world, you may not be able to buy on it using debit or credit cards. Plus, because it is on the Ethereum blockchain, buying NFTs from OpenSea with crypto involves gas fees (see below for an explanation of gas fees).
Foundation.app is another major platform where NFTs can be bought and sold. It is a platform heavily influenced by social media, in particular Instagram. Users are encouraged to link their social media to their Foundation account. Anyone can sign up, but if you want to sell your NFT, you must be upvoted by other community members.
This community‐led curation makes selling your NFTs more challenging, but it does also maintain a certain level of quality of the artwork. It also means that there is a broader range of high-quality NFTs on Foundation compared to the other platforms. However, its biggest drawback is that there is no way to filter your searches as you can do on OpenSea. The Foundation platform is also based on the Ethereum blockchain, which once again means gas fees for transactions.
Each NFT marketplace has a slightly different method, so, for the sake of simplicity, I'm going to walk you through the largest NFT marketplace, OpenSea.
Here's a step-by-step guide to making an NFT purchase.
- Before buying your chosen NFT, you need to set up a crypto wallet. Visit one of the following sites: MetaMask, Coinbase or Trust Wallet. Depending on the wallet you're using and the device you're working from (desktop or mobile), you'll be asked to connect your wallet using a QR code scanner on your phone or download your wallet to your computer.
- Transfer your crypto to a crypto wallet. Think of it as a digital current account that stores and transfers your cryptocurrency.
- Connect your wallet to your OpenSea account. Once connected, you can start browsing the marketplace's NFT collection. You can filter your search on the top right bar by clicking on Trending, Top, Art, Collectibles, Domain Names, Music, Photography, Sports, Trading Cards, Utility, and Virtual Worlds. There, you'll find thousands of NFT collections available. When you find something you like, you can buy it directly or make an offer. You can also see the details of the NFTs, like names, their respective collection, the subtotal, and the total. This can help you shortlist the NFTs that have piqued your interest. Found 'the one' you like? Then save it as a favourite.
- Press "Buy Now" to proceed to checkout. Next, OpenSea will load up your digital wallet.
Please note — an important caveat about ownership
You must read the description section of your NFT very carefully before you purchase it. The description is where you can see the information concerning the licence for this digital asset. There are different types of licences for digital assets linked to NFTs.
In general, when you buy an NFT, you own the NFT that represents the artwork on the blockchain. This means that you can display the piece on social media platforms. You can also sell or trade it on a secondary market. But you can't claim legal ownership, copyrights,
trademarks or other intellectual property rights. You also can't use the artwork in a commercial context or make any changes.
It's paramount to know that even if the creator sells the item as one-of-a-kind, they still have the right to reproduce it unless you also buy the ownership rights. Therefore, it is good to know who you purchase an NFT from. There are many unethical and opportunistic NFT sellers out there.
Gas Fees
Selling an NFT requires the network to do some computing. That transaction will cost some money, known as a "gas fee." Gas fees are transactional fees charged for using Ethereum on the blockchain.
Two things affect the price of gas fees. The first is the amount of time to process the transaction, and the second is network volume. In essence, high volume=higher gas fees. It is like Uber's surge price during busy times.
You can change the gas fees by clicking on Edit, but keep in mind that lowering gas fees will considerably reduce transaction speed. The best time to buy is when the Ethereum network is less busy. You can check the recommended gas prices on ETH Gas Station to ensure you don't pay high gas fees.
Summary
I think NFTs are here to stay and may well be bigger than Bitcoin. Many people have made big money on the internet. Those people will want to buy art. Digital art will speak to them much more viscerally than the old art did to the previous generations who didn't make their money on the internet.
The dot-com bubble in 2000 grew out of fad-based investing, the abundance of venture capital funding for start-ups, and the failure of dot-coms to turn a profit. Cisco, Amazon, and eBay were among the companies that survived the dot-com bubble.
As you know, the bubble didn't kill the internet. People kept using it. Why? Because its functionality has improved our lives. That is what I believe will happen with NFTs. I think many NFTs will be wiped out, but the technology behind them and some of NFTs with cultural and symbolic meaning will stay.
There are many things that we connect a value to that don't have any inherent value. Like the first tweet! Twitter CEO Jack Dorsey sold his first tweet as an NFT for $2,915,835.47. The tweet has cultural and historical significance, comparable to the historical value of anything physical. So, if you believe that Twitter will be something people care about in the future, the first tweet might be worth a lot more than $2,915,835.47.
So, I think it is safe to say that NFTs don't derive value from their utility but from the cultural and historic relevance they represent. And that is why NFTs are here to stay.
