How to buy NFTs in Web 3
Digi Caps explains how to buy NFTs
There are many things you need to understand when you want to know the best way of how to buy NFTs in Web 3.
There may be a number of reasons why you are looking to purchase NFTs. Perhaps you are looking for a good investment for some spare cash. Maybe you just love buying artwork and taking ownership over certain pieces that interest you. Either way, you need to know what to look out for when investing in this market and what the best practices are. Digi Caps is here to offer you the best advice possible on the subject.
Crypto Exchange and Digital Wallet
The purpose of exchanges
It’s likely if you are reading this you already know the basics of Cryptocurrency and Crypto Exchanges, but I’d like to explain to those that don’t know the purpose of these entities.
Before you delve into buying NFTs, you need to swap fiat money (such as Dollars) for cryptocurrency (most commonly Ether on the Ethereum Blockchain). This is where an exchange comes in, they act like the middle man and swap your fiat currency for crypto.
Its easy enough to setup an account with any of these Crypto Exchanges. Be prepared to supply them with some form of I.D, access to your bank account details. You will mostly likely need to provide them with a selfie video including voice to identify you as the one opening the account.
The top 3 Crypto Exchanges to use in 2023
The top 3 crypto exchanges at the moment by trading volume according to Coin Market Cap are:
- Binance
- Coinbase
- Kraken
My personal preference is Coinbase, but I’d also recommend checking out Gemini as well due to their ease of use.
Create a digital wallet
Crypto Wallets are where you store your cryptocurrency and your NFTs. You don’t want to store your crypto on the exchange very often. There is a saying, “not your keys, not your crypto”, which basically warns you about keeping crypto on the exchange.
With a digital wallet you first must create something called a “Seed Phrase” which is a phrase made out of a number of words, usually between 12 – 24 which is basically your password.
With this phrase you can access your hot wallet from anywhere, so as you can imagine, this phrase is vastly important. Cold Wallets are used to keep access to your crypto offline, so for now we’ll focus on Hot Wallets.
Your crypto isn’t technically stored in the wallet itself, however you wallet holds the keys to access your crypto on the blockchain.
We’ll talk more about these digital wallets in another post…
The top 3 Crypto Wallets to use in 2023
The top 3 Hot Wallets that are most popular amongst NFT buyers in 2023 are the following:
- Coinbase Wallet
- Metamask
- Crypto.com Wallet
Again my personal preference is Coinbase Wallet, as it’s a super secure and easy to use wallet that’s accepted almost everywhere. Metamask is the most widely used wallet, but comes with some security issues at this time, being susceptible to countless hacks.
How to buy NFTs using your wallet
You’ll want to select the cryptocurrency you wish to buy based on which NFTs you’re looking to purchase.
Ether (ETH) on the Ethereum Blockchain is the most popular Crypto to purchase NFTs with, followed by WETH on the Polygon Blockchain. Polygon is essentially a second layer built on the Ethereum Blockchain which uses a lot less resource to process transactions, so the gas fees are miniscule. Other popular blockchains that you can buy NFTs on are Solana (SOL), Tezos (XTZ) and Cardano (ADA).
With every Ethereum transaction there is a Gas Fee, which varies in cost depending on how many transactions are being processed at that time. We’ll talk about gas fees in another post.
Once you know which crypto you will be using, you can buy this on the exchange and send it to your wallet address.
Find an NFT marketplace
Choose a marketplace and connect your wallet
Connecting your wallet to a marketplace acts as your login and profile for that site. You can usually edit your profile, but you will always log in using your wallet to gain access to buying and selling features.
You can either use a browser with a wallet extension for the wallet you have, or usually access the marketplace directly through the browser on your wallet.
The top 3 NFT Marketplaces in 2023
The top 3 NFT Marketplaces that are most popular amongst NFT buyers in 2023 are the following:
- Opensea
- Rarible
- Binance
OpenSea is a clear favourite amongst NFT traders, and because of which is one that I mostly recommend as it’s usually easier to find buyers for NFTs you own. However this does not mean you should only ever consider the most popular marketplaces to buy and sell NFTs on. It’s simply a good starting point to get to understand everything.
Types of NFT and How to buy NFTs
What to look for when buying NFTs
There are many varieties of NFT and these are usually categorised as well. The most popular types of NFT are the Digital Art variety which are usually categorised into PFPs/avatars, one of ones, generative art, and collectibles.
Other types of NFT include photography, music, gamified and utility based NFTs.
To HODL or to flip, that is the question
You must first understand what it is you want to gain out of buying NFTs. Almost always someone will buy an NFT to make money from it. That may be immediately or perhaps years down the line. If you are looking to buy and NFT and sell it immediately for a profit, this is called “flipping” the NFT.
In this market, it is part of the game, and definitely a fun aspect to trading. However, there are only very specific projects you can successfully achieve this with and the risk of losing your investment is always high. NFT Projects that you can successfully flip are usually built up with a lot of hype. A lot of these projects are in this for quick gains, and all in all, tend not to deliver on their promises.
NFTs you can look for that are more trustworthy investments tend to be those with a plan and vision for the future. Whether these are 1/1 artists who create one of a kind pieces of art, or if they are a larger scale project looking to build something for the future, you need to be vigilant and do your own research when it comes to investing your hard earned crypto in them.
How to make the right investment decision
Generally speaking, no-one knows exactly what the right investment for your money is. Like Crypto, NFTs are a gamble, you must choose to only invest what you can afford to lose and invest wisely into something that you believe in.
Choose a project that you are connected to and decide whether to invest in it long term or try and make a quick gain by flipping shortly after they drop their first NFTs.
Do your own research (DYOR)
Investigate the artist or project of the NFT you are looking to buy. Ask these questions and make sure they reach the mark for most, or if not all of these values:
Do they have an active community
Check their social media channels and make sure they are active in the community. Make sure they post more than just shilling posts for their NFTs and actually get involved in conversation. This shows there is a person behind the NFT Project.
Are they doxxed
Have they identified themselves as their real identities? If yes then its highly unlikely that they will cut and run, as they could be followed up in real life.
Have they made previous sales
If they have a lot of holders for their NFTs already and have made previous sales that date back a little while, this is a good sign that they are a trustworthy investment.
Are they original or a copycat
Research into the NFT you are buying and make sure it's not just a rip off of something that's been done before. There are a lot of copycat projects that want to ride the success of others. Usually these projects will cut and run after making some profit.
What are their future plans
See if they have a roadmap or some kind of indication of what they plan to do in the future. If they have outlined something that sounds reasonably achievable then it's a good sign they legitimately want to follow through with their promises.
In conclusion, how to buy NFTs...
No-one can tell you what the best investment is. If they knew that they’d probably keep it to themselves and get super rich very easily. All you can do is know the path on how to buy NFTs from a technical standpoint and then make the best decisions based on your own research and instincts.
My advice is to look for projects that are trying to build something for the future and moving forward even during tough times in the market. Buy artwork from artists you like the artwork of! That way even if you don’t make a profit you own something that you love. Buy NFTs that are unique and show innovation, and something you don’t see being replicated all over the place.
Be careful what you buy and be weary, for buying NFTs is addictive too! Good luck!
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