Nov 3 2022
How to Buy NFTs: Basics, Best Practices, Watch Outs and More
Buying an NFT is not like buying a pair of socks. You’re probably reading this blog because you’re intrigued by NFTs. Maybe you’ve read the news and heard about the crazy sums of money involved. Maybe you’ve bought one or two, but you feel lost and want to educate yourself before you make another purchase.
Whatever camp you fall into, this blog is here to offer the ultimate 101 on buying an NFT. Please note that this is by no means a “how to make money with NFTs playbook”. The market is so new that any such guide would be making bold claims.
Read on for all the knowledge an NFT enthusiast should have ingrained in their consciousness before embarking on any NFT shopping trip.
A quick outline of what NFTs are
Don’t mistake NFTs for digital artwork. Yes, as we’ll see below, purchase an NFT and you’ll be the proud owner of digital art. But what an NFT really is, is a method of recording ownership digitally. It can be applied to art, music, real estate, intellectual property, ticket sales, medical records and more.
NFT stands for non-fungible token. This means it can’t be exchanged for a similar asset of equal value. A dollar is fungible. One dollar is worth exactly the same as another dollar. Every NFT is unique, with its own value.
NFTs can be used to record the ownership of
Art and digital collectibles: the art can be physical or digital.
Video game assets: 3D models, wearables for an avatar, etc.
Physical real estate: ownership of entire properties can be recorded as an NFT on the blockchain. Smart contracts can automate sales by eliminating the mounds of paperwork required to purchase physical real estate.
Tickets/passes: owning an NFT can grant you access to certain restaurants, clubs, communities, etc. Equally, they can be used as one-off tickets to events.
Medical records: NFT ledgers can provide safer methods of storing sensitive medical data while still allowing authorized healthcare professionals access when required.
Metaverse real estate: plots of digital land. The kind you might buy from The Sandbox, Decentraland, and of course, VerseProp.
In most contexts when people refer to an NFT, they’re talking about a unique piece of digital art/collectible where the owner can be verified on the blockchain. So in this blog, assume that’s what’s being referred to unless stated otherwise.
The technology behind NFTs
Most NFTs are smart contracts built on the Ethereum blockchain, blockchain that can execute smart contracts. To quote Wikipedia:
“a smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreement.”
NFTs can’t exist without smart contracts, however, there are several other blockchains that also support smart contracts, and with that, NFTs. Polygon, Cardano, Flow, and Solana are some of the most prominent.
Here’s a quick rundown of some notable projects
The First 5000 Days
This was the project that blew things up. Digital artist Beeple stated that he created one piece of work every day for 5000 days. That’s over 13 and a half years. His depiction of prominent cultural figures and decision to publish during the 2020 lockdown were both key ingredients in his rise to fame, and ultimately in the $69 million price tag achieved at
Inspired by the punk and cyberpunk movements, these 10,000 illustrations each depict 1 unique character. Although being one of the first NFTs – launched in 2017 – the collection’s popularity wasn’t fully realized until 2021. The high price (average being around 78 ETH, or c.$104,000, at the time of writing this) is due to the collection’s status as being one of the first NFTs. No doubt an accolade that many think will carry even more weight in years to come.
Bored Ape Yacht Club
Credit: Yuga Labs
Bored Ape Yacht ClubNFT by Yuga Labs gives the owner access to an exclusive, members-only community, limited edition merch, and in-person events. Its celebrity owners include Snoop Dogg, Jimmy Fallon, and Mark Cuban.
And let’s not forget, The Skyscraper Collection
VerseProp and world renowned architecture studio, PLP Architecture
have created an NFT projectlooking to marry the worlds of cutting-edge architecture with the Metaverse. Based on a concept building designed by PLP, these NFTs give owners access to a range of commercial utilities, from exclusive digital content to a bespoke
metaverse real estateasset designed by PLP.
Get a wallet if you don’t have one already
A wallet will let you store your NFTs. Well, technically wallets only store the keys you need to facilitate NFT transactions but in essence, they still feel like they “store” your NFTs. When choosing wallets, you’ve got two main routes to go down: software wallets (AKA “hot” wallets) and hardware wallets (AKA “cold” wallets).
Software wallets are, as you might have guessed, software that lives on your computer or mobile device. Many of them have a browser extension that makes purchasing seamless. Their main con though is that they’re easier to hack than hardware wallets. Popular software wallets include Math Wallet, Coinbase Wallet, and what is by many measures the most popular,
Hardware wallets on the other hand are only online when plugged into your computer. Thereby making them more secure. When it’s time to make a transaction, you’ll need to plug in and turn it on. Similar to accessing files on an external hard drive. Popular options are
Trezor. Whilst they’re certainly more secure, their downside is that they a) aren’t free, and b) can result in you losing your crypto/NFTs should you lose your wallet and recovery phrase.
VerseProp’s recommendation (and many other people’s for that matter) is to just use MetaMask. It’s super simple to use and install thanks to its browser extension, and it’s compatible with most NFT marketplaces.
Whichever wallet you choose, you’ll also need to make sure that it can store the type of crypto required for buying NFTs. This isn’t too much of an issue though as you’ll usually be dealing with Ethereum and its native currency Ether – accepted by the bulk of today’s quality wallets.
This should go without saying but just as a reminder, never share the password or private keys to your wallet. It’s like giving someone your pin number or any other confidential bank details. For more crypto safety info, the video below will help.
Make sure you have the right crypto in your wallet
This will usually involve buying ETH. Don’t believe what some crypto detractors may tell you; buying ETH can be as easy as signing up for Netflix. Start by choosing a crypto exchange. Any of the big names like
Crypto.comwill be able to help you. Most exchanges will make the whole process pretty effortless; create your account, fund your account (with fiat currency), and buy ETH.
You may of course not be in the market for ETH; if there’s an NFT you’re interested in that isn’t on the Ethereum blockchain – and yes, plenty of them exist – then ETH won’t be much use. Depending on what NFT you’re buying you might need SOL for NFTs on the Solana blockchain, ADA for the Cardano blockchain, etc., etc. You’ll also need to use marketplaces that are compatible with the required cryptocurrency.
Want to know how to buy NFTs without crypto?
Quite understandably, many people want to avoid crypto. It’s still new and perceived as untrustworthy. Plus, its volatility means that holding any can leave you out of pocket should the market dip. Depending on which platform you choose to purchase from, there can be the option to buy using a credit or debit card. For example, OpenSea lets users pay by card using a tool called
MoonPay. You will, however, need a crypto wallet.
If you want to go one step further and avoid crypto completely there are even options to mint without the need for a wallet. If the NFT platform you’re purchasing from accepts it,
Crossmintwill let you mint with just a card and an email address. This is one way you’ll be able to purchase The Skyscraper Collection.
Before you jump in and start spending, ask yourself the following
What do you plan to do with your NFT? Because different purchases will require different pre-purchase actions. For example, if you’re just a collector looking to own a piece of NFT art, then feel free to follow your heart and buy whatever takes your fancy.
If on the other hand, you’re looking to flip your NFT for a quick profit, or hold it long term and see what kind of value builds, then you’ll need to do your research. The art of smart NFT sales and investing is boundless – not to mention hard to pin down since the space is so new. But to get you started, we’ll be covering various metrics you can use to evaluate a project.
Where to buy NFTs
With NFT marketplaces you can shop for NFTs like you would on Amazon or eBay. As we’ll see below, some marketplaces are highly decentralized, some aren’t.
On marketplaces, you can view an NFT’s transaction history – providing it has a history and isn’t newly minted. In addition, each marketplace will have its own features, characteristics, listings, etc. So depending on what you’re looking for, there will be an array of factors to weigh up. But first, here’s a rundown of some of the top marketplaces to buy NFTs from.
Claiming to be the largest marketplace, this peer-to-peer platform has a vast array of NFTs. From your standard collectibles (Cryptopunks, Bored Ape, etc.) to
trading cards, to plots of digital land.
OpenSeais super easy to use – you can set up an account in minutes. So if this is your first rodeo, then OpenSea is probably your best bet.
Pretty similar to OpenSea only not quite as large. Same eclectic mix of NFTs. Same 2.5% marketplace charge on transactions. Its key difference is that it’s more decentralized than OpenSea, functioning as a DAO; Decentralized Autonomous Organization. Rarible also has a governance token: RARI. Ownership lets
Rariblesupporters vote on the development of the platform, giving NFT creators the kind of power they wouldn’t have on OpenSea.
Since Binance – the largest crypto exchange – is behind this, it is most definitely centralized. Any NFTs sold are paid in BNB tokens to the creator. One standout advantage of
Binance NFTis its low transaction fees at 1%. The potential disadvantage is that it won't let you purchase with a credit card (which makes sense since Binance is a crypto exchange!).
There are also platforms with a more select focus.
SuperRaredoesn’t offer as broad a range as the aforementioned platforms. Instead, it focuses on unique, one-off pieces of NFT art. It’s essentially Christie's or Sotheby’s, only dedicated to NFTs. It’s also a peer-to-peer network, enabling artists to sell their work directly to the collector.
This platformfocuses on selling NFTs as tickets. The NFT mechanism reduces fraud, lets royalties get paid to the ticket issuer, unlocks exclusive content to the ticket owner, and much more. It’s basically the future of ticketing.
And of course, VerseProp
Since our platform (launching in Q4) offers advanced analytics, you’ll be able to aggregate results from multiple metaverses and have access to data-driven insights unavailable on OpenSea or Rarible. Plus, you’ll have the option to talk to your own metaverse real estate advisor that’ll help you figure out what and where you should buy.
Connect your wallet to the marketplace
This step is pretty straightforward since it’s often incorporated into the marketplace signup process. Some marketplaces might even set you up with their own proprietary wallet. If on the other hand, account creation isn’t twinned with wallet connection, make sure your wallet is connected.
You’ll also need to make sure your wallet is compatible with your marketplace of choice. This is why we recommend MetaMask since there aren’t many NFT marketplaces that don’t accept it.
How to evaluate an NFT project
Outside your own personal tastes, NFTs can be valuable for several reasons. The following serve as a series of best practices when choosing an NFT. Click
herefor a detailed outline of them. Below is a quick rundown of all the reasons why a particular NFT might be a good buy.
Like with any piece of art, if a big name is behind it that will automatically add a zero or two. Even if the token was only previously owned by someone big or it’s affiliated with a reputable brand, that can also boost the NFT’s value.
Beeple’s The First 5000 Days being the perfect example. They depicted familiar characters from the current affairs circus and were thus much more shareable and newsworthy than your typical NFT.
Some NFTs are “in.” Some NFTs are sooo last year. If you’re looking to flip an NFT, you’ll probably want to go with the former.
Whilst there are plenty of expensive NFT artworks that could have been done by a five-year-old, there are also plenty of masterpieces that command high prices because they’re so beautiful.
Simple economics and human nature mean that if there’s less of something then it's more valuable. Gold, shiny Pokémon cards, truffles. NFTs are no different.
Access to a valuable, real-world experience
An event, show, etc. The value of the NFTs will be affected by the demand for that experience.
Are people trading this NFT frequently? Is there an active secondary market? If not then there might not be much interest or resale potential.
This follows on from the previous point. If there’s already a group talking about and genuinely interested in an NFT, then that’s often a good sign. Emphasis on the genuine part though. At first glance, bots and aggressive P.R from fake accounts can make a community look more active than it is, so always do your due diligence.
Could you rent out/licence the NFT?
The perks of an NFT can be enjoyed by someone besides the owner if you rent it out to them. E.g. somebody might want to rent your NFT to get temporary access to an exclusive members club.
This has already been touched on with many of the previous points. Still, as a general point, keep an eye out for quality NFT utility. These can be any perk brought about through ownership. Access to exclusive content, discounts, priority access, etc.
These are some factors you can use to inform your decision when buying an NFT. And if you want to know how to buy NFT art successfully, you could learn just as much by
studying the traditional art market.
You might see an NFT with a modest floor price - the base price that freshly minted NFTs go for. If the NFT looks promising in any of the above departments then it could be a smart investment.
You could also pay attention to the crypto market in general. In a bear market, you’ll often see depreciated NFT prices. This isn’t always the case, but put it this way: since people are more cautious, the large sums people usually ask for in a bull market won’t be as common.
Subscribing to several NFT marketplaces is a great way to stay informed. Get on their mailing lists and see what announcements they make about NFT drops. Getting that
much desired NFT “alpha”from places like Twitter and Discord chats is also a great way to get NFT tips.
One last thing you could consider is whether you want to reproduce the NFT’s image; as a physical copy, as part of a commercial, etc. For this, you’ll need full ownership rights, something that may or may not be included in your contract. If this is your plan, make sure you read the small print on every NFT you purchase.
Browse and buy your NFTs
Now comes the fun part. With your wise NFT purchasing hat on, you can pour over the marketplaces, looking for treasure. Like on eBay, most NFTs are sold by auction. You submit a bid and wait to see if you win. Naturally, the NFT’s price history will come in handy here. Also, like eBay, if bidding isn’t your thing, on some marketplaces there’s a “buy now” button.
The bidding process will be either your regular timed auction where the buyer who places the highest bid buys the NFT. Or it’ll be a Dutch auction, where the price starts high and decreases until a buyer submits a suitable price or the reserve price is met.
Don’t forget about gas fees
These can surprise many new or unsuspecting NFT shoppers. The additional ‘service charge’ that is an Ethereum gas fee can sometimes be high depending on the amount of activity happening on the chain at that point in time.
So to ensure you’re not paying stupid money, keep an eye on the
price of gas feesand mint at quieter times. Our blog on
NFT gas feeswill also tell you everything you need to know on the topic.
How to buy NFTs safely
Some points may feel like common sense but regardless, they’re worth reiterating to keep them front of mind.
Scammers are everywhere
Fake “look-alike marketplaces”, hacked accounts, and suspicious direct messages. Many of the common phishing style scams and cybercrime practices have infected the NFT world. Make sure you adhere to cyber security basics like having a strong password + 2FA. You should also educate yourself on
the basics of phishing. A cold, hardware wallet will also be more secure.
For those unfamiliar, a pump-and-dump is where scammy creators spread information that misrepresents the NFT, inflating the price. They then “dump” their NFTs, cashing out, before people realize the NFT is worthless.
Make sure you research the creators and engage with the NFT’s marketing. There could be obvious red flags upon closer inspection; an overabundance of “hot tips” mentioning the project, aggressive marketing, large barely believable bids, etc. That last one is particularly pertinent if the creator isn’t well known.
Not all P.R is good P.R
As a general point – one that certainly supports the two previous points – make sure you don’t skim over the coverage your proposed NFT purchase is getting. You might rejoice when you see that it’s trending but make sure you find out why – it could be trending for the wrong reasons.
Beware of celebrity P.R.
This can often be a green flag. But if the NFT is a pile of trash and the only thing giving it value is because some celeb tweeted about it one time then a price dip on secondary markets could be just around the corner.
John Cena’s NFTwas just a gimmick with his name on it.
Another celeb P.R pitfall can happen should a celeb’s public image be tarnished; it’s unlikely the NFT will hold its value should this celeb commit [insert heinous crime here].
Check the royalties
The royalty payments on an NFT might be sneakily high. Find this out after you purchase it and you may have trouble making a profit or even selling it at all.
Make sure the NFT you’re buying is the genuine original
Right click save an NFT and then do a quick “search Google for Image” to show you where else the image might be. If you’re looking at a fake, then this can be a great way of uncovering the original, real, NFT on another platform.
The NFT space is definitely in wild west mode. That’s both good and bad news. Good for the intrepid investor looking for an exciting wild card. Bad for the unlucky or naive investor that doesn’t approach this nascent market with caution.
VerseProp is here to swing the world of metaverse real estate and NFTs in a more positive direction. Whether it’s through our upcoming NFT collaboration, or our forthcoming metaverse real estate marketplace and advisory platform, our goal is to make this asset class as profitable and professional as possible.
If you would like to join us on this journey and receive regular updates, content, and special offers on the world of metaverse real estate, click below to sign up to our mailing list.