Have you heard about the bored ape NFT? Yep, those pictures of cartoon apes that were all the rage some time ago. Don’t take them lightly though. Those apes were easily fetching thousands of dollars at one point. But how? You might be wondering.
These are digital tokens. Essentially pictures on the web. How does one even go about buying something like that? The talk of minting tokens, blockchains, marketplaces, and gas fees may make it seem like a difficult process but it’s actually quite simple. However, it is still important to know what all those terms mean and the costs involved in buying NFTs or putting them up for sale.
What is NFT?
NFT stands for Non-Fungible Token. These are digital tokens created on a blockchain and have some unique identifiers. To understand this better, let us first talk about “fungibility” and “non-fungibility.”
Fungible assets are those whose single units are of equal value. Take money for example. A $10 bill will be equal and interchangeable with another $10 bill. You can go to your friend and ask him to exchange your $10 bill for the one he has with him. This is no big deal because those bills have the same value.
On the opposite end of the spectrum are non-fungible assets. Here, individual units of the same type of asset have some unique identifiers or properties. This implies that you cannot just exchange one unit of such an asset with another. At least not without paying some price for it.
For example, you cannot go to your friend and ask him to exchange the sofa in his house with yours. You cannot argue that they are both sofas made with teak wood and hence, interchangeable. There would be some identifiers that would make one piece different from another.
Now transplant this example of furniture and sofas to the digital realm. Non-fungible tokens or NFTs are, therefore, digital tokens published on a blockchain. Each NFT minted on a blockchain will have some unique properties that make it different from another one of the same type. This helps in establishing the authenticity or ownership of a token. Therefore, while you cannot exchange an NFT for another, you can buy or sell them like stocks. You can turn anything such as an art piece, music, games, sports memorabilia, or a specific video into an NFT and display it on a marketplace for sale.
How to Buy NFTs
We just mentioned above that you can buy or sell NFTs like stocks or collectible items. The easiest way to do so is through a marketplace that deals in NFTs. While there may be some differences in the way different marketplaces function, the larger process of NFT purchases remains more or less the same.
Step 1: Select a Marketplace
While you can buy NFTs from independent project websites, it is more convenient to do so from a marketplace where you can explore different NFT collections. Further, it is relatively easier to make payments and complete transactions on a dedicated NFT marketplace.
OpenSea, Rarible, and Axie Marketplace are some examples of NFT marketplaces. Most such marketplaces are based on the Ethereum blockchain and accept Ether(ETH) as payment. However, marketplaces based on other chains such as Cosmos, BNB Chain, and Solana are also available.
Select a marketplace to buy NFTs from after considering their functionality, NFT projects, and other things.
Step 2: Get a Crypto Wallet and Some Cryptocurrency
You need money to buy your NFTs and also a secure wallet where you can store them. Crypto wallets can be of three types- custodial, non-custodial, and hardware wallets.
Custodial wallets are considered to be the most convenient ones since a third party hosts the wallet and stores the crypto on your behalf. Transactions are fast and easy with such wallets and you can retrieve your crypto even if you forget your password.
Non-custodial wallets, though leave total control in the hands of the user. They just provide the storing facility while the user is responsible for the security of his crypto assets. A hardware wallet is a physical device that is used to store crypto offline. Though expensive, these wallets are the most secure way of storing cryptocurrency.
Get a wallet that aligns with your needs and preferences. Since most NFTs and NFT marketplaces are Ethereum-based, it is better to get a wallet that supports standards such as ERC-721.
After that, get some cryptocurrency that you would use to pay for your NFTs. Make sure that the crypto you get is acceptable as a form of payment on your selected marketplace.
Step 3: Create an Account and Connect your Wallet
Most mainstream NFT marketplaces would require you to create an account on the platform before you proceed to buy the NFTs. You have to follow some simple steps to sign up for the marketplace and then connect your crypto wallet. The funds from this wallet would be used to pay for transactions on the platform.
Step 4: Select the NFT and Finalize the Purchase Method
An NFT marketplace would typically have a number of single tokens as well as full collections for you to explore. Select the NFT you want to buy and then choose the method for the same. Instant Buy, Auctions, and Offers are the three main ways via which NFTs are sold.
Instant Buy is similar to buying things on an e-commerce website or purchasing crypto with fiat on a cryptocurrency exchange. You just confirm the listed price, click on “Buy Now” and pay for the token to confirm the transaction.
In an auction, people interested in buying the NFT would place bids on the token. This is similar to an auction process for any other collectible item. Usually, the NFT will be given to the highest bidder though the seller can also choose to accept any of the offers made during the auction.
The Offer process is sort of like bargaining or negotiating the price of an NFT. You can offer to buy an NFT for less than the listed price or even offer to buy tokens that are not listed for sale.
Step 5: Make the Payment
You will be prompted to the payment section after you’ve finalized your purchase. Note here that certain platforms also support paying for NFTs with fiat money via a debit or credit card.
In that case, you will be asked first to select a payment method. You will be shown a preview of the final amount to be paid. Along with the listed price of the NFT, you would also pay the gas fee for completing the transaction. A processing fee may also be charged if you pay with a card.
Go on to make the payment if you are satisfied with the final amount to be paid. The necessary funds would be deducted from your wallet if you choose to pay with cryptocurrency. In the case of cards, you would have to first enter the requisite information and then make the payment.
Once the transaction is confirmed, your newly-bought NFT will be visible in your collection.
How to Sell NFTs
Now, maybe you own an NFT and want to sell it for a higher price to make a profit. Or maybe you are a creator who wants to turn his artwork into NFTs and then list them for sale. Either way, the process of selling NFTs can look complicated. But it doesn’t have to be.
A lot of people prefer selling their NFTs by listing them for sale on marketplaces. This is easier than setting up an independent project website which would require a certain level of technical know-how.
Here, we will discuss how you can sell your non-fungible tokens via NFT marketplaces. Note that although there may be some minor differences across different platforms, the larger process remains more or less the same.
Step 1: Select a Marketplace
There are numerous NFT platforms out there. Shortlist a few and then select the one that fits your needs. Check out the chains and the cryptocurrencies it supports and keep in mind that you may have to pay a listing fee as well as the network gas fee before putting up your token for sale.
OpenSea, Rarible, Nifty Gateway, and Axie Marketplace are some examples of popular NFT marketplaces.
Step 2: Get a Crypto Wallet and Fund It with Cryptocurrency
You will need cryptocurrency to pay the minting fees on your selected marketplace. Ether(ETH) is the most accepted form of payment since most NFT marketplaces are based on Ethereum.
However, marketplaces running on other chains may accept their native tokens for payments. Therefore, make sure you get the cryptocurrency that is accepted on the marketplace that you have selected.
Next, you will also need a digital wallet to store your crypto as well as use it for transactions on a marketplace. MetaMask, Coinbase Wallet, Torus, and Portis are some popular wallets for this purpose. Again, since most NFT marketplaces are Ethereum-based platforms, it is probably better to get a wallet that supports the ERC-721 standard.
Step 3: Connect Your Digital Wallet to the Marketplace
In the next step, you have to connect your crypto wallet to your desired marketplace. On most platforms, you will find the Connect Wallet option on the home page itself. Click on it, enter your wallet provider, and connect your digital wallet. Then, agree to the Terms of Service and Privacy Policy before proceeding further.
Step 4: Upload the Image
If you want to create a token from scratch to sell later, you have to first complete the minting process after which the token is added to the blockchain. For this, click on the “Create” or “Add New Item” button.
Then, upload a high-quality image of the item you want to turn into an NFT. You have the option to create a single work or a whole collection. It is up to you to decide whether your NFT will be a one-off item or part of a collection.
Step 5: Choose the Sale Method and Add a Description
Now, you have to select the method by which your NFT art will be sold. Most marketplaces give you the option of either listing a fixed price or setting up a timed auction. Some places may also allow unlimited auctions where buyers continue placing bids until you accept an offer.
Next, give your NFT a title and add a brief description of the piece. Specify the royalty percentage you want for each future resale of your NFT. Then click on the “Create” button.
Step 6: Pay the Listing Fee
Before you finally create and list your NFT for sale, you have to pay a listing fee as well as the network gas fee. It is important to consider the final cost you will pay for generating your NFT. Click on Confirm only if you are satisfied with the final amount displayed.
Thus, your NFT will be minted and listed for sale as per your specifications.
Step 7: Selling Your Collected NFTs
The process of re-selling a bought NFT is more or less the same as a freshly minted token. First, you need to go to your profile and select the token you want to sell from your wallet.
Next, choose whether you want to list a fixed price or go for an auction. Set the duration of the sale and complete the listing. Note here that you will not receive any royalties because you are not the original creator of the token
While selling your NFTs, you also have to pay the gas fee and a service fee charged by the platform. This service fee differs from marketplace to marketplace. OpenSea, for example, takes 2.5% of the sale price as a service fee. Some sales may also involve a creator fee that is paid to the original creator of the token.
NFT Frequently Asked Questions(FAQs)
What is Minting in NFT?
Minting is the process by which an NFT is uploaded or published on a blockchain. Since any data added to a blockchain is immutable, minting helps establish the authenticity and veracity of an NFT and acts as a record of ownership.
Can Anyone Create an NFT?
Yes, anyone who wants to create an NFT can do so though it does require knowledge about the technical process and the cost involved in the process. You can use any NFT marketplace to turn a picture, video, or audio file into an NFT.
Can You Buy an NFT and then Sell It?
Yes, of course. The process of buying an NFT and then selling it at a favorable time to earn a profit is called NFT trading. Trading NFTs can be a lucrative option given that you are savvy enough to parse out the right opportunity.