How To Purchase Your First NFT: Step By Step GuideOct 13, 2022
Step By Step Guide to Purchasing an NFT
While NFTs are a relatively new addition to possible asset accumulation, it is not a new concept. NFTs are akin to collectibles, which have dominated the creative world for centuries. Many prominent people love to own originals and collectibles, whether for investment purposes or as a hobby.
NFTs, or Non-Fungible Tokens, represent a much-needed approach to an ever-growing digital world. On top of allowing new investable assets to enter the market, they also help to identify creators, provide sustainable change, and even have communities centered around their entire mission statement.
Entering this esoteric world can be daunting, but not as difficult as you may think. In this post, we will break down the five necessary steps to purchasing your first NFT.
Let's get started.
1. Establish An Account on OpenSea
Much like any other investment, NFTs trade inside a marketplace. There is no way to transact without a place or method. Naturally, this means that an exchange needs to be created, lest the entire operation is done between two parties, which would be difficult to maintain and would destroy the integrity of the transaction.
OpenSea is the largest NFT exchange, rising to prominence from the famous Bored Ape Yacht Club (BAYC) collection. OpenSea's last valuation was at a whopping $13.3B at the beginning of 2022.
Creating an account is simple, but requires a much different approach than a traditional secondary market at a brokerage. OpenSea does not need authentication or verification for a native account; instead, it needs to link your cryptocurrency wallet, which we will detail below.
2. Open a Crypto Wallet
In order to purchase an NFT, you need currency. Of course, this is how NFTs and cryptocurrency have come together, as transactions are conducted in digital assets rather than fiat currency. Cryptocurrency needs to be secured with a wallet.
A crypto wallet stores your private and public keys, the keys that give permission for transactions to go through. A seed key gives you independent access to your funds. In this way, your wallet does not physically store the currency but provides the necessary safeguards for you to access the coins themselves.
Various wallet types are used for cryptocurrencies, so selecting the right wallet is essential. Your wallet must be compatible with NFT purchases and the specific coin types you'll need to buy. An example of a compatible wallet for NFTs is MetaMask. For the purchase of OpenSea collectibles, all transactions occur in Ethereum, the second-largest coin by trade value. Ethereum has one of the most promising blockchain technologies, so it is highly beneficial to have access to this currency, especially when deciding to purchase NFTs.
Once you choose your coin type, you'll need to decide which wallet you want to use for safeguarding your currency. There are two categories of crypto wallets: hot and cold.
Hot wallets are application or software-based and connected to the internet. They are also:
- Easy to access and can be stored on your desktop and mobile phone
- Extremely convenient with faster transaction speeds
- Much more liable to hacking, cyber-attacks or information leaks
Cold wallets are typically hardware or physical devices, not connected to the internet. They can be:
- More costly
- More secure, cannot be digitally hacked or targeted
- Easily lost, stolen, or destroyed physically
- Defunct if you lose your seed phrase
Many traders prefer to have both a hot and cold wallet. However, starting with a cold wallet affords the most security to new market entrants.
Step-by-step instructions for opening an Ether wallet can be found here.
3. Fund The Wallet With Ethereum
Most NFTs and OpenSea itself trade using the Ethereum blockchain. The token native to this blockchain is called Ethereum Coin, or ETH (ticker). You are able to purchase Ethereum through three different methods, centralized exchanges, decentralized exchanges (DEXs), or directly from your wallet itself.
A centralized exchange functions much like a traditional fiat currency exchange. The exchange itself is a third party, where buyers and sellers pay a commission for using their services. In return, businesses like Binance handle delivery, safeguarding and identification. The buying and selling are done anonymously and tracked only by the exchange itself for reporting purposes.
A decentralized exchange is usually geared towards enthusiasts and those with experience trading and safeguarding their digital currencies. This is because they connect buyers and sellers directly, which increases the transaction speed and lowers reporting requirements. More buyers and sellers are available as these exchanges are not restricted to physical borders.
A decentralized exchange (DEX) uses a unique code for the transaction, which is much less secure than trading on a centralized one. For this reason, there is a much more limited security guarantee, and the process is much more complex.
Step-by-step instructions for funding your wallet can be found here.
4. Connect Your Crypto Wallet
Once you have your funded wallet, the fun can begin. Navigate over to OpenSea. There will be a wallet icon on the top right corner of the screen, where OpenSea will guide you through the process of connecting your crypto wallet. This is how OpenSea verifies transactions, as every purchase or sale you make will be recorded in the ETH blockchain.
Step-by-step instructions can be found here.
5. Purchase The NFT
Once your funded wallet is connected, you are able to browse the various collections available on OpenSea. To buy an NFT, choose a collection such as Bull and Apes. Using various filters on the left of the screen, you can narrow your selection by body type, poses, and type of clothing. Peruse the collections, see what speaks to you, and then make your purchase.
Step-by-step instructions can be found on OpenSea's FAQ here.
Wrapping Up Your First NFT Purchase
As you shop for your first NFT, remember that NFTs represent collections and projects and are not just about trading. Some buyers are looking for collectibles, while others look for investment potential. Some projects even have various holder benefits, opening a whole new world of possibilities. Whatever your reason, we hope this guide has helped you navigate your first NFT purchase.
For more information about NFT basics check out our NFTs 101 course.
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