How to buy an NFT

ByMartin Rupprecht

27. June 2023Blockchain & Digital Assets, Blog post

#DigitalAssets #NFT #crypto #currency #blockchain #cryptoportfolio

Disclaimer: This article is for informational purposes only and does not constitute a recommendation to purchase non-fungible tokens or use the mentioned platforms.

WHat are Nfts?

Non-fungible tokens (NFTs) are one of the many fields of application within the world of blockchain-based assets. However, unlike traditional cryptocurrencies such as Bitcoin or Ethereum, which can be exchanged (fungible = interchangeable) at will to carry out transactions, NFTs are unique.

One use case for NFTs in the financial market is the tokenization of assets (see also H&C publication on Digital Assets or here). By using NFTs, assets such as real estate or company shares can be converted into digital tokens. These tokens can then be recorded and traded on a blockchain, which can lead to greater liquidity and efficiency in the market (see also H&C publication on custodians/electronic securities).

However, NFTs continue to receive the most attention from digital art. NFTs are used there to represent a unique digital artwork that cannot be duplicated.

The following part of the article is therefore limited to the purchase of such digital art objects.

How to Buy an NFT

Buying an NFT can be easy if you know the right steps. You'll need a wallet, cryptocurrency and access to an NFT platform. This guide will show you how to purchase your first NFT quickly and securely.

Step 1: Create wallet

Before you can buy an NFT, you will need a wallet (digital wallet) where you can store cryptocurrencies and the NFTs you buy with them. There are several options, including online wallets like MetaMask and hardware wallets like Ledger. Make sure you protect your wallet carefully, as NFTs and cryptocurrencies are irrevocably lost if they are stolen from your wallet or you lose your credentials.

Step 2: Buy cryptocurrencies

Once you have set up a wallet, you will need a trading platform to buy cryptocurrencies with fiat currencies (e.g. euros) and transfer them to your wallet.

Trading exchange for cryptocurrencies: “Coinbase”

Step 3: Select NFT marketplace

To buy an NFT, you first need a “marketplace” where you can exchange cryptocurrencies for NFTs. There are various options, such as OpenSea, Nifty Gateway, SuperRare or Rarible. You need to register with the exchange of your choice and deposit your cryptocurrency into an account there or link your wallet to the NFT exchange before you can make purchases there.

Currently the largest NFT exchange “OpenSea”

Step 4: Search for the desired token

Once you have transferred your cryptocurrencies to the NFT marketplace, you can search for the token you want. For example, you can search for specific digital artists or collections, or you can search more freely by type of NFT (such as collectibles or virtual properties).

Each NFT has its own unique characteristics, which you should check carefully before you buy it. These may include the edition of the NFT, the date of creation or sale, the creator or the price.

Excerpt from an NFT profile picture collection

Step 5: Bid, buy NFT, sell NFT

Once you have found the NFT you want and are satisfied with its characteristics, you can either place a bid or buy it immediately. If you place a bid, you will have to wait until the creator of the NFT accepts or rejects your offer. If you buy now, the NFT will be added directly to your account.

After you have purchased the NFT, you must store it in a digital wallet or it will be stored there automatically by the exchange. You can store it there, send it on or try to sell it again via one of the NFT trading platforms.

NFTs found by the author during the research for this article

CONCLUSION AND IMPLICATIONS FOR THE FINANCIAL MARKET

At present, NFTs offer new speculative opportunities in the field of digital art, especially for investors who are willing to take risks. However, if expectations of increased liquidity and easier trading through digitized assets are realized, NFTs could mean profound changes for asset investment and management. Retail investors, for example, could invest in assets that are currently difficult to access.

In addition, the decentralized monetization of content enables and offers potential new revenue streams. Accordingly, despite the currently limited use cases in the financial market, it is worth getting to grips with the topic early on and building up knowledge in this area as an interested individual or institution.