So you want to buy your first NFT? Non-fungible tokens have ignited an exciting new era of technological evolution and artistic expression. Blockchain technology has granted everyone the ability to independently own a unique and verifiable digital asset without the need of any central authority to certify authenticity.
An NFT can represent a unique piece of digital art, a pass to an exclusive community, or even a plot of land in a video game. Owners buy and hold these items using a DApp (decentralized app) wallet that interacts with the Ethereum blockchain.
The NFT world moves fast, and participating in the marketplace presents a daunting learning curve. I created this guide to share everything I learned during my own first foray into the world of NFTs.
If you want to learn how to find NFTs, determine their value, and buy them, then you are in the right place. This guide will save you countless hours of piecing together disparate information about NFTs flung across the Internet.
Create your NFT wallet
To buy an NFT, you must create your own wallet using a DApp wallet app like MetaMask or Coinbase Wallet. MetaMask is the most popular NFT wallet and is available as a browser extension or a mobile app.
Using the browser extension will make the process easier for beginners. You can download the browser extension here.
After you download the wallet, follow the instructions in MetaMask to initialize your wallet. The most important step is recording and safely storing your recovery phrase.
One of the beautiful things about decentralized ownership is that it does not require a central authority to manage your assets. Although, The drawback of decentralization is there is no central authority you can run to for help when things go wrong. All responsibility falls on you, the user.
Your secret recovery phrase is your key to all the funds and NFTs you store in your wallet. You can use these 12 words to access everything stored in your wallet on any device, anywhere, that supports MetaMask.
However, this also means that:
- Anybody who has access to your recovery phrase can access your wallet
- If you lose your recovery phrase, you could lose access to everything in your wallet forever.
This is why you must take steps to safely and redundantly store your recovery phrase. To create redundancy, store your recovery phrase using two methods. My recommendation:
- Write down the phrase on a piece of paper and store the paper in a secure location
- Store the phrase in a secure password manager like 1Password or LastPass
Less secure methods for storing a recovery phrase:
- Text file on your computer
- Cloud storage like Google Drive or Dropbox
- Post-it note on your monitor.
Anybody who gains access to your computer, cloud drive, or home office could potentially steal your wallet if you use any of the above methods.
The NFT and crypto world is rife with scams, so you must remain vigilant. The most important advice I could ever offer is to never share your secret recovery phrase with anybody. The only time you should ever share or use your recovery phrase is to restore your wallet.
No person from MetaMask or any company will ever need your recovery phrase. So DO NOT ever share it with anybody. This goes for any crypto wallet. Hackers and thieves impersonate employees from reputable companies or even creators of NFT projects, so please use sound judgment when playing in the crypto space, or risk losing everything.
Did I scare you? Good. I cannot emphasize enough how important it is to take the responsibility of being your own bank seriously. If you protect your recovery phrase, you will avoid nearly all risks of losing your assets.
Ethereum is the most popular blockchain protocol used to buy, sell and store NFTs. Alternative protocols that support NFTs, like Solana exist, but Ethereum is far and away the most popular, and the first to create the concept of smart contracts, so we will only focus on Ethereum in this guide.
The creators of Ethereum envisioned a “world computer” that could run programs called smart contracts. The breakthrough concept of Ethereum is that programmers can publish contracts publicly to the Ethereum blockchain and allow anybody to use them without any server or third-party standing between them. The contracts are decentralized programs since they do not require any server or middleman between the two parties interacting with the contract.
The Ethereum protocol requires gas to run a smart contract. Gas makes the contract run. Users of Ethereum pay for gas using ether. Ethereum is the standard, and ether is the transactional token used to operate on the Ethereum standard. We will discuss gas more in a later section.
Ether is a fungible token, meaning every unit of ether is identical and can be divided into smaller parts. In contrast, an NFT or non-fungible token is a unique asset created from a smart contract. Each token is assigned a unique tokenID that represents its individuality. No two NFTs are alike.
Funding your wallet
You must fund your wallet with ether so that you can pay for the gas required to instruct an NFT smart contract to assign an NFT to your wallet. You can purchase ether directly in MetaMask or transfer ether to your MetaMask wallet from a cryptocurrency exchange like Coinbase.
Most exchanges offer guides on how to transfer ether in that specific platform. However, you will use your public wallet address to receive ether from an external source. In MetaMask, you can copy your public address to your clipboard by clicking your account name.
If your cryptocurrency exchange has a mobile app that supports QR codes, you can generate your public address as a QR code by clicking the three dots in the top right corner of MetaMask, and then clicking “Account Details”. This will generate a QR code that you can scan using your exchange’s mobile app rather than copying and pasting your public address. This avoids any possibility of typos or errors when copying your public address into an outgoing transaction.
Unlike your recovery phrase, you can freely share your public address to receive NFTs or ether. The one risk is that you can compromise your privacy if you share your public address along with your real-world identity.
Once someone has your public address, they can look up every transaction you make. If you publicly disclose your Ethereum address alongside your identity, everyone can know that you are the one behind the transactions.
Transferring ether requires gas, and your exchange will either deduct or add the gas amount from the final amount sent to your DApp wallet. If you receive an amount less than what you sent, it is most likely because your exchange deducted the gas from the amount of ether you entered to send.
Finding and Buying NFTs
So you now have a wallet full of ether and are ready to acquire your first NFT. But how do you find an NFT? What makes an NFT valuable? And how do you actually buy an NFT?
Properties and Rarity
This article will focus on valuing NFT projects or collections. NFT projects typically release thousands of similar NFTs with their own unique properties or traits. You may have heard of the most popular NFTs of this type, like Cryptopunks or Bored Ape Yacht Club.
NFT collections are released by teams of people that banded together to launch an NFT project.
An NFT project is a team of people that create, sell, and market NFTs. To learn more about NFT projects, check out this article on marketing and advertising NFT projects.
These collection-based NFTs are different from 1:1 NFTs sold on exchanges like SuperRare. 1:1 means there is only 1 in the 1 collection. 1:1 NFTs are similar to traditional art, and harder to value because the value is more subjective or based on the fame of the artist creating the piece. In this article, we will be focusing on NFTs from collections.
Part of the fun of NFTs is collecting assets that you find aesthetically pleasing or brings you joy. But if you want to approach NFTs as investments, you need to understand why some NFTs are more valuable than others.
Much like traditional art or collectibles, NFT collections derive most of their value from rarity — meaning the rarer an NFT, the more valuable it becomes. Rarity is established through two means:
- The number of NFTs in a given collection
- The properties of an NFT within a collection
Most NFT collections have between 5,000 - 10,000 unique pieces of art. You can make the argument that an NFT in a 5,000 piece collection is more valuable than an NFT in a similar 10,000 piece collection since there are fewer items available.
Each NFT in a collection will have properties about them that can make them rarer than another NFT in the same collection. Let’s look at this Lazy Lions NFT in the MetaVerbal collection:
If you navigate to the OpenSea listing for this lion and look at the “properties” section, you will see the following:
This lion is pieced together through a set of unique properties. The mane, skin, background color, eyes, body, and mouth are all “properties” that make this lion different from the other items in the collection.
Some properties are rarer than others. OpenSea displays what % of all NFTs in a collection share an attribute. The rarest property on our lion is its “Top Knot - Ice” mane, with only 2% or 200 of all 10,000 lions having this mane style.
The floor price of an NFT collection is the lowest price of an NFT listed for sale in a collection. The floor price is a meaningful metric since this is conceivably the lowest value you would receive if you wanted to sell an NFT from a given collection.
You, of course, do not need to sell your NFT at the floor price — but it is wise to extract the maximum possible value of your NFT when trying to sell it. An easy way to maximize the value of your NFT is to look at the floor price of the rare properties of your NFT. We will discuss how to do this in the next section.
Finding a valuable NFT
Finding an NFT to buy is not very hard. Navigate to OpenSea, the most popular NFT marketplace, and you will find an endless selection of NFTs. The sheer amount of NFTs already available and added daily can overwhelm any first-time buyer.
Finding an NFT is not hard, but locating a valuable NFT is difficult. Everybody has their own strategy for finding valuable NFTs, but I will share some tools and concepts to get you started on your NFT journey.
There are four indispensable tools that every NFT collector must use.
As mentioned before, OpenSea is the most popular marketplace for finding and buying NFTs. Most NFT projects will create an OpenSea collection for their holders to list their NFTs for sale on.
One place you can start is the rankings section of OpenSea. This section will display the top NFT collections by volume from the last 7 days or 24 hours. Volume is the total amount spent on a collection in a specific time frame. If 5 NFTs in a collection sold for 10eth in the last 24 hours, then the 24-hour volume would be 50 ETH.
Watching volume can give you a sense of current liquidity, that is how quickly or easily you could sell an NFT in a collection. Unlike cryptocurrency, you cannot sell an NFT instantly. It may take hours, days, or weeks to find a buyer for your NFT since art is subjective and no two NFTs are alike.
So if a collection has a high % gain in volume in the last 24 hours or 7 days, you can assume it would b easier to quickly flip or sell an asset in that collection relative to a project with a decreasing or low % gain in volume.
The rankings section displays the floor price of a collection, and how many unique owners and assets exist in each project. These data points can further help you assess value.
When you browse an NFT collection on OpenSea, you can view every NFT available for sale- and filter the displayed NFTs by their unique properties.
Projects will work with OpenSea to verify their collection, so potential buyers do not buy from the wrong project. Scammers create similarly named projects to confuse buyers. Verified projects will have a blue check mark next to their name.
If you quickly want to find the cheapest available NFTs in a collection, OpenSea has a not-so-obvious method for surfacing floor NFTs.
Navigate to a collection, like Robotos, and click the “floor price” box that displays the current floor price. OpenSea will immediately modify your search in two ways: only “buy now” (not auction) listings will display, and they will be sorted from lowest to highest price.
From this point, you can use the filters on the left to narrow down your search by specific properties. But how can we figure out which properties are rare or coveted?
Rarity.tools is a platform that provides an easy-to-navigate interface to help you determine the rarity of an NFT and to filter collections based on specific attributes. Before you buy any NFT, it is a good practice to plug that NFT into Rarity.tools.
Find a collection using the search bar at the top. Once you navigate to a collection page, you will see a grid of NFTs in that collection with a number in the top left corner of each NFT image. This number represents the rarity rank of that NFT in its collection. Rarity.tools will sort all NFTs from most to least rare by default.
If you want to see more detail for a specific NFT, you can either click an NFT image or plug in the ID of the NFT in the “ID” field in the top left corner, then click “lookup”. You can find the ID of an NFT on its OpenSea listing page either in the NFT title or in the details section on the left side of the page in the tokenID field.
For example, check out this Roboto NFT. The first thing you will see is a rarity score. This score is calculated by adding up the scores Rarity.tools assigns to each individual property. You can view each property below the main rarity score and see each score assigned for a given property.
The scores of the individual properties are derived by the rarity of the trait. Each property score is added up to achieve the main rarity score.
If you click the highest floor price filter, you will notice that some traits are valued more even though they are less rare than other traits. This is where the subjective nature of NFTs comes into play.
For the example Roboto, you will probably notice that the Pirate Hat trait has the highest floor price even though it’s the 3rd most rare trait. What this exemplifies is that the value of an NFT is not always quantitative.
Many members of the Roboto community think the pirate hat looks cool, so they value it more than other traits. Rarity.tools offers the highest floor price filter for this reason.
If you click the pirate hat filter, then click away from the dialog box, you will now see a listing of all pirate hat Robotos. The platform will initially sort the NFTs by rarity, but if you are looking to buy one you can also alter the sort from lowest to highest price.
So now you know the NFT world, like the art world, has a level of subjectivity not found when trading cryptocurrency or stocks. So how do you keep your finger on the pulse of what’s cool or trending? That’s where the next two tools come into play.
Discord is a chat and communication client that allows anybody to set up a server with channels organized by topic. Think of it as the fun version of Slack.
When you buy an NFT from a collection, you are not just buying art, you are buying access into a club, and that club lives on Discord.
If you navigate to any collection profile on OpenSea, you will find a link to that project’s Discord server. If you join the Discord you will see many different channels. You will not see the many hidden channels that are only accessible to holders of one of that project’s NFTs.
Many projects use a Discord bot to connect your wallet to prove you own an NFT to unlock secret channels. You will need to message the bot, and then it will provide you a link to connect your wallet to authenticate you are a holder.
If you really want to gain a pulse of a project, you can join the project’s Discord to:
- Understand what people are thinking about a project.
- Figure out if the team behind the project is engaged.
- Check if there is community activity.
Generally speaking, the more engaged the community, the more hype behind a project, and the more hype behind a project, the better chance for the value of a collection to appreciate.
You may also see some discussion of something called a roadmap. An NFTs project's roadmap consists of milestones that the project will complete in the future. These milestones are features or events that a project does that create more value for the holders of their NFT.
Some examples of roadmap items can include distributing sales royalties or airdropping new NFTs to all holders. Airdropping means sending an NFT straight to your wallet.
These roadmap items are a method of delivering value to everyone who invested in an NFT from that collection. You can compare it to receiving dividends from holding a stock in a company.
Besides using Discord to assess an NFT project’s value, it can just be plain old fun to hang out in a project’s Discord. Many people join projects simply because the community is fun and welcoming.
Discord creates tight-knit communities, but sometimes projects need to shout from the rooftops and really amplify their message. That’s where the next tool comes into play.
Twitter has played a key role in the NFT world ever since collectors started setting their Twitter PFP (profile picture) to their favorite NFT. If you spend any time on NFT Twitter you will see PFPs of apes, punks, lions, ducks, and every other kind of animal.
The uptake of users making NFTs their PFP has even sparked the company to begin looking into implementing an NFT authentication feature to prove you actually own your PFP.
Twitter profile images may have created a viral effect leading to the dramatic rise in popularity of NFTs, but Twitter is also the main destination to discover NFT projects and stay up to date on the latest NFT trends.
Hype plays a crucial role in the NFT world. If a project gains exposure, it has a much better chance of finding a wider audience of buyers. Before buying any NFT, you should check out that project’s Twitter profile and perform a Twitter search to understand if the NFT community is discussing the project.
Searching the latest tweets about an NFT project allows you to understand the momentum behind a project. If you find many new tweets about a project, you can reasonably believe that other people value the project.
How to buy an NFT
Now comes the fun part. You have funded your wallet, combed through OpenSea and Rarity.tools, gauged the community, and found an NFT you want to purchase.
This workflow is only for “buy now” style listings, not auctions.
- Hover over the icon in the top right corner of OpenSea
- Click “Profile”
- Click Sign In to sign in using MetaMask.
- Navigate to the OpenSea listing for your NFT.
- Click “Buy Now”
- Check the box to agree to the OpenSea terms and conditions.
- Click “Checkout”
- A MetaMask dialog will display. Check the total amount + MetaMask suggested gas fees to confirm they are expected.
- Click “Confirm” in the MetaMask dialog
You should then see the OpenSea page with a loading animation indicating that the transaction is processing. Once the transaction has been processed, the OpenSea page will display a confirmation.
If you navigate back to your OpenSea profile page, you should see the NFT listed under your account.
Important things to note:
MetaMask will automatically populate a suggested gas fee. However, gas prices can fluctuate wildly throughout the day based on how many transactions are sent to the Ethereum network. If your gas fee seems abnormally high, you may want to wait until the network congestion calms down.
You can use gas checking tools like this one from blocknative to check current gas prices. I would consider anything over 150 GWEI base fee high. (GWEI is 0.000000001 ETH).
Most transactions take between 15 - 60 seconds. Your wallet will broadcast the transaction to the network, and the NFT will transfer from the previous owner’s wallet to your wallet. If the network is experiencing a high load, the transaction could take longer.
MetaMask allows you to adjust the gas fees if you click the “Edit” button next to the gas fee values. You can set low, medium, or high gas, which will decrease or raise the gas fees accordingly, along with displaying the expected time it will take to make a transaction.
Processing time is relevant in some specific scenarios. Minting an NFT is one of these scenarios. Minting means to purchase an NFT directly from a project during the initial sale. You are in a race against everyone else to have your transaction confirmed during a mint — so elevating gas fees to decrease processing time is a necessity.
You should avoid minting until you become more confident in the NFT space since it is very challenging to mint hyped NFTs, and you can lose all of your gas fees if your transaction fails. You do pay a premium buying on a secondary market like OpenSea, but you avoid much of the risk associated with minting.
When purchasing NFTs on OpenSea, you probably should only worry about processing time if you are buying high-volume NFTs off the floor. These NFTs may have many buyers looking for a deal trying to purchase the same floor NFTs.
If you do not want to worry about processing times or gas fees but still want a deal, I would suggest buying during low volume times (late American hours) or scooping NFTs a bit higher than the floor — then you can leave MetaMask gas fees on their default setting.
When you click “buy now” on OpenSea, you will notice a field called “royalties” with a % value. The royalty is the amount of the sale price that the project keeps if you sell the NFT.
You should note this amount because to break even (not lose money) when selling the NFT, you will need to account for both the royalty fee and the OpenSea 2.5% commission.
So for example, if you bought an NFT for 1 ETH with a 5% royalty, you will need to list it for 1.075 ETH to break even. That is because OpenSea will retain .025 ETH and the project will retain .05 ETH (1 + .05 + .025 = 1.075).
Do Your Own Research
The purpose of this guide is to build a foundational layer of learning that I hope you will build on. You must DYOR (do your own research) before plunging into an NFT project and understand why you are making a purchase.
Even though you may like a particular project, you still want to protect your investments. That is why it is necessary to establish your own strategy to value NFT projects.
If you found this guide helpful, please share it with any newbies looking to jump into the world of NFTs.