Non-fungible tokens (NFTs) are transforming how people collect and own items online. By the end of last year, this digital asset grew notably popular that the NFT market's worth reached around $40 billion.
If you're planning to make your first NFT purchase, there are a few essential things that you need to take care of.
Research is always vital when you're considering investing in a new asset. Whether it's shares in a company, an artwork, cryptocurrency, or NFT, research helps you grasp important aspects of a potential investment.
With NFTs, you need to look into several aspects, including:
· Gas and other transaction fees
· The blockchain that mints the NFT
· Authenticity and fraud risks
· Carbon cost
A Solid Reason
NFTs are digital proof of ownership of a number of tangible and intangible products, from art to music to sports collectibles to in-game items. With the broad range of things you can buy as an NFT, it's crucial that you determine the NFT you're buying and the reason for purchasing it.
If you decided to own an NFT just because most investors are buying or talking about it, you might need more reasons than that. Otherwise, you could end up following the crowd all the time without a good idea about the NFT and a clear reason why you're buying it in the first place.
If you're going to purchase an NFT, make sure you're buying based on your personal interests and have considered the key differences that make every NFT sector unique. For example, an art collector has different needs from a basketball fan looking to own an NFT of one of the greatest sporting moments.
A Digital Wallet
You need an NFT wallet to pay for and store your digital coins. You can start with a software wallet, but if you end up buying NFTs regularly, a hardware wallet that protects your NFTs offline may be ideal. You can also find many useful information online to help you get started on creating a wallet.
Once you've set up your account, you'll receive some type of master password called the seed phrase, which you need to keep somewhere safe as this would allow you to access your NFTs if you lost or don't remember your password.
Note that the NFT wallet should work properly with the trading platform and blockchain network you will be using. You also need to check whether the two-factor authentication is available.
Platform and Blockchain Network
Many NFT marketplaces allow individuals to browse, create, and buy and sell NFTs. But you need to focus on finding a platform that trades the NFTs you plan to own.
You should also see what blockchain network that platform is using. The Ethereum blockchain supports a significant number of NFTs and is the most common out there, although Solana and Tezos have also entered the NFT venture.
Choosing the blockchain matters because buying NFTs with fiat currencies like US dollars can be pretty tricky. So while you need to have cryptocurrency, it needs to be the correct cryptocurrency.
Considering the risk of fraud in NFTs, several platforms have implemented measures to ensure the NFT is genuine. No investor would want to purchase an NFT only to find out that it was not authentic, and the original creator does not even know that his work has been made as an NFT.