NFTs have gone through a solid hype in the past year – this can also be observed in the prices. But what exactly is an NFT and where can you buy one?One of the most sought-after products on the crypto market in 2021, along with numerous coins, were so-called NFTs. Some of them have experienced real price fireworks.
For inexperienced investors, the question arises as to what exactly an NFT is and how one can buy one. Because it’s not that easy right now – here’s why and how.
Meaning: What is an NFT?
The abbreviation NFT stands for “Non Fungible Token”. NFTs are unique digital tokens that are not represented by an equivalent or cannot be replaced.
They function as a kind of digital proof of ownership or authenticity. Similar to cryptocurrencies that you can exchange with a Bittrex trading bot, these digital certificates of ownership are based on blockchain technology.
However, unlike cryptocurrencies such as Bitcoin or Ether, NFTs cannot simply be exchanged among themselves like coins. Instead, they are individual and unique and therefore depend on the degree of rarity and especially on-demand in terms of price.
Thus, if there is no interested party, a sale may be difficult. However, if demand is high, the price of this one Non Fungible Token could rise rapidly within a very short time – which is of course what many investors are hoping for.
The variety of NFTs is very large: NFTs are currently mostly images or videos, but they can represent almost anything and are therefore not limited to one area.
For example, music, domain names, or virtual properties can also be NFTs. Currently, for example, the world’s first SMS is being auctioned off as an NFT.
The actual purpose of the NFT is to certify ownership rights – like a digital title deed, so to speak. In 2021, digital artworks, in particular, caused a sensation internationally due to their rapid price developments.
Why Are NFTs in Such Demand?
NFTs have been fetching record sums at auction or on sale since last year. In 2021, NFTs hit the mainstream thanks to rapid growth. Currently, many experts predict the final breakthrough of the technology this year.
Nevertheless, it should always be taken into account that the risk can be even higher than with the already volatile cryptocurrencies such as Bitcoin due to the extreme price fluctuations.
At the same time, NFTs offer the possibility for enormous price gains, as the right NFT can be worth tens of millions of dollars within a short period of time, depending on demand, provided that a high degree of rarity and a corresponding demand is given.
However, if the demand for an NFT is lacking, this can also turn out to be a disadvantage, as in the worst case there is simply no interested party who would buy the NFT for the current price – the consequence would be a falling price and associated possible losses.
Which NFTs Are Currently Particularly Valuable?
Since last year, NFTs from the CryptoPunks or the Bored Ape Yacht Club collections have been particularly popular. Both collections are limited to 10,000 unique digital collectibles and have seen an extreme rally over the past year.
Recently, U.S. rapper Eminem purchased a Bored Ape Yacht NFT named “EminApe” for 123.45 Ethereum on Jan. 3, 2022 – which was equivalent to about $450,000 at the time.
The NFTs are traded on the Ethereum blockchain and in are their external composition individually, which increases the degree of rarity of some NFTs of both collections. Due to the strong limitation of the stock, there is a high demand, which could give a long-term boost to the prices of both NFT collections.
For example, the NFT “EminApe” features a Bored Ape figure based on the rapper’s outer appearance. The figure wears a khaki army cap and a gold necklace. Both items of clothing Eminem also wears frequently in real life.
Where Can I Buy NFTs?
If you want to buy a Non Fungible Token, you need to register with an appropriate platform. Trading venues where you can buy NFTs include:
- Nifty Gateway
- Coinbase Wallet
Important: These platforms require a certain amount of prior knowledge, so trading NFTs could be complicated, especially for beginners on these platforms. Again, some marketplaces have both advantages and disadvantages over others.
Ether as a Prerequisite for NFT Purchase
To buy an NFT on one of the above-mentioned trading venues, interested parties need Ether, as the purchase is made via the Ethereum blockchain.
Platforms on which the cryptocurrency can be purchased include Etoro, Binance, Justtrade, Coinbase, or Scalable Capital. From there, Ether can be sent to a wallet that can be connected to an NFT trading site.
A comparison of the different NFT trading venues to find the right offer is definitely worthwhile. The best marketplaces for buying NFTs at a glance.
Buy NFT Using Coinbase Wallet as an Example
Coinbase, one of the largest crypto platforms in the world, offers its customers to buy NFTs via its in-house wallet app. However, this is only available as a mobile app, but can be installed on both Android and iOS devices. The app can be found in the corresponding app stores of the manufacturers.
After installing the Coinbase wallet app, it has to be connected to the Coinbase account where cryptocurrencies can be held. This step is mandatory for the purchase of NFTs via Coinbase.
After linking it to your Coinbase account, tap the “Trade” tab in the wallet app to exchange ETH for any NFT compatible with the Ethereum standard “ERC-20 token”. Tap “Choose Coin”, select NFT and an appropriate trading venue.
Enter the ETH amount you want to invest in NFT. However, you need to consider any transaction fees that may be incurred. Therefore, plan for a sufficient amount.
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