1. Open an exchange account and crypto wallet
Open a crypto exchange accountThe first step in buying NFTs is to open an account on a crypto platform or crypto exchange. To do this, it’s important to first understand the difference between cryptocurrency exchanges, wallets and marketplaces, as there is often confusion between these terms.
Also please refer to How to sell crypto to learn about wallets!
- Function as a brokerage where you can buy and sell a variety of cryptocurrency
- Issue and hold your public and, in some cases, private keys
- Secure your access to the cryptocurrency in your account.
- Provide support for account functions like resetting passwords
2. Buy EthereumThe majority of NFTs are built on the Ethereum blockchain. Ethereum is a type of network where transactions are recorded and distributed to members on a shared ledger.
The currency native to the Ethereum platform is called Ether or ETH, though you will also hear it referred to as Ethereum as well. As a cryptocurrency, Ethereum is similar to Bitcoin in that it can be bought, sold, traded or saved to increase its value.
Coins vs. tokens
The difference between the terms coin and token might be difficult to understand at first. Crypto coins belong to their own blockchain, are exchangeable, and are a store of value, meaning they retain their value and do not depreciate. In this regard, crypto coins function much like physical coins.
Tokens, unlike cryptocurrency such as Bitcoin, are not native to a blockchain. Rather, they rely on smart contracts, programs stored inside blockchain that enable and verify transactions. Tokens work much like arcade tokens or carnival tickets do – they have value and can be traded for assets (like prizes or food). However, you couldn’t immediately buy gas for your car with your carnival tickets.
Most well-known and trusted marketplaces showcase NFTs that are built on Ethereum’s blockchain, so it’s important to make sure that the exchange and wallet you choose are compatible and work with Ethereum. However, the major issues with Ethereum are the high gas fees associated with it and slow transaction speeds due to network usage.
Having said that, Ethereum-based NFTs are not your only option. For example, the Polygon platform was built on top of the Ethereum blockchain aiming to provide more scalability and lower fees. Other Proof of Stake (PoS) blockchains that support NFTs, like Solana, Flow, Tezos and Cardano are also edging in on Etherium’s lead. However, Ethereum is still considered the forerunner of NFT platforms and the token most widely used to buy NFTs.
3. Transfer Ethereum into a crypto walletOnce you’ve chosen an exchange and bought ETH, the next step is to transfer it to a wallet. How you do this will be determined by the exchange where you buy ETH, the wallet you use, and the marketplace you’ll buy your NFT from.
For example, if you bought a cold storage wallet, since it’s a piece of hardware, you’ll also need to link your cold wallet to a third-party connection to the NFT marketplace such as MetaMask or Coinbase Wallet. These are the most widely used wallets in NFT marketplaces.
4. Connect your crypto wallet to the NFT marketplaceNFTs began in the digital art world, but you can buy many different types of NFTs nowadays, including:
- Digital art
- Digital collectibles
- Sports highlights
- Video games
- Trading cards
- Event tickets
- Domain names
- NFTs with utility (a physical item that accompanies an NFT)
- Open marketplace – Anyone can sell, buy or mint NFTs. Minting is the process of converting a digital work into a unique crypto asset on the blockchain. These marketplaces usually offer in-house minting options, though creators can also mint their own works.
- Closed marketplace – These marketplaces are more exclusive. Artists must apply and the marketplace usually undertakes the minting processes. Selling and trading are more restricted.
- Proprietary marketplace – This type of marketplace sells NFTs that are trademarked or copyrighted by the company operating it.
Once an account is created on the marketplace, you should connect your wallet to the marketplace selling the NFT. This process usually functions the same way across sites. Some marketplaces also have a way of setting up a new wallet from within the website, or they use their own proprietary wallet. Using a marketplace’s proprietary wallet might come with discounts and/or a reduction of additional gas fees incurred through the use of external wallets.
All websites will offer step-by-step guides. Be sure to read these guides, usually located in their own tab or in the FAQ section.