At this point, hopefully you have read Part 1 of this series on NFTs for people unfamiliar with the industry. If not, go back and read it now. Don’t worry. I’ll wait. Your world…
OK, so now that you have read Part 1 and understand the basic types of NFTs, you are ready to start investing. Or, at least, want to be ready in case an NFT you want is available for purchase. Below are a few things you should have or know prior to buying your first NFT.
Before you consider buying an NFT, you need to do your own research. To do that, you will need both Twitter and Discord accounts. Twitter is where you can learn about new projects and see what projects are both doing well and not doing well. Some people I would recommend following include @JayZedRun, @ColeThereum, @pranksyNFT, @DanVerno, @jarule (yes, THAT Ja Rule), @beijingdou, @beaniemaxi, and @DrewAustin.
Now, let me be very clear. You should not automatically buy the things the above (or any other) NFT influencer is hyping up. Just like with stocks, pump and dumps are a very real part of the game. While I don’t even necessarily like or agree with all the individuals above, they all undeniably have their fingers on the pulse of the NFT market and all have valuable insight worth reading.
If you find a project you like, you should also follow the project’s Twitter and join its Discord. Think of Discord like an AOL chat room, where people talk about specific projects, generally talk about NFTs, and otherwise spread information/memes. Virtually every project will have a Discord where you can learn about when and how to buy their NFT, troubleshoot any problems or questions you may have, and keep up-to-date on developments relevant to that project. Always spent time in a project’s discord prior to purchasing an NFT. The quickest way to lose money in NFTs is to buy based off hype without jumping in the Discord first to see the general sentiment among people who have largely spent more time learning about the project than you have.
NOTE: While in my experience Discords are 99% filled with genuinely good people out to help, there are also the 1% of scammers trying to steal from you. Never send ETH to somebody from Discord. Never click a link from an untrusted source. Never give out your passwords or seed phrases. Just generally be cautious. NFTs are still very much the wild west in some ways, so be on guard against digital highway robbers.
If you are somebody who bought into crypto back during its rise to the mainstream a few years ago, you are probably familiar with Coinbase and can skip this section. If you are totally new to cryptocurrencies, then what you need to know is that most NFTs are bought and sold in Ethereum (or ETH). Think of Ethereum as a dollar bill and Bitcoin as a gold bar. Both are ways to store and exchange value, but you don’t use a gold bar to buy things at the grocery store.
While you may be used to buying cryptocurrencies on an exchange like Robinhood, you aren’t actually buying usable assets there. Instead, Robinhood owns the asset and you are simply investing in that asset’s gains or losses. Coinbase is referred to as a digital wallet. It is a place you can both buy and send/receive actual ETH and is the best combination of user friendly and low fees. If you connect your bank account and take their steps to verify your identity, you will be able to instantaneously both buy and send ETH (within certain limits).
If Coinbase is your savings account, think of MetaMask as your checking account. MetaMask is also a digital wallet, but it uses a browser extension (or mobile app) to allow you to directly buy digital assets (such as NFTs). While you can also buy ETH directly on MetaMask, the fees are typically higher than Coinbase so it is cheaper to buy directly on Coinbase and then send that ETH to your MetaMask account. One of my favorite NFTs, Zed.run, put out a helpful video on how to download and and use MetaMask.
Two quick things: 1. NEVER SHARE YOUR SEED PHRASE. Don’t store it on your computer at all. Write it down, and put it in a secure location where it won’t be lost such as a safe or filing cabinet. 2. It can be extremely stressful sending your first ETH transaction from your Coinbase to your MetaMask. I highly recommend for your first deposit, you send something small like $10. Coinbase often does not charge a fee (AKA, “Gas”) to transfer from Coinbase to another wallet, so do this and confirm you are doing everything correctly before sending a larger amount.
OpenSea is a peer-to-peer marketplace for NFTs, rare digital items and crypto collectibles. Think of it as E-Bay for NFTs. While there are some NFTs which are bought and sold on other marketplaces, OpenSea is the primary place to both buy NFTs on the secondary market and also sell your NFTs. The good thing about MetaMask and OpenSea is that they integrate flawlessly. When you buy something on OpenSea, the funds will automatically come out of your linked MetaMask account and when you sell they will automatically be added to that account. Your wallet address will be the same for both OpenSea and MetaMask.
The above image is from one of my assets on OpenSea. As you can see, there is a picture of the asset, what project the asset belongs to (Zed.run), and drop downs which allows you to learn about the asset’s properties and the date it was created on the blockchain. People can make offers to buy the asset (as you can see above) and specify how long they want that offer to remain open for. I could also list the asset (using the “Sell” button), and either provide a price for the asset to be immediately bought or put it up for auction.
So now you should have a Twitter account following at least some NFT influencers, a Discord account which you can join project pages to learn more about them, a Coinbase account to buy ETH, a MetaMask account to buy NFTs with that ETH, and an OpenSea account to view the NFTs you have bought or to buy NFTs on the secondary market. Congratulations, you are now ready to buy your first NFT! I will be releasing a Part 3 next week which will describe some NFT lingo you are likely to run into in various discords, and explains the “drop” process for buying an NFT directly from the developers of that project (as opposed to on the secondary market like OpenSea).
If you have any questions or would like me to write about anything else, let me know on either of my twitter pages! As always, I am an attorney, I am not your attorney. For legal advice, you should always consult (and pay for) an attorney.