Our experts choose the best products and services to help make smart decisions with your money (here's how). In some cases, we receive a commission from our partners; however, our opinions are our own. Terms apply to offers listed on this page.
Twenty47studio/Getty
- NFTs, or non-fungible tokens, are digital tokens that represent ownership of an asset.
- Buying NFTs requires a crypto wallet and an account on an NFT marketplace.
- Investing in NFTs has its pros and cons, and investors should proceed with caution.
Non-fungible tokens, or NFTs, have been around, in various forms, for years. But many people, including investors, have only caught on recently, driving a surge in their popularity. As much as 4% of the U.S. population owned NFTs as of late 2022, according to data from blockchain analytics platform Nansen.
While you may think NFTs merely consist of owning the rights to pieces of artwork, they're actually much more than that. Many also also grant their owners certain utility, often in the form of access to exclusive events, or clubs. So, while the digital ownership aspect of NFTs is certainly attractive to some investors, there are other reasons that they may catch a buyer's eye.
However, buying NFTs, for the uninitiated, can be an opaque process.
What is an NFT?
Before getting into the nuts and bolts of how to buy NFTs, it's important to understand what, exactly, an NFT is, and what it is not.
NFTs are non-fungible tokens. That means they're one-of-a-kind digital assets that cannot be replicated. They grant or link ownership to specific items or goods, which can include things like artwork, music, or videos.
"There are two ways to think about NFTs," says Rob Petrozzo, chief product officer and co-founder of Rally, an alternative asset investment platform. "They present the opportunity to create new experiences or collectibles," he says, "or, they're a new version of everything that we buy — we can now transact without middlemen" using blockchain technology.
As an example of that concept, Petrozzo says NFTs, "can be a concert ticket or a piece of art."
What prospective NFT investors need to know, however, is that NFTs essentially serve as proof of ownership over some type of asset, and often, they give their owners certain types of perks and benefits, too, such as access to exclusive events.
Where to buy NFTs
Buying and selling NFTs isn't all that different from buying or selling cryptocurrency, in many respects.
"NFTs are generally sold on NFT marketplaces," says Lisa Teh, cofounder of Mooning, an Australia-based Web3 marketing agency with specialization in NFTs and the metaverse. Teh says that some of the more popular marketplaces are OpenSea, SuperRare, Nifty Gateway, and Rarible, though there are many others.
"Some NFTs are also sold through traditional auction houses such as Christie's and Sotheby's," Teh adds.
As for how those marketplaces work, prospective investors "might need to buy crypto if they are buying on a platform that only accepts crypto," Teh says. That includes many NFT marketplaces. For instance, investors may need to purchase Ether (ETH, often just called Ethereum) to purchase NFTs. That would also entail having a crypto wallet to store their crypto holdings, as well as their NFTs.
From there, using a marketplace is fairly simple: You can browse the market for NFTs that interest you. If you find one you want, you can choose to bid or purchase it. Then, you'll execute the transaction, and ownership of the NFT will be transferred to you via your crypto wallet.
See Insider's picks for the best crypto wallets.
4 steps to buy an NFT
To gain ownership of an NFT, you can do one of two things: Make NFTs, or buy them. Here's the general process of buying an NFT.
1. Select and fund a crypto wallet
Before you can buy NFTs, you'll need the tools to transact on NFT marketplaces. As such, you'll need a crypto wallet, with cryptocurrency to facilitate any transactions. There are a multitude of crypto wallets out there, and new NFT investors may be best off choosing one of the more popular ones, such as MetaMask, as they're likely the most versatile when connecting to most exchanges.
See Insider's picks for the best crypto exchanges.
With a wallet, you may need to go to a crypto exchange to purchase Ether (ETH). Like wallets, there are a lot of exchanges—but platforms like Coinbase or Kraken can be good places to start. Trade your USD or fiat currency for ETH, and you'll be ready to choose an NFT marketplace.
2. Choose a marketplace and create an account
Next, decide which NFT exchange or marketplace (OpenSea, Rarible, etc.) you want to use, and create an account. Depending on which exchange you choose, the process will be slightly different. But it'll likely entail adding some personal information, and perhaps most importantly, connecting your crypto wallet to the exchange.
3. Connect your wallet to the exchange
Again, the exact steps required to connect your crypto wallet to your chosen exchange may vary. But if you're using a popular wallet and connecting it to a large exchange — say, for example, you're using a MetaMask wallet and connecting it to your OpenSea account — the process should be fairly straightforward.
You'll be prompted to connect your wallet to the exchange through your profile, in many cases, which will then allow you to interact with the marketplace. Again, the specific steps may vary, but once your wallet is connected to your account and your information is uploaded and correct, you'll be able to start browsing the market for NFTs.
4. Choose and buy an NFT
With a funded and connected wallet, browsing for and purchasing NFTs on most major marketplaces should feel similar to buying pretty much anything else online. You can search for or otherwise select an NFT you want, check out the price (which may be in USD or ETH—again, it'll depend on the exchange), and decide if you want to go through with the transaction.
From there, it's as simple as hitting the "buy" button. You should then see the NFT in your wallet, and the corresponding amount of ETH should have been transferred out of it.
Is an NFT a good investment?
NFTs are one of the myriad investment options on the market. And like all investments, they have their pros and cons.
Pros | Cons |
|
|
Among the upsides of investing in NFTs is the fact that NFTs are still relatively new to the market, which means there's room for growth and appreciation. They're fairly easy to invest in as well, and benefit from the security of blockchain networks.
On the downside, NFTs are far from a mature asset class, and their values can fluctuate wildly. They're also not impervious to security flaws. Investors could fall victim to any number of scams or pump-and-dump schemes out there. There are also few, if any, protections for NFT investors from regulators.
Another thing investors might want to keep in mind: Petrozzo notes that many big brands are just beginning to explore NFTs, which could serve as a nod of confidence to their long-term prospects and viability.
"There are giant brands investing in the space, and they're not thinking about pictures of monkeys," he says.
Teh agrees. "If you are a brand and are looking for a unique way to acquire new users, buying into a hyper-engaged NFT project and using the commercial rights of the NFT in your brand is a new and exciting way to gain a community overnight," she says.
But, as with any investment, experts urge caution and say that investors should do their homework before putting their money at risk. And since some of the hype around NFTs has died down a bit, investors have more time to do their due diligence and homework — something that was often thrown to the wind during the particularly frothy period of NFT trading in 2020 and 2021.
"There's time to do research now," Petrozzo says. "You're not going to miss out on anything."