How to buy an NFT – explained by a financial advisor and a technical dummy

How to buy an NFT – explained by a financial advisor and a technical dummy

First and foremost, I’m the kinda person who likes to keep my conversations, especially when it comes to technical things like financial planning or buying NFTs, on a level that everyone in the room can understand.  
 
NFT stands for Non-Fungible Token. Non-fungible means one-of-a-kind. So, an NFT is a one-of-a-kind piece of digital art.
 
When I heard of NFTs a few months ago, I didn’t really understand why someone would want to buy a piece of digital art. I tried to rationalize it by saying maybe it is just another non-correlated asset when compared to the stock market.
 
There’s two reasons that caused my skepticism of NFTs. The first reason is because it is very hard to conceptualize what an NFT is and why it exists. The second reason is because I spent a small fortune as a little kid on baseball cards that were super popular at the time and the point was to collect the most valuable and rare playing cards. Unfortunately, all my childhood baseball cards never appreciated and are basically worthless today. My initial thought was that NFTs have that same stink about them.
 
Today, I have a friend  whose NFTs are worth $400K+, CNBC & Fox Business is dedicating segments to NFTs several times a week now, and just a few weeks ago Visa bought a popular NFT (CryptoPunk) for $150,000. As I see all this happening, I told myself that I need to stop being skeptical, get into the game and see what the hype is all about. So, I went out and bought an NFT!!!    
 
At this point in my blog, I’m going to fast forward to the actual steps I took to purchase my first NFT. Buying an NFT for the first time is a process and not a pleasant experience, especially when you’re not a tech guy like me.   
 

Step 1: Buy some crypto!

 
I was completely shocked to learn that the crypto of choice to purchase an NFT is Ethereum (ETH) and not Bitcoin. Regardless, this was the easiest step of the whole NFT buying process.  I chose to buy my ETH on CoinBase because it’s the most popular company I know in the crypto buy/sell space.
 
Fee alert – the transaction fee of converting US Dollars to ETH on CoinBase is about 3.5%. I have heard you can get CoinBase Pro and save money on the trade, but I’m just not that advanced at this point.
 

Step 2: Create a MetaMask (MM) crypto wallet account.

 
MM is a platform where you can create a crypto wallet which serves two functions. First, MM is the place you store your NFTs after purchase. Second, MM is what I will call the “middle man” between your CoinBase account (where you just bought ETH) and buying an NFT on OpenSea (I will talk about OpenSea in Step 3).
 
When you open your MM account, you’ll find that they’ll ask you to set up Password (typical), but they’ll also have you set up a Seed Phrase. The Seed Phrase is literally 10 random words that you’ll have to save because it’ll be the only way to restore a forgotten Password.  So, don’t forget your Password and don’t lose your Seed Phrase!
 
Once your MM account is set up, you’ll be given a “public account number”. This MM account number should look something like this “0xbf1….4C6a”.  You’ll need to take this account number and plug it into CoinBase so you can transfer your ETH to your new MM account.    
 

Step 3: Create an OpenSea account and connect it to your new MM account.

 
OpenSea is the platform where you buy, sell, and trade NFTs. Conveniently, OpenSea connects to your new MM account (which is where your ETH should now be located). Your MM account connects to your OpenSea account through your MM “public account number”. 
 

Step 4: Start buying, collecting, or selling NFTs

 
Two things I feel everyone should know about Step 4: 

1. There’s a fee called “gas” involved when buying an NFT. Gas fees can vary depending on how much NFT buy/sell traffic at any given time. The cost is anywhere between .01-.03 ETH (about $30-$90) and is added to the NFT purchase price.
2. There is A LOT that goes into which NFT to buy. Every individual NFT is part of a “project”. Every time a project is approved and commissioned, there’ll be several thousand unique NFTs created for that project. Then, the project will go through a “mint” process which is basically a public offering of all the newly released NFT. Minting varies between .04-.09 ETH, and the NFTs are randomly distributed. It is similar to buying a pack of baseball cards when I was a little kid.  All the packs of cards cost the same amount, but you never know if there’s a valuable baseball card inside the unopened pack. If you miss out on the mint of an NFT, you can buy one on the secondary market where the price will most likely be higher than the mint price.

 
In closing, I am learning something new every day about NFT projects, the community that surrounds each unique project, and the cult like following involved around each project. I’m going to save my thoughts on which NFT to buy for an upcoming Capitalist Investor podcast. The episode will feature a guest host who is having a lot of success buying NFTs; plus, my guest is creating his own project within a well known project. Very exciting stuff!
 
I will also leave you with some bonus info I’ve learned along the way that I find very useful:

• rarity.tools is a great website to look up nearly every NFT project available, look up the rarity of an NFT you want to buy, and even see the volume associated with all the popular NFT projects.
• Discord is a great chat room platform for the NFT community. Also, most people I’ve crossed paths with on Discord are friendly and are very helpful if you have a question.
• Read up a little on the different projects.  My first NFT purchase was a project called Tools of Rock (TOR). The three main reasons I bought into the TOR project was because (1) it’s a newly released project, (2) I think the NFTs look really cool, and (3) 2.5% of the fees collected by TOR go towards Make-A-Wish. I can get behind that!