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How to buy and sell NFTs: Are they a good investment?

Peter Terlato avatar
Peter Terlato
- 4 min read
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While you’ve likely heard of Non-Fungible Tokens (NFTs), their purpose may elude you. Essentially, NFTs are electronic markers that represent a certificate of authenticity and proof of ownership for digital artwork.

NFTs are recorded and stored on a digital ledger aka the blockchain. NFTs authenticate cryptoart, providing an immutable digital footprint of ownership. To better comprehend what this means, think of NFTs as unique identifiers tethered to individual works of art. When cryptoart is bought, sold or gifted, an NFT transaction is validated across the entire blockchain network.

The popularity of NFTs and cryptoart exploded during the pandemic, in 2020, when artist Beeple sold a collection of illustrations and animations entitled Everydays: the First 5,000 Days. The sale made him the third most valuable living artist in history, netting him a whopping US$69.3 million at the time of purchase.

How to invest in NFTs

There are a few basic steps to follow in order to successfully purchase an NFT.

Step 1: Purchase cryptocurrency

The most common way to buy NFTs is with cryptocurrency. Most NFTs are bought and sold in an open marketplace. All trades and transactions are registered on supported blockchain networks, which are powered by a particular cryptocurrency. 

The world’s first and largest digital marketplace for NFTs is OpenSea. The core cryptocurrencies used for exchange on this platform are altcoins. Most platforms won’t let you use fiat currency to buy or sell NFTs, although some allow credit card transactions.

To buy crypto, you’ll need an account with a cryptocurrency exchange. Next, purchase the desired coins needed for your NFT transaction and store them in a digital wallet.

Step 2: Find an NFT marketplace

As mentioned above, OpenSea is the most recognised global platform for NFT trading. However, there are a number of other marketplaces you might choose to explore:

NFT marketplacePayment optionsTransaction fees
OpenSeaEthereum (ETH), Solana (SOL), USD Coin (USDC), Dai (DAI) or credit card2.5% of every transaction
RaribleEthereum (ETH), Flow (FLOW) & Tezos (XTZ)2.5% of every transaction
BinanceBNB (BNB), Binance USD (BUSD) & Ethereum (ETH)1% of every transaction
SuperRareEthereum (ETH)3% of every transaction
Nifty GatewayEthereum (ETH) or credit card15% of every transaction

Be aware that each marketplace has different trading rules and conditions. Research what you intend to buy and understand how transactions are conducted on that marketplace. There are often fees charged for each transaction, typically as a proportion of the sale price. You may also be charged a gas fee for using a particular cryptocurrency.

Connect your digital wallet to the intended marketplace and search for the NFT you wish to purchase.

Step 3: Buy an NFT

Deciding what to buy can be simple but it’s sensible to do your research before committing to anything. Discover who created the NFT, and whether or not there’s a community interested in this NFT, or NFTs like it. Is it part of a collection? Is it a rare item? These considerations may prove helpful if and when you decide to sell or trade the NFT.

Once you’re satisfied, make your purchase using either cryptocurrency or your credit card. NFTs are generally sold by means of an online auction. These are typically won by the highest bidder within a designated expiry period. Check marketplace regulations for details.

Should I invest in NFTs?

The method of certification is perhaps more definitive than practices used to verify physical artwork, such as paintings and sculptures. In these instances historians and experts establish legitimacy by analysing tangible elements of the art. As time goes on the means of confirming authenticity naturally diminish.

Conversely, blockchains are designed to be decentralised, perpetual registers that exist on peer-to-peer networks. Employing these digital mechanisms means the artwork’s authenticity and ownership is assured, indefinitely.

It’s important to note that as an NFT collector, you aren’t buying original content. It’s unlikely you’ll have any copyright claims to the artwork associated with your purchase. The content creator retains these rights and most NFT platforms pay artists royalties on NFT trades. You’re essentially buying tokens that link your name to a specific artwork on the blockchain. NFT purchases serve as proof of ownership of that record. Value is often determined by community interest in the artwork and other factors, such as rarity and controversy.

Any investment carries potential risks and NFTs are no different. Price fluctuations can be prolific and difficult to predict. The crypto arena is still in its infancy and there are likely to be many changes and developments that could negatively affect your investment.

Before investing in NFTs, cryptocurrencies, equities, or any other assets, it may be sensible to seek financial advice to determine the best options for your individual financial situation and goals.

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This information does not reflect any ranking, rating, recommendation or endorsement by RateCity of cryptocurrency or any specific provider. RateCity is providing factual information supplied by providers. Not all providers or products are shown. RateCity will earn a fee from the providers displayed in the table (if a link to the provider's website is shown), and the fee levels determine placement in the table. Cryptocurrencies are speculative, complex and can involve significant risks. RateCity is not providing a recommendation for your individual circumstances.

Disclaimer

This article is over two years old, last updated on September 29, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent cryptocurrency articles.

Compare cryptocurrency exchanges

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Cryptocurrencies available: 245

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Withdrawal Fee: $0 for AUD/ Deposit's withdrawals. Network transaction fees apply while transferring coins to an external wallet

Deposit Fees: No POLi fees. No fees on cryptocurrency and PayID deposits. Credit/Debit card deposits supported (5% fee)

An Australian owned and operated digital currency exchange that allows users to sell, trade and buy Bitcoin, and over 245+ other digital assets, with low trading fees and one of the smallest spreads available.

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Buy, sell, trade and pay with crypto. Simple, low fees, easy to use and trusted by 100,000+ members. Enjoy $10 BTC credit after verification with promo code: RATE10

This information does not reflect any ranking, rating, recommendation or endorsement by RateCity of cryptocurrency or any specific provider. RateCity is providing factual information supplied by providers. Not all providers or products are shown. RateCity will earn a fee from the providers displayed in the table (if a link to the provider's website is shown), and the fee levels determine placement in the table. Cryptocurrencies are speculative, complex and can involve significant risks. RateCity is not providing a recommendation for your individual circumstances.

Product database updated 14 Nov, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.