You may have witnessed the recent NFT craze on social media, but you might not know exactly what they are, how they work or how to buy NFTs.
UK investors, however, need to set up a few things in advance if they wish to get involved with NFTs.
While they may seem complicated at first glance, NFTs are actually a fairly simple concept to understand. NFT stands for “non-fungible token”, and is essentially a unique, digital collectible that is stored in a crypto wallet on a blockchain.
Continue reading this guide to find out more about what an NFT is, how you can start investing in NFTs, and the pros and cons of doing so.
- Buy ETH crypto with eToro
- Connect your wallet to an NFT Marketplace like Opensea
- Buy NFT collectibles using the Ethereum blockchain
- The Bored Ape Yacht Club (BAYC) is a collection of 10,000 cartoon ape NFTs that double as membership cards.
- $APE is the token of the APE ecosystem.
- Be one of the first to invest in $APE at eToro.
Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.
How to buy NFTs
Before you can buy an NFT, you will need both a crypto wallet and cryptocurrency that are compatible with your chosen NFT marketplace.
Different NFT marketplaces have different cryptocurrency requirements, but the majority of NFT marketplaces require an Ethereum wallet. This is because most NFTs are Ethereum-based tokens, and they operate on the Ethereum blockchain.
How to buy NFTs with Coinbase
It’s relatively easy to buy NFTs using Coinbase. Just follow these steps:
- First of all you will need to buy Ethereum (ETH) from Coinbase – Use this link to get £5 FREE in Bitcoin which you can trade for ETH
- Then you’ll need to send some ETH to your Coinbase Wallet which is a different app from the main Coinbase app.
- You can download the Coinbase wallet here – Your Coinbase wallet this is where you keep some of your Ethereum to buy NFTs.
- Next visit an NFT Marketplace like Opensea and open an account.
- Then connect your Coinbase Wallet by selecting “My Profile”.
- Finally, start browsing and buying NFTs.
- Your NFT will now be available in your crypto wallet.
Please note: You will still to pay transaction fees when buying NFTs. OpenSea uses the Ethereum blockchain in most cases, and charge what’s known as a “gas” fee for transactions including NFT sales, which can vary depending on how busy the network is.
- Buy ETH crypto with Coinbase
- Connect your wallet to an NFT Marketplace
- Start buying collectibles using the Ethereum blockchain
Cryptocurrency is not regulated by the UK Financial Conduct Authority and is not subject to protection under the UK Financial Services Compensation Scheme or within the scope of jurisdiction of the UK Financial Ombudsman Service. Investing in cryptocurrency comes with risk and cryptocurrency may gain in value, or lose some or all value. Capital gains tax may be applicable to profits from cryptocurrency sales.
What is an NFT?
In short, an NFT is a digital collectible that is stored on a blockchain and accessed through your digital wallet. They are tokens designed to authenticate the ownership of whatever digital asset is attached to it, typically a piece of digital art or music.
Unlike cryptocurrencies, which have value due to their perceived worth and usefulness, an NFT has value because of the asset it is attached to.
The difference between non-fungible tokens and other forms of digital asset or token you can own is that they are unique and irreplaceable. Most digital assets you can buy are sold within another programme, like skins and customisation options in a video game.
While you can pay for and own an item in a game and equip it on your character, anyone else who plays the game can also buy and wear the exact same thing.
With NFTs, you are the sole owner of that digital asset, and your certificate of digital ownership is encrypted on the blockchain technology you use.
This means that each NFT is totally unique and can only be owned by one person, much like how famous paintings like the Mona Lisa can be reproduced a thousand times but only have one authentic owner. Because of this, non-fungible tokens have recently exploded in popularity, and the online NFT space expects their value to increase in the future.
But be warned, NFTs are a new and unproven investment. Much like investing in the stock market, the value of your NFT could go down as well as up.
What is a crypto wallet?
One of the most important things you’ll need to buy NFTs is a cryptocurrency wallet.
A crypto wallet is similar to a digital bank account, in the sense that you can store, send, and receive cryptocurrencies and other digital assets.
You can obtain crypto from a cryptocurrency exchange, most of which will also have their own branded crypto wallets.
Some of the most common are the Coinbase wallet and the Metamask wallet, both of which are tied to the Ethereum blockchain.
Once you have an Ethereum wallet and an appropriate cryptocurrency within it (probably Ether), then you can find an NFT marketplace to buy from.
Before you start browsing the first NFT market you find, ensure that both your crypto wallet and selected cryptocurrency are compatible with the NFT marketplace you wish to buy NFTs from.
What is an NFT marketplace?
An NFT marketplace is essentially an online shop that markets and manages NFT sales internationally. Users of an NFT marketplace can buy and sell NFTs using various cryptocurrencies.
There are several different types of NFT markets selling a variety of different NFTs, from digital artwork to more niche digital collectibles like trading cards.
NFT marketplaces often have search bars and other functions allowing you to browse what you like, with prices ranging from pennies to thousands of pounds.
Prices are often listed in a specific cryptocurrency, meaning that you will need to convert the cost into your local currency yourself to work out its value.
How do NFT marketplaces function?
Most NFT marketplaces function in a similar way to other online shopping sites like eBay, with each NFT listed in either a “buy now” or auction format.
The NFT marketplace you choose to use will likely have a preview of the token you are buying and a price listed in Ethereum or another cryptocurrency.
Most NFTs are sold in an auction, where you bid a certain amount against other buyers in a limited timeframe, and hope to bid the highest amount before the timer ends. However, some are listed at a fixed price, allowing you to simply buy NFTs straight off the platform for a set price.
Your chosen NFT marketplace may also have additional charges. One such example is a “gas fee” which compensates for the computing energy required to process the payment on the Ethereum blockchain.
What are some popular NFT marketplaces?
Some of the most commonly used NFT marketplaces are OpenSea, Binance, and Mintable. Here you are likely to find pieces of digital artwork and music from internet-based artists.
However, it is worth remembering that each NFT platform operates in its own way, uses its own cryptocurrencies, and sets its own transaction fees along with other charges.
More niche NFT platforms, which may be centred around more specific digital collectibles, whereas Axie, for the NFT video game Axie Infinity, and NBA Top Shot, for American basketball digital trading cards are currently popular and trending.
How to sell NFTs
If you want to sell your own non-fungible tokens in the future, then there are two main ways of going about it: trading an NFT you have already bought, or selling an NFT you have minted yourself.
The first step is to decide which NFT marketplace you want to sell on, taking into account the various fees you’ll need to pay in order to list it.
Trading an NFT you have bought
Selling NFTs you have already bought is the simpler option of the two. All you need to do is ensure that the NFT in question is stored in the crypto wallet paired with the marketplace you wish to sell on.
From there, you should simply be able to put it up for sale with the click of a button. But be warned, there is no guarantee that your NFT will sell for more than you bought it for, and the long-term value of NFTs has not yet been proven.
Selling an NFT you have made
If you want to mint NFTs yourself, then you will need the image, music file, or another digital asset you want to upload and a crypto wallet useable with your chosen NFT marketplace. Crypto wallets must be pre-funded before you can list your new NFTs, as most NFT markets have additional charges.
Every marketplace approaches the minting of NFTs differently, but most will offer a simple “create” button or a similar function on the website, which will come with instructions on how to complete the process. This will usually involve uploading your chosen token, choosing how you wish to sell your NFT, and selecting a starting price.
Can I invest in NFT companies?
If you don’t want to jump into the NFT market right away, you could invest in companies that are creating their own NFTs instead. Several well known, international brands have already begun investing in and producing their own NFTs, like Funko, Pizza Hut, and Pringles.
Funko has already shown that it knows how to produce collectibles. Funko makes highly sought-after figures and plush toys of thousands of pop-culture characters across film, TV, comics, and video games. The company’s expertise has been transferred to the world of digital collectibles too, as it launched “Funko Digital Pop!” in July 2021.
It might also be worth looking at companies that could benefit from the rise of NFTs, like cybersecurity firms and video game companies that have announced NFT-related projects.
Are NFTs a good investment?
NFTs are both an investment and a collectible, meaning that they could make for a good investment should they be here to stay, but they don’t come without risk. The main appeal of NFTs is their uniqueness and authenticity, which means they operate in a similar way to many real-world collectibles today.
NFTs created for specific purposes or owned by certain celebrities are far more valuable than those made by a small artist and given to a friend.
Think of them like rare comics: the modern Amazing Spiderman issues are worth mere pennies, but Spiderman’s first appearance in Amazing Fantasy 15 from 1962 can go for more than £1,000.
This is because that specific issue has a history, and can be verified for authenticity by an expert.
The value of an NFT is entirely perceived or judged by its history or relevance, so the likelihood of your NFT going for thousands on the market is unlikely.
However, there is the chance for it to grow in value over time, especially if it is part of a series like the Bored Ape Yacht Club, where only a certain amount is made available.
What does the future hold for NFTs?
No one can predict the future, but the technology behind NFTs certainly has the potential to lend itself to society down the line. In fact, there’s no reason for the blockchain to be limited to virtual assets, as it could be used to verify the ownership of real-world assets, like art pieces or even homes and cars.
But NFTs themselves could be little more than a fad, destined to fall out of popularity when the next hot collectible hits the market. Or, they could prove to be the first step into mass digital ownership and collecting, and grow in value for years to come.
Interestingly, Shiba’s Wife is the first decentralized meme token that supports women’s rights where 10% of transactions are donated to the cause.
Pros and cons of NFTs
- NFTs make it easy to buy and sell digital media on an NFT marketplace with proof of ownership and authenticity stored on the blockchain.
- NFTs can benefit artists and creators who want to list their products for sale, and help buyers know that their products are genuine.
- NFTs can make collecting more engaging and interactive, allowing for more reliable purchasing and trading than physical collectibles.
- The popularity of NFTs has increased the prices of some tokens which may not hold their value in the long term.
- Incorrectly stored NFTs are at risk of being hacked and stolen, along with cryptocurrencies and other virtual assets. Sometimes, having a wallet on its own isn’t enough to protect your assets.
- Some of the ways to manage blockchain transactions that are currently employed are linked with a high production of greenhouse gases and environmentally damaging practices.
How do I start investing in NFTs?
To start investing in NFTs, you will first need a crypto wallet and some cryptocurrency. To buy a cryptocurrency, you will need to go to a cryptocurrency exchange, where you will be able to see the rates of different cryptocurrencies compared to your local currency.
You will also need a crypto wallet to safely store both your chosen cryptocurrency and any NFTs you buy. The most widely accepted cryptocurrencies are those on the Ethereum blockchain, and some of the most reliable wallets are the Metamask wallet and Coinbase wallet.
How can I buy NFTs UK?
To buy NFTs in the UK, you need to find an NFT marketplace that is compatible with the cryptocurrency you wish to use. Simply search for the kind of NFT you want and place a bid if they are in an auction format, or click “buy now” if it is selling at a fixed price.
Have you bought an NFT? How did it go? We’d love to hear more about it! Send us a message and tell us more…