DeFi Series: How to Buy an NFT in 19 Easy Steps

Welcome to PYMNTS’ series on nonfungible tokens (NFTs), the newest craze in cryptocurrency.

We’ll be looking at every part of the NFT craze sweeping the worlds of art, video games, social media, fashion and sports.

When it’s finished, you’ll have a solid grasp of the basics of NFTs — what they are, how they work, what they are going to be used for, what their drawbacks are, what you need to be aware and wary of, and why people are paying so much money for them.

See also: What Are NFTs and Why Are They Crypto’s Newest ‘Next Big Thing?’

So, NFTs are the hot new thing in crypto, and you want in.

Maybe you want a piece of art for that digital frame Grandma gave you five years ago, or an avatar for your Twitter portrait, or a slice of land in the metaverse where you can set up a gallery of your cat’s cutest ankle attacks. Or maybe you just want to buy something that, with some luck, will put your kid through college.

Whatever it is, you’re ready to jump into the world of NFTs either because you want the product or as an investment. So, how do you do that?

First, you find an NFT marketplace like OpenSea, the space’s top dog. Looking through it, you find Sherbet NFTs, which look cute and “act as an all-access pass to Sherbet.com — an all-new PVP gambling experience.”

Read also: In the Metaverse, NFTs Can Buy Experiences, Luxury and Eyeballs

You see that there are 7,800 Sherbet NFTs, with a floor price of 0.083 ether. After a quick trip to cryptocurrency price tracker CoinMarketCap, you find that ETH is selling for $3,098.42 at the moment. Another quick trip to your mobile’s calculator tells you that Sherbets cost a minimum of $257.17. Scrolling through the offerings, you find No. 2572, which has a blue frosted donut head and glasses — perfect! It’s selling for 0.095 ETH, which the calculator tells you is $294.34.

Next, you load some ether onto your digital wallet — you do have a digital wallet, right? No? Well, you can set one up at the Coinbase exchange. All it requires is some personal information and a photo of your driver’s license. Waiting several hours for the anti-money laundering (AML) confirmation you…

…put your phone down, get a stiff drink, go to your couch and reconsider your desire to get in on the NFT craze.

And keep in mind, Coinbase makes opening a crypto wallet about as simple as it can get, and its wallets are automatically connected to OpenSea. (We’ll go through the process in a more orderly fashion below.)

Seriously?

Yes. One reasonably accurate count puts the process, from opening a Coinbase wallet to pressing buy, at 19 steps. Using a MetaMask wallet — one of the industry’s leaders but targeted more at people who know crypto — took 30 steps.

And we skipped right over “gas,” the name of Ethereum transaction fees that could add 10% to 50% — or more — to the price.

Read more: Ethereum’s Sky-High Transaction ‘Gas’ Fees Blew up $40M Crypto Constitution Crowdfunding Project

That could be why Coinbase announced in a Wednesday (Jan. 19) blog post that it has teamed up with Mastercard to simplify the process at its forthcoming and highly anticipated NFT marketplace — where the waiting list stands at 2.5 million.

To do this, Coinbase got Mastercard to classify NFTs as “digital goods” rather than crypto — which could be an important precedent for the entire NFT industry.

See more: Mastercard, Coinbase Make It Easier to Buy NFTs

In Mastercard’s own blog post announcing the deal, Raj Dhamodharan, executive vice president of Blockchain/Digital Asset Products and Partnerships, said “buying digital goods should be as simple as buying a T-shirt or coffee pods on an eCommerce site. You can make your purchase with one click — that’s it.”

Read also: From Famous Artists to Forgers, the Art World Embraces NFTs

But today, he added, “if you want to buy an NFT — such as a digital art piece — you first need to open a crypto wallet, buy crypto, then use it to purchase an NFT in an online marketplace. Cryptocurrency enthusiasts are used to this process. But for most people, it’s not simple, it’s not intuitive. We think it should be much easier. That will ensure NFTs can be for everyone.”

Dhamodharan also highlighted Mastercard’s recent acquisition of blockchain intelligence firm CipherTrace, saying that it has the “cybersecurity capabilities to ensure Mastercard customers’ data is protected and the NFTs they buy are secure.”

More to the point, it also has Mastercard’s zero liability protection policy for fraudulent or unauthorized transactions.

Step by Step (but Not 49 of Them)

So, what’s involved in buying an NFT?

1. Get a cryptocurrency wallet. This is more or less difficult depending on which one you select. Coinbase’s is very intuitive for the crypto-uninitiated, but it involves providing AML proof of identity, waiting for it to be confirmed, sending money to the wallet and buying some ether. The days of banks closing the accounts of crypto buyers is largely past, but a quick Google of your bank’s policies is a good idea.
2. Sign up for an NFT marketplace. On OpenSea, it is relatively straightforward if you have a wallet.
3. Find an NFT you want. Just scrolling through OpenSea — or any other sizable NFT marketplace — isn’t hugely helpful if you don’t know what NFT project you want to buy. If you’re unsure, Google is a better place to start looking.
4. Ether pricing. This is how NFTs are sold. When Christies sold that $69 million Beeple collage last year, the bids were priced and paid in ether, the No. 2 cryptocurrency. However, you must be careful of the real dollar price of what you’re buying — 0.083 ETH doesn’t sound like it could be more than $250, does it?
5. Ether gas fees. Be careful here. Gas prices can be ludicrous if you’re buying at the wrong time. A quick Google search will find loads of posts and articles by people who paid more for gas than for the NFT itself.
6. Buy it. If the numbers add up, make the purchase. But remember, just because CryptoPunks are selling for hundreds of thousands and even millions of dollars doesn’t mean every project is going to break out like that. Just like with physical art, buy NFTs you want unless you’re very familiar with the investing market.

See also: NFTs Target Collectors Market With Avatars, Celebrities