NFTs Explained: Why Everyone Is Jumping In (Should You?)

What do Samsung, Nike, Taco Bell, Snoop Dogg, and Paris Hilton have in common? They've all embraced NFTs. This acronym even became Collins English Dictionary's word of the year 2021. Indeed, NFTs are taking the digital art and collectibles world by storm. Some experts predict they could reshape the future of digital payments.

What exactly are NFTs? What purpose do they serve? And how can you buy them? We'll answer these questions in our definitive guide to NFTs.

What are NFTs?

NFT stands for Non-Fungible Token—a digital asset created using blockchain technology. Simply put, blockchain is a vast distributed database of transactions stored on computers worldwide. These computers continuously update and synchronize each copy to maintain perfect consistency. Tokens are individual entries within a blockchain, and most tokens have one key characteristic: they are fungible.

In plain English: they're interchangeable and hold the same value.

Cryptocurrencies like Bitcoin, Ethereum, and Solana run on blockchain too. Just as you can swap one gold bar for another of equal weight, these tokens are interchangeable. But some things can't be swapped—like artwork or people—because they're unique. That's what we call non-fungible.

Think of famous artworks: a Monet isn't equivalent to a Picasso, just as a Beatles song isn't the same as a Beyoncé track. Each is unique.

Sure, you can photograph a museum piece, screenshot digital art, or download music (gasp!), but that doesn't make you the owner.

An NFT, therefore, is a unique digital or physical item whose ownership rights are recorded on a blockchain through a smart contract—a self-executing program that activates under specific conditions. Simply put: NFT = token + metadata (owner, creator, description, links, etc.) + media.

What can become an NFT?

Almost anything can become an NFT: text, music, pictures, videos, 3D models, artwork, collectibles, in-game items, and even domain names.

• Singer Grimes (the mother of a boy named XÆA-12, the child of Elon Musk) sold her digital art collection as NFTs for $5.8 million.
• Jack Dorsey, CEO of The Block (and ex-CEO of Twitter if you’re new here) sold his first tweet as an NFT for over $2.9 million.
• Musicians have also jumped in—DJ 3LAU, The Weeknd, and Kings of Leon all sold their music as NFTs. But the biggest sale came from artist Mike Winkelmann, known as Beeple. His digital artwork "Everydays: The First 5000 Days"—a JPG file combining images he created daily for 5,000 days—sold for a staggering $69.3 million.
• CryptoKitties, a popular game by Dapper Labs, lets you buy, breed, collect, and sell virtual cats. Some digital pets have sold for over $100,000. A similar concept exists in the game Axie Infinity.
• Decentraland offers a virtual world where every piece of land and item is an NFT. By December 2021, it was attracting 18,000 daily active users.
• In the fashion world, luxury brands like Louis Vuitton and Prada use AURA, an anti-counterfeit blockchain that lets customers verify product authenticity and history.
• And you can't miss the Bored Ape Yacht Club and CryptoPunks—they're practically Twitter icons now.

Find an NFT to buy

Now that we understand NFTs, let's address the key questions about buying them:

• Where to buy NFTs?
• Which wallets should you use?
• Which cryptocurrency do you need for buying and how and where to get it?
• How to actually buy an NFT?

Several major marketplaces allow users to buy, sell, and auction NFTs. OpenSea, Rarible, SuperRare, and Nifty lead the market. Some NFTs are platform-exclusive—for instance, sports fans might want to check out NBA Top Shot for video highlights.

Collections

NFTs typically come in collections or projects. Using a Bored Ape as an example, each piece shares the same base image but differs in small details—color, facial expression, accessories, and background. These unique combinations of features make each piece one-of-a-kind. Some feature combinations appear frequently, while others are rare, affecting their market value.

Each collection contains a limited number of NFTs united by a common narrative. This storyline connects the pieces and encourages collectors to acquire multiple items.

Many NFT collections function as utility tokens, offering more than just digital artwork. Holders can gain exclusive memberships and early access to clubs, events, and partner deals.

Before investing in any NFT—whether new or established—thoroughly research the project. With numerous scams in circulation, it's crucial to gather as much information as possible.

If you plan to participate in an upcoming project, ensure you're well-prepared in advance.

How to buy NFTs

First things first, check these two things. Which wallet and cryptocurrency do you need to buy and store your purchases. You can find this information in each project’s description section. Most NFTs are Ethereum-based, which means that you will need to get some ether.

You can buy crypto on Coinbase, Kraken, eToro, Binance, Crypto.com etc.

Use Cryptoradar to compare exchange platforms and make better investment decisions. We show you prices, fees, payment methods, and user reviews.
Now, let’s sign up for an exchange. We’ll use Kraken as an example. Kraken is available on the web and as an app. Everything is pretty straightforward: follow the instructions and you’re golden. What we need to do next is deposit your money. Kraken accepts credit cards, bank transfers, and transferring crypto from other exchange platforms.

Set up a crypto wallet

Next, set up a crypto wallet that supports Ethereum. A wallet is a digital address where you can securely store your crypto. Of course, you can leave your assets on whatever exchange you use. Wallets are considered to be a much safer option though. The wallets come in different forms. They are available as software or an offline hardware device that looks like a USB drive. If you want to learn more about crypto wallets, check out this article.

What to look for when choosing an NFT wallet

There are certain things you have to consider when choosing a wallet:

• Compatibility with the marketplace you want to buy NFTs from. Quite obvious.
• Security. Some NFTs can be worth thousands or even millions of dollars.
• User interface should be easy to understand and use.

You might also want a wallet that supports other blockchains. As we mentioned above, most NFTs live on Ethereum. But there are several other blockchains that NFTs can be based on as well.

Metamask is one of the best crypto wallets for Ethereum NFTs. It comes in a form of a browser add-on or mobile app and is very easy to set up and use. Other popular options are Math, Coinbase (yes, like the exchange), Alpha, Trust, and others.

An important thing to remember is that such wallets are different from the ones made of leather. You can keep your cash and photos of your family members in a regular wallet. In crypto or NFT wallet you store the private keys that provide access to your digital assets. They are stored on a blockchain.

Link Crypto Wallet to NFT Platform

Here’s what you should’ve done so far:

• bought some crypto
• transferred it from an exchange to your wallet.

Now it’s time to connect your wallet to an NFT platform. Let’s go swim in an OpenSea together. Once you land on the homepage, you’ll be able to browse all available NFT collections and, of course, the main menu. Click on the wallet icon in the top right corner to connect your crypto wallet. Follow the instructions until you see the status “Connecting”. This will mean you’re almost done. Once connected, you will see your profile settings. The only thing that will be pre-filled is your crypto wallet address. Customize your profile and you’re all set. Now let’s go buy them NFTs!

How to buy NFTs on OpenSea

There are two ways you can do this:

• From the landing page, select Explore. Now you can enjoy the process of browsing through thousands of items. Have fun figuring out what you like and what you want to buy;
• Use the search bar if you already know what exactly you’re looking for. There are various filters for search options — from price to rankings.

Bid or buy NFT

Creators can set a fixed price on NFTs or set up auctions where buyers can bid on items.

Buying a fixed-price NFT

Find an NFT you’d like to buy. Check pricing history if you’re looking to get into trading NFTs later on. When you’re ready, click the “Buy Now” button. OpenSea might ask you to review some details and then agree to the terms of service. Click “Checkout” to launch your crypto wallet. There you will see a final cost including applicable gas fees (or simply, fees). If everything looks good to you, click “Confirm”. Congratulations! You’re now a proud owner of your first NFT!

Bidding on an NFT

As mentioned, some NFTs are also available through auction. The bidding process is very simple: find an NFT you’d like to bid on. Review all information about the item of your choice, including current price offers. Each bid must be at least 5% higher than the previous. Click “Make offer” and select the currency you’d like to use. Then, enter your bid and expiration date. You’re done. Just remember: it’s an auction. If you bid on an item you REALLY like and want to have in your collection, make sure to stick around to up your offer.

NFTs as an Investment

Just because you can buy NFTs, does it mean you should?

Yes, NFTs are bright, colourful, fun and everyone’s talking about them these days. It’s cool to have one. Or two. Or print the whole collection and decorate your walls‚ as we did in the '90s and '00s. At the same time, NFTs are still very new and could become a rather risky investment. For each person that says NFTs are here to stay there’s another person who says they’re a bubble that will burst in 3..2..1. Another thing to consider is fraud and theft. Like cryptocurrencies, your NFTs could be stolen. If you've purchased a high-value NFT, consider storing it offline in a secure location. Also, keep in mind that buying an NFT doesn’t mean owning the copyright. If you don’t want any trouble, this is when you actually read Terms and Conditions before accepting them. The above mentioned issues are solvable though.

SO: if you don’t understand how NFTs work, are FOMO-ing or don’t have any spare money you can afford to invest, don’t buy any.

But if you understand the technology and art, are a collector who is looking for another investment opportunity, why not give those non-fungibles that have exploded out of the ether a try. See what we did there? Ether. Go get some.