Newcomers to the crypto and NFT space often overestimate how complicated it is to participate in the buying, selling, and trading of cryptographic tokens. Although each investment is unique, the basics of investing are usually the same. Whether it’s a piece of art, stocks, cryptocurrency, or buying an NFT for the first time, you need to know what you’re purchasing.
Most people had never heard of a non-fungible token (NFT) before 2021, and even fewer knew what it signified. Now, one year later, more and more people have decided to take their first steps into the NFT world.
Here are some things to factor in if you’re thinking about buying an NFT for the first time.
There are Fees
A gas fee is charged when a transaction is made on a blockchain network. These can differ based on the network, cryptocurrency values, and network congestion levels. There are also royalty fees to consider if you are looking to flip an NFT for profit.
NFTs may be minted on a variety of blockchains, with various platforms charging fluctuating fees. The most commonly known and widely used NFT blockchain is Ethereum. However, NFTs may be created using a variety of smart contract cryptos. Most will be less expensive and less harmful to the environment than Ethereum (ETH), and even Ethereum is now using a 2nd layer solution that charges no gas fees called Polygon, which brings us to the third point.
If you are a person who cares about east of the planet and energy sustainability, then you may not want to participate in the exchange of assets on a gas-heavy blockchain such as Ethereum. As mentioned above, there is the second layer solution, Polygon. There is the Solana blockchain with minuscule gas fees, if any, and there are other less popular NFT blockchains.
As the Proof of Stake model makes headway, a much more environmentally friendly alternative to the Proof of Work model, this will be less of a problem.
It can be challenging to value an NFT, especially since there are so many types and reasons for purchase.
Trends drive markets, long-term projects may or may not be worth holding on to, and there are projects with short lifespans that you are better off flipping for a small profit and jumping sip. Like any art purchase, there is no telling how its value will be perceived over time, so know what you are buying and what to expect.
NFT Scams and Rug Pulls
In a space as unregulated as the crypto world, scams are inevitable, and scammers are constantly finding new ways to disguise their intentions. You must learn to read the tell-tale signs of a possible rug pull and spot the red flags before it’s too late.
Now that you have an idea of what you need to search for, go out there and read relentlessly. Follow social media pages to stay up to date, read whitepapers from cover to cover, watch YouTube videos, and read reviews. It’s your hard-earned money we are talking about here, and you want to make sure you are buying something for the right reasons.
There are a number of factors to consider before buying an NFT for the first time. There are hidden fees, investment value, long-term considerations if that is your goal, and scams galore. Research is your bread and butter, and you must be relentlessly thorough if you are to avoid losing your money and multiply your investments.
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