In this episode we look at what to expect when buying your first NFT, and will introduce you to terms like gas fees, miners, Proof of Work and Proof of Stake.
Episode 8 - Buying your first NFT. Welcome back. In this episode we look at what to expect when buying your first NFT, and we'll introduce you to terms like gas fees, miners Proof of Work and Proof of Stake.Speaker:
Buying your first NFT can be a very daunting task. So let's break it down as a process. The first thing to understand is that there are several marketplaces where you can buy your first NFT. Not all marketplaces are built on the same blockchain, so that means they do not all accept the same cryptocurrency. While the most popular ones out there have been built on the Ethereum blockchain and accept Ether, there are now several other marketplaces that are built on other chains like Solana and Tezos.Speaker:
This means that once you find an NFT that you're interested in buying, you need to make sure that the cryptocurrency exchange you have looked up not only lets you buy that particular cryptocurrency, but lets you withdraw that currency to your wallet.Speaker:
On the matter of wallets, you need to make sure that the wallet is both compatible with the currency you wish to purchase and can be connected to the marketplace you wish to buy the NFT from. That is a lot to take in, I know!Speaker:
To simplify it further, when you choose to enter the NFT space as a collector, you will likely set up at least three digital wallets to hold your different cryptocurrencies and transact on different NFT marketplaces. This is because a blockchain is developed by a company that wants to build a business from it. Business is still business, and these chains currently compete with each other for your business. The wallet companies also need to work with these blockchains to make sure the process is as smooth as possible for everybody.Speaker:
Now that you have your digital wallet and you have deposited cryptocurrency in it, you are ready to start shopping for your first NFT. I recommend you start with buying something that costs maybe $5 to $10. Just to try out the process for the first time. To buy from any NFT marketplace you need to connect your digital wallet to it. When you go onto the website, you will see the words Connect Wallet. I have found that Chrome has the right extensions for digital wallets that I have set up. So I always open the digital marketplaces in Chrome. If you get stuck at any stage, never fear, all the NFT marketplaces and digital wallet companies have excellent step-by-step instructions that guide you through it all.Speaker:
I have put up the links to several of these companies in the Meet the Metaverse Guide, which you'll find in the Links section. An NFT listing contains a lot of information about the particular asset that you wish to buy, so make sure you read through it all. To proceed with the purchase of your NFT you'll need to sign the Smart Contract to trigger the sale you will be presented with a screen showing the smart contract which will list the price of the NFT plus another line item showing a fee called gas.Speaker:
If you are on an Ethereum marketplace like Open Sea, you will probably be quite alarmed to find that there is a gas fee which puts an additional $40 to $200 -and that's US dollars - on top of your purchase price. So why this hefty fee?Speaker:
A gas fee is paid to the miners who verify and process your transaction for the Ethereum blockchain. Miners are people sitting at computers all over the world. Their computers are part of a massive global network of computing power required to facilitate the hundreds and 1000s of transactions that need to be added as blocks to the blockchain. If you had the know-how and the time and money to invest in the hardware required to do this, you could also become a miner. Miners are like worker bees working behind the scenes double checking the transactions. They're paid a gas fee in Ethereum to do this work.Speaker:
So back to this screen of the Smart Contract. Once you double check your wallet address, agree to the gas fee and sign the Smart Contract, your transaction is then processed and finalized. This entire process is viewable by you in real time via a site called Etherscan, which tracks your transaction and produces a receipt upon completion. Once your transaction has been finalized, your NFT will appear in your digital wallet and you have successfully purchased your first NFT.Speaker:
So why does a gas fee fluctuate? Just like when it's peak hour traffic and your Uber fare suddenly spikes because of high demand, so too gas fees. You as the purchaser of the NFT have the choice to make you can either pay this surge gas fee price to get your NFT straight away, or you can wait until a quieter period to pay a much reduced gas fee.Speaker:
Ethereum blockchain has been built on what is called Proof of Work and this is the mechanism by which it processes its transactions. The major problem with Proof of Work is that it is manually intensive and requires such enormous computational power that it comes at a staggering cost to the environment. Ethereum is now building its 2.0 version expected this year. Ethereum's version 2 will run on what is called Proof of Stake. This is what most of the newer blockchains are built on. When you purchase from a Proof of Stake NFT marketplace, you will immediately notice that the gas fees are extremely low or even negligible. I recommend looking at all the NFT marketplaces mentioned in the Meet the Metaverse Guide to familiarize yourself with the cryptocurrencies, the price of NFTs and to see what type of NFTs you find personally appealing.Speaker:
Do not feel pressured to buy an NFT if it is something you have no interest in or cannot afford. But if this is something you want to try at least once then you're now armed with information to feel more confident and to just go for it.