I thought buying my first NFT was going to be a breeze, especially since I work in tech. To my surprise, it was a huge headache loaded with unexpected fees.
To preface, the purpose of this article is not to promote any particular NFT collection or crypto coin, but rather to walk through my example of an NFT purchase to help others avoid the mistakes I made (especially for non-technical folks). If you’re experienced and just looking for my takeaways, skip to the conclusion.
In addition to finding the NFT you want to buy, you need the following before making a purchase:
- An Ethereum (ETH) wallet that can connect to the decentralized web. I used my MetaMask wallet from years back, but there are others too.
- A cryptocurrency exchange to purchase ETH to fund your wallet. Coinbase is commonly used, but you could alternatively buy ETH directly from inside MetaMask via Wyre.
- General knowledge of what an NFT is, how digital ledgers work, and how web3 applications differ from the internet (web2) we know of currently.
When I began browsing NFTs for sale on Rarible (one of many NFT marketplaces), I was surprised by how many collections were way out of my price range. I had to do a lot of research to find a verified collection with a floor (lowest ask) around 0.1 ETH (~$400 USD, at writing). Cheaper options were available but I wanted a specific type of artwork in an exchange-verified collection. I also noticed that collectable artworks that double as a profile picture, which are very popular, are more expensive due to higher demand.
Once I found the NFT I wanted, I was ready to transfer ETH from my Coinbase account to my MetaMask wallet. This can be a somewhat-scary step for new users, but as long as you double-check the transfer is using ETH and going to the address listed under the account name (under Account1 in the image above), you should see the amount appear in the wallet in a minute or two.
My transfer of ETH from Coinbase to MetaMask cost $10 in gas (the cost necessary to perform a transaction on the network). Once in MetaMask, it had to be moved into Rarible in order to make a bid on the marketplace.
This is where mistakes were made, as bidding is very different than buying on the platform. Each bid will cost you gas money to power the transaction, regardless of if the bid is accepted or not. Part of this deposit for bidding also involves converting your ETH into WETH (wrapped ETH…).
This deposit of ETH (now in my Rarible account as WETH) cost $25 in gas, plus a one-time $21 Rarible fee to unlock the ability to bid on this collection now and in the future. Our running total of fees is at $56 USD, just to place my first bid. Processing my bid took forever because I didn’t know to open MetaMask and confirm an action that was holding it up.
My bid sat idle for 24 hours. I had to increase it but knew it was going to cost me. Cancelling the bid outright was quoted at $45 in gas, but modifying the bid (depositing more ETH and converting to WETH) was only going to set me back about $20 in gas. Once the second deposit settled, I increased my bid up to the asking price hoping it would trigger the sale. Spoiler: It did not. My guess is because it was not enough to cover marketplace fees and gas required for the sale, or the backend logic is partitioned on purchase method and does not automatically reconcile bids that match listing prices.
To add insult to injury, I accidentally queued up two deposits from MetaMask to Rarible due to an unstable internet connection or a double-click somewhere along the way. The second deposit failed on insufficient funds, and clogged the wallet until I made a second transfer of ETH from Coinbase. Another $14 gas fee on the transfer from Coinbase, plus $20 in gas down the drain for a deposit into Rarible I didn’t need.
I now had a stranded bid the same as the buy-it-now price, and had spent a total of $110 USD already on this NFT experiment.
The bid sat idle again for a few hours. Knowing it was a lost cause, I had no choice but to cut my losses and move away from bidding towards the buy-it-now option (what I should have done in the first place). This involved a third transfer of ETH from Coinbase to fund upcoming gas costs since I just converted by leftover ETH into WETH during my accidental deposit (another $14, gone). Finally, I cancelled my bid ($34 in gas) and withdrew funds back to MetaMask, requiring a conversion of my WETH back into ETH ($20 in gas). At this point, I am sad, broke, and NFT-less. Total fees have reached a whopping $178 USD.
Knowing I needed to finish this once and for all, I proceeded to make a direct purchase at the ask amount. The last of the fees were a $20 marketplace fee (based on 2.5% percent of the purchase price) and a massive $188 gas fee to process my largest transaction yet.
In total, I paid $386 USD in fees (40% of the market value of my NFT). But hey, I did end up with this nice piece of AI-generated digital artwork. You can screenshot if you want, I won’t get mad. :)
Knowing how the Rarible marketplace works now, the best-case scenario would have been around $210 in fees, if I could have consolidated my moves to a single ETH transfer from Coinbase a single gas fee for the purchase transaction. This would have only been 20% of the market value of the NFT, which is still significant compared to purchasing many other assets.
In conclusion, remember the following when purchasing an NFT:
- Avoid bidding while gas prices are high. Instead, either purchase your NFTs outright in a single transaction or wait for upcoming ETH2 updates that should remedy ridiculous gas prices.
- Transfer more ETH than you think you’re going to use to avoid multiple transfer fees and volatile gas prices.
- Have ETH in your wallet before starting the purchase of the NFT. Do not pay additional fees to buy crypto mid-purchase through a third party like Visa unless purchase fees are less than the price to buy and transfer from a crypto exchange.
- If a transaction seems to be stuck, check inside your wallet to see if you have forgotten to approve or sign for an action.
