Buying NFTs Safely 101
How to choose a safe NFT, and what to look for when buying
The NFT market is fairly new and is still evolving. The only way to truly own a digital item is through ownership on a public blockchain; NFTs aren’t controlled by a central entity, allowing for true ownership of these assets. NFTs have value because of the media attached to them — the most common forms of media on NFTs today are art and music, but NFTs can be the tokenized version of any real world asset.
Well, let’s jump right into it and tell you how to sort through the noise and get the NFT you want. But first, you may want to familiarize yourself with some of these terms and read this article that we wrote.
The best way to know what projects are good and have real potential is to follow NFT artists in the creative space you are interested in on Twitter and Instagram. Get notifications when they post and do your due diligence by reading about their project on their website. Again, don't click on random links that you may be sent, double-check the links with their Twitter or Instagram platform message. Check engagement on Twitter, to see if their followers are commenting, instead of the Twitter feed just being full of re-Tweets. What are they about, do they have a good background story about their art? Do you like their art? Do other people like their art? If you like what you’ve read about them, then you’re ready to buy their NFT(s).
Check the trading history
Go on to the NFT marketplace they are using from their website. Clicking the link on their website is the only sure way of knowing if you will be buying the real NFT, and not a fake duplicate. Once on the NFT marketplace, Opensea for example, you’ll want to check the trading history of the NFT. Some creators sell NFTs to themselves in order to inflate their value. So by viewing the addresses of past owners and the purchase dates, you can determine if the price of the NFT has been inflated.
In the “Trading History” section, select the “Sales” filter to display sales. There are 3 signs that an NFT is being artificially “pumped”:
- Buyers have not made any transactions before. This information is visible in the “Activity” tab on the account page.
- Transactions were made in a short period of time.
- The same account bought the token over and over again many times.
Check the Listing history
If the item has been listed repeatedly for different prices, each successive listing decreasing in value, you can be sure the creator places no real value on the work. They are looking to just sell the item and make anything they can off it.
Do an Authenticity check
This is required to prove that the NFT is original and not created by a scammer. Not all sites for creating NFTs require verification of the identity of the seller. For example, on OpenSea, anyone can upload a token of a Tweet by Kayne West. The account will be named “Kanye West” or “Yeezy” and the link will lead to his official Twitter page. However, on his Twitter page, you won’t find the Tweet in which Kanye talked about the NFT release on OpenSea.
If the NFT is created by a well-known artist or a public person, then they should go through account verification so a verification checkmark appears next to their name, similar to Instagram or Twitter.
However, some legitimate sellers do not do a verification check for whatever reason. So another way to make sure that the NFT is original and not fraudulent is to check the supplied links. Even if they lead to verified social media pages, search for the NFT releases or links to the marketplace. If you can't find any on the indicated pages, then most likely the creator is trying to defraud you.
Smart contract verification
Smart contracts allow for the issuing of NFTs. These are programs that describe the rules for creating tokens and in what manner they are to be used. You can find out which contract is responsible for the issuing of the NFT by going on Opensea and under the NFT you want to buy, on the left side of the screen, scroll down to the “Contract Address” line in the “Details” section. Click on the Contract Address and the smart contract page will open in the Etherscan blockchain explorer. Then go to the “Comments” tab, and read the reviews of other users, if any. Negative comments should not be there. It may be an indication that the project is already closed or the developers are not fulfilling their obligations.
Ok so everything checked out and you’re ready to buy. You’ll need an Ethereum-compatible crypto wallet, such as Metamask, and some ETH you bought on an exchange loaded up in the wallet to get started. The actual process of buying is relatively straightforward, but there are plenty of Youtube videos to show the process from start to finish. Certain listings will feature a Buy Now option, while others allow you to place an offer to the owner. If you click Make Offer, choose the amount you are willing to pay and a expiration date. After the exchange is complete, the NFT is transferred into your wallet and appears under the Collected tab on your profile page. OpenSea will take a 2.5 percent cut from every marketplace transaction.
Congratulations, you’ve safely bought your first NFT!
In our next article, we’ll take you through the process of “minting” your own NFT.