How to Buy and Sell Digital Art on NFT Marketplaces

Non-fungible tokens, or NFTs, are related to cryptocurrency and can be used to store digital art and sell it online. If you pay any attention to cryptocurrency news, you have probably heard about some big-ticket sales of NFTs .

At Addition Financial, we talk to our members about every aspect of their finances and that includes buying and selling NFTs. We’ve been getting a lot of questions about how to buy and sell digital art, so we put together this guide to help you get started. Here’s what you need to know.

What is an NFT Marketplace?

Let’s start with what NFTs are and where they’re bought and sold. An NFT is a digital representation of an asset, often a piece of digital artwork or a digital collectible. Like cryptocurrency coins, NFTs are minted and added to a blockchain, which creates a record of the token’s creation and sale.

The main difference between cryptocurrency and NFTs is that crypto coins are fungible, meaning that any two coins of the same type can be swapped in a like-kind exchange in the same way one dollar bill could be swapped for another. Each NFT is unique and may not be swapped in a like-kind exchange. The information contained in an NFT and its value makes it different from any other NFT.

An NFT marketplace is an online market, an essential part of the NFT ecosystem where people can mint, buy and sell NFTs. The very first NFTs were minted on the Ethereum blockchain and that’s still where most NFTs are created and sold.

Examples of NFT marketplaces include the following.

• Binance NFT
• Crypto.com
• NFT Launchpad
• OpenSea
• Nifty Gateway

If you are interested in buying and selling NFTs, you’ll need to do it on an NFT marketplace.

What Do You Need to Buy and Sell NFTs?

There are three basic things you will need to begin creating NFTs from digital art and selling them, or to buy NFTs created by other people.

1. An account on an NFT marketplace. The first thing you will need is a working account on the NFT market of your choice.
2. A crypto wallet. A crypto wallet is exactly what it sounds like: a place to store cryptocurrency and NFTs. Crypto wallets can be hot, meaning that they are connected to the web, or cold, meaning that they are never connected to the web. Cold wallets are safer than hot wallets. 
3. Cryptocurrency to fund your wallet. Finally, you’ll need some form of cryptocurrency to fund your wallet. The type of currency you choose may be dictated in part by the NFT market you choose.

For NFT storage purposes, we recommend cold wallets for our members because there is no risk that a hacker will be able to access your wallet and steal your cryptocurrency and NFTs, unlike with a digital wallet. 

How Do NFT Marketplaces Work?

Before we get into the step-by-step process of buying and selling digital art on NFT marketplaces, let’s talk about how these marketplaces work.

Digital artwork is uploaded to the marketplace by creators. It’s at this point that the NFT is minted. Then, the creator lists the digital asset for sale. Some items may be auctioned off to the highest bidder while others are sold at a fixed price.

Once the item is listed, potential buyers can see it. They can make an offer if it’s an auction item or buy it outright. If the offer is accepted – or if the fixed price is offered – the market then generates a smart contract for the sale of the item in question.

A smart contract is a program on blockchain technology that runs when specified conditions are met. With the sale of an NFT, the smart contract might release the NFT to the buyer after the buyer transfers the agreed-upon currency to the seller’s wallet.

Once ownership of the NFT is transferred to the buyer, they own it and the transaction can be verified on the blockchain.

How Can You Sell on an NFT Marketplace?

Now, let’s walk through the step-by-step process to create an NFT of digital art and sell it on an NFT marketplace. 

#1: Choose an NFT Marketplace and Create an Account

The first step is to choose an NFT marketplace and create an account. As we noted above, there are many marketplaces to consider. Our research indicates that OpenSea is widely considered to be the best marketplace for beginners as well as the best place for artists to sell their work.

While most people buy and sell NFTs with cryptocurrency, OpenSea does have the option for you to accept fiat currencies such as the US dollar for your art. They don’t charge artists to create NFTs, which is a nice feature as well, although they do charge a transaction fee.

#2: Fund Your Crypto Wallet

The second step is to fund your crypto wallet. Marketplaces such as OpenSea are compatible with a variety of wallets. You’ll need to connect your account with your wallet to pay fees and receive payments, so you’ll want to be sure to choose a wallet with good security features.

Depending on your comfort with risk, you may choose one of the more volatile cryptocurrencies for your wallet, or you may prefer a stable coin whose value tracks with the US dollar. The latter is a good choice if you don’t want to worry about market fluctuations.

#3: Upload Your Artwork

If you want to be an NFT creator, the next step is to upload your digital artwork to be sold as an NFT. That might sound intimidating, but NFT marketplaces don’t require any technical know-how because they’ll create the NFT for you. 

Most marketplaces do not charge a fee to creators to mint an NFT. Instead, they store the artwork until it is sold. The “gas fee,” which is the name for the fee to mint an NFT, is paid by the buyer. It is at this point that the NFT transaction will be authorized and transferred on the blockchain.

While marketplaces such as OpenSea do not charge creators to mint an NFT, they do charge a fee for each NFT that you list for sale. The fee is 2.5% of the listing price on OpenSea, but you should make sure to check if you choose another marketplace. That fee is charged up front, so that’s why you’ll need to fund your crypto wallet before you begin.

#4: List the NFT for Sale

Part of the listing process involves setting a price for your NFT. You have the option of selling it via auction, which allows potential buyers to bid for your artwork. The auction process works similarly to the process on eBay and other traditional auction websites. You can choose between a timed auction and an unlimited auction. The former ends at the time you choose and the highest bidder gets the NFT. With the latter, you can end the auction at any time you choose by accepting a bid.

The alternative is to sell your NFT for a fixed price that you set when you list it. Since many NFTs are minted on the Ethereum blockchain, it’s common for artists to set their prices in Ether.

The final part of the listing process is setting your royalty level. Some NFT marketplaces, including OpenSea, allow creators to earn royalties in perpetuity, meaning that if the initial buyer of your NFT resells it, you will still earn money. It’s for this reason that many artists like the option of selling digital art as NFTs.

#5: Collect Your Money

The final step of the NFT selling process is collecting your money. The seller will transmit payment via the NFT marketplace and the money will be put in your NFT wallet. 

For security purposes, you may want to transfer funds out of your connected wallet and into a cold wallet. Options include a hardware wallet, which is akin to a thumb drive, or a paper wallet, where you print encrypted information and save it for later use.

How Do You Buy an NFT?

The process to buy an NFT is a lot like the process to sell one with a few notable exceptions. Here are the steps to follow.

1. Choose an NFT marketplace to buy NFTs. Just as you would if you were an NFT creator, you’ll need to choose a marketplace to buy NFTs. 
2. Create an account and fund your crypto wallet. The process here is the same as it is for NFT creators.
3. Research NFTs. Before you buy any NFT, it’s good practice to research it. This would be akin to researching the provenance of a piece of physical art. OpenSea and other marketplaces make it easy to view every transaction regarding an NFT, including prices.
4. Make an offer/buy the NFT. Once you have identified an NFT to purchase, you can make an offer if it’s being sold in an auction, or buy it outright.
5. Store the NFT in a crypto wallet. The NFT you bought is now yours and will be transferred to your crypto wallet. You can choose to keep it in the same wallet that’s linked to the NFT marketplace or store it offline in a cold wallet.

If you choose to sell an NFT that you previously purchased, you can use the same method that we listed above for selling NFT artwork. The only difference is that there is no need to mint it because the NFT already exists.

Conclusion

Buying and selling digital art on NFT marketplaces can be fun and profitable. It’s a good way for artists to earn money from their creations and can also be a good way for buyers to support the artists whose work they admire.

Do you need investment advice and guidance? Addition Financial’s MEMBER Financial Services program can help! Click here to learn more.