Observations on buying on an NFT on the Ethereum Blockchain

NFTs have recently piqued my curiosity. If you don’t know what an NFT is, it’s a Non-Fungible Token.

Clear as mud right?

There are many articles on the subject these days, so I’ll defer you to them if you want more background.

Anyway, to get exposure to the NFT market I decided to buy an NFT. It didn’t matter what it was, I just wanted to experience the process. More importantly, I wanted to see what it was like from a consumer perspective.

The Metamask Wallet

In order to buy, sell or trade in the digital ecosystem, you have to have a place to put your “money”. Much akin to fiat currency like the US Dollar, you have to have a place for your cash/currency/money to live when it’s a rest. The same thing applies in the cryptocurrency world. The only difference is that your crypto-wallet, much like your cryptocurrency exists as excited electrons running a gauntlet.

It’s electronic.

Knowing I needed an up to date crypto wallet, I decided to use the MetaMask Ethereum Wallet for this adventure. It’s a browser add-on that creates an Ethereum Wallet for you to receive or send funds with. After playing with it a little bit, it appears fairly straightforward. It creates a wallet, prompts you for a password, and gives you a secret keyphrase (that you have to keep safe somewhere). This secret keyphrase is a series of words that can be used to unlock your wallet - regardless of where it lives. They can be used to generate your private keys for accessing your wallet if you lose your computer or browser. Treat it like cash. Print it out or write it down and put it in a safe or a vault. Or don’t. You do you.

Coinbase

Now that I had secured the wallet (pun intended) I went to Coinbase - a well known cryptocurrency brokerage / clearinghouse. I linked my bank account as I have with many other brokerages and payment sites. Within a few days my account was validated and I was able to casually buy / sell / trade cryptocurrency.

Disclaimer: If you use the coinbase link above, you and I both get $10 cash USD that can be spent on cryptocurrency. I am not affiliated with Coinbase in any official capacity. I’m just a happy customer.

Some Background

I bought my first Bitcoin back in 2013. The entire process was a non-trival combination of hoops through which I had to jump. I used a then little known website called localbitcoins.com. I had to drive to my bank and deposit money into some random persons account. I had to provide a photo of my driver’s license. I had to build a reputation and find a seller that would consider my lowly cash offering. The Bitcoin ecosystem was still very much new and there was a lot of blind faith involved back then. It was both alluring and scary at the same time.

   Much like a drug addict who had to get their fix in a shadowy underworld, I did what I had to do to get me some crypto.    

Depositing cash into a strangers bank account was intimidating. My thoughts back then were more instinct than standard common sense. I figured that if the bitcoin seller was in this space, they likely had a technical background. They were probably like me. I could probably trust them. They had a reputation rating on the website. They also had a history of transactions that were much larger than mine. I coupled logic with my instinct that Bitcoin was going to explode someday. I peppered it with some altruism and I enabled my greed. My desire to see the technology take off had overridden what little common sense I had (and still have, too).

   I’m glad I listened to my instincts and went with my gut.    

That BTC investment in 2013 has paid for itself in spades. I continue to hold and I have no intention of getting out of BTC. However, the entire aquisition process left a very bad taste in my mouth.

Ease of Use

After reflecting on the nothing-short-of-a-headache that was my first Bitcoin purchase, I was immediately struck by the simplicity of using Coinbase. Their product is quite purely a very simple on-ramp to the world of cryptocurrency. The ease of use and the ability to purchase fractional shares of the leading cryptos was exhilirating and a relief.

   Like a sobernaught putting their life back together, I was able to buy / sell / trade cryptocurrency legimately. Cleanly. Above board.    

I purchased some Ethereum using my standard bank account. Coinbase, unlike most of their competitors, allows you to transfer your cryptocurrency out of their brokerage and into another wallet. After the transaction settled a few minutes later I transfered the Coinbase Ethereum (ETH) to my MetaMask browser wallet address. Within a few more minutes and after a hefty fee (more on that later), it was in my browser wallet and completely under my purview to spend, swap or transfer as I see fit.

After playing with the MetaMask wallet for a few days, I learned how to swap crypto, spend crypto and receive it. I learned about blockchain networks and that Binance Chain is a completely different network from Ethereum. After this initial discovery phase, I decided to proceed with my exploration and dive into the NFT world and buy an NFT.

Opensea.io

After doing some research (web surfing) I settled on to the popular Ethereum NFT marketplace Opensea.io. I didn’t have to create an account or verify my information or anything. I just had to CONNECT my wallet to the website. I was hesitant at first so I read up on it. Connecting your wallet to a website simply allows that site to see your Ethereum Account Address. Public information. In fact, you want to give this address out in hopes that someone will put money in it.

   Like a panhandler in need of soup, I agreed and connected my wallet to the website.    

That’s it. I was logged in to the website, anonymously, with my Ethereum Wallet Address.

With that out of the way, I started browsing the virtual wares. Sifting through the way overpriced garbage I saw an annoying animated .gif image that was as overpriced as it’s little friends. I thought “What the hell, I’ll enter a low bid on this stupid thing and see what happens”.

Oops!

Within a few minutes, my bid was accepted (at a 70% discount). I wasn’t expecting to win it, but I contractually agreed to buy it so I proceeded with the transaction. The first “oh shit” moment was when the fees popped up. It was about $42 USD just for the transaction. In the Ethereum world this is called gas or gwei - a small unit of Ethereum that validators or miners receive for using their computing power to verify transaction blocks. I was committed so I confirmed the transaction. I justified the cost as a learning exercise - albeit a pricey one.

When all was said and done, I got confirmation that I now owned the NFT - Yay!

I think.

The NFT

His name is “Optimus Prime - POP!” and he’s a cute little guy. Here he is:

And just like that, I now own an original, one-of-a-kind, overpriced Optimus Prime POP! .png file. Or gif. Or whatever it is. It’s mine and the Ethereum blockchain can prove it.

A Few Observations

• The Ethereum blockchain is an expensive sandbox to play in. Gas fees (gwei) are through the roof these days because Ethereum hasn’t merged with v2 for Proof-of-Work (PoW). Once that happens, I expect gas fees to drop significantly and ETH to skyrocket in value (NOTE: ETH the cryptocurrency, not this NFT).

• NFTs, while interesting, are a very niche and very expensive market. While I expect useful business models to emerge, we’re not quite there yet.

• Standing out in the NFT space is challenging. The ratio of creators to actual good content is large. Once large players enter the space with good implementations, I expect decent filtration and less noise.

• MetaMask is a great wallet. It’s far from perfect considering it’s a browser extension, but the ability to connect with dApps and web3 sites is extremely cool. The surface of dApps and integrations has barely been scratched. It will be interesting to see where this technology is five or ten years from now.

This is the embed for the NFT: