How to store NFTs
Non-fungible tokens (NFTs) are distinctive digital files on a blockchain network that are completely unique. Unlike trading cards, you cannot exchange NFTs for each other. Crypto enthusiasts can turn anything into an NFT, including clothes, doodles and even a family rental, which recently sold for nearly $247,000. But you need an NFT wallet to keep your collectibles safe while protecting them from thieves. The best NFT wallets securely display your collection and easily connect to NFT marketplaces. We’ve compiled the basics every NFT enthusiast should know and structured this guide to storing NFTs to answer the questions most beginners have.
How to store NFTs
Storing NFTs is easy, especially if you have experience using a crypto wallet. In fact, many NFT wallets are crypto wallets that have been modified to support NFTs. Buying and storing NFTs differs from buying and storing cryptocurrency, although the processes are similar.
After buying an NFT, you need to keep it somewhere. The best place to store NFTs is in an NFT wallet. However, project creators also use alternative methods such as IPFS (InterPlanetary File System) to store their NFTs. IPFS stores metadata, images and other assets outside of the blockchain. They can be accessed with a custom IPFS URL at any time.
How to buy an NFT and store it in your wallet.
Step 1: Browse NFT marketplaces like OpenSea to search for NFTs to buy if you don’t have a specific one in mind to buy. The NFT marketplace is where people buy and sell NFTs.
Step 2: Download an NFT wallet from your device’s app store. Make sure the wallet you want to download supports the NFT you intend to buy or create. For example, some Solana NFTs will not work on Metamask.
Step 3: Link your wallet to your chosen marketplace. Most NFT marketplaces have the WalletConnect feature to make it easy to connect your wallet to the marketplace.
Step 4: Make a dummy transaction to see how much you’ll pay in gas taxes for your purchase. This step is important to ensure you don’t go back and forth to get NFT due to incomplete gas.
Step 5: Verify you have the correct gas tax. If you have the correct gas tax in your wallet, you are ready to buy your NFT. If you don’t, send the fee (and a little extra) to your wallet, then hit buy.
Step 6: Confirm that the NFT is in your wallet and the purchase is complete.
Best cryptocurrency wallets
What you need to set up an NFT wallet
Setting up an NFT wallet is similar to setting up a crypto wallet. First, download or purchase an NFT wallet of your choice. Then set up your profile by following the KYC protocol if you choose a hot wallet. The following documents are usually required to complete your profile:
- A government-issued ID
- A selfie in your wallet
- Proof of address, for example a copy of the electricity bill
Cold wallets usually do not require KYC and are suitable for users who intend to bypass it. You need to set up your cold wallet by connecting it to your device and configuring it.
Personal information
To use a hot NFT wallet for the first time, you will need to submit some basic personal information for KYC purposes. Companies providing financial services, even in crypto, must implement KYC procedures for legal reasons and to identify bad actors who may be using the wallet. An NFT wallet company usually does not use personal data for anything other than identification. The types of personal information you must provide include:
- First name and last name
- Residential address
- Date of birth
- Telephone number
- E-mail address
It is important that you only enter the correct information, especially your phone number and email address. This information is also used for 2FA and communication purposes.
Investing in cryptocurrencies, decentralized finance (DeFi) and other initial coin offerings (ICOs) is highly risky and speculative, and markets can be extremely volatile. Consult a qualified professional before making any financial decisions. This article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies, nor can the accuracy or timeliness of the information be guaranteed.
Types of NFT Wallets
Hot Wallets
Hot wallets, often provided by crypto exchanges, are digital wallets that are always connected to the internet to facilitate frequent transactions. These computer programs are popular because they are easy to download and use. As an added benefit, you can easily store purchased NFTs in these wallets for free. However, since they are always connected to the internet, hot wallets are less secure than cold wallets, as they are more vulnerable to hacking and other forms of cyber attacks.
Cold wallets
Cold wallets are physical devices that store digital assets off the internet to protect against unauthorized access by storing your private keys on your device alone. These are ideal for storing blue-chip NFTs or NFTs that you do not need regular access to for long periods of time.
In terms of security, losing your private key or cold storage device could mean an irreparable loss of any NFTs in your wallet. Cold wallets are not free as you have to buy a physical device. Since they cost more than a hot wallet, it is advisable to buy cold storage only if you have valuable digital assets to store.
How much do NFT wallets cost?
Storing and protecting your NFTs on hot wallets is usually free; you only need to pay for transactions. On the other hand, cold wallets for NFT storage are more expensive, ranging from $140 to $400. Note that not all cold wallets are NFT wallets, so when buying a cold wallet, make sure the model you go for is NFT compatible.
Factors to consider when choosing an NFT wallet
Wallet quality/security: You should choose an NFT wallet with at least a PIN (personal identification number) or 2FA (two-factor authentication) feature to prevent losing your assets to thieves and hackers. Beware of wallets that lack security or only enable biometric security without advanced safeguards.
User interface (UI): When looking for a place to store NFTs, prioritize wallets with an intuitive user interface that facilitates interaction with your NFTs. If you’re a beginner, choose wallets that display all your NFTs, show how much your collection is worth, and have a search bar to find any NFTs easily, all at a glance.
Connection: Choose a cold wallet with Bluetooth and software connectivity and ensure that the wallet connects seamlessly with the corresponding software on your phone/PC. These features help you process NFT transactions much faster.
Setup time: Most hot NFT wallets take five to 10 minutes to set up. Completing KYC processes can take five minutes to a few days, but once you’re past these, your wallet is ready to use. Cold wallets have a longer setup duration, with beginners often needing one to two hours to complete the process.
Fees (if applicable): Unlike cold storage, using a hot wallet to store digital assets is free. For both wallet types, users must pay a small network fee to send or list your NFT on a marketplace.
Customer service: Before choosing an NFT wallet, check that it has a live chat/support option. This is the best way to contact the company if you have an urgent problem with your wallet.
Storage and storage: A cold wallet is the best option to access your NFTs. It prevents anyone from accessing your NFTs, including the creators and the wallet company. Hot wallet users are prone to face what FTX users suffered with the exchange because the exchange had access to their customers’ crypto holdings. But frequent NFT traders will find a hot wallet more useful for faster transactions and easier access to their NFTs.
Common questions
What are NFTs?
NFTs (nNon-fFungible tTokens) are unique digital artworks or representations of physical assets backed by a token on a blockchain network. An NFT is as unique as a fingerprint, as the blockchain generates a unique token every time someone creates an NFT.
NFTs are quite different from regular digital files, as the latter have no support on the blockchain. This is why you cannot present the screenshot of an NFT as proof that you own it. Anyone can create an NFT with a digital file, some crypto to pay gas fees, access to a coining platform, and an NFT wallet. However, most people just buy NFTs instead of minting them.
It is important to research an NFT project before you decide to buy it. One way to explore a project is to check if its founders are publicly known (doxxed). Projects with such entrepreneurs have less chance of being fake.
Many popular companies are entering the NFT space, and are now seen as reputable sources from which NFTs can be purchased. For example, Starbucks recently sold 2000 NFTs in minutes in March 2023. While Meta also began supporting NFTs on Instagram and Facebook in 2022, the company stopped this practice in March 2023. Well-known NFT projects such as the Bored Ape Yacht Collection are also seen as solid project sources.
Whichever NFT project you choose, you need an NFT wallet.
How do non-fungible tokens (NFTs) work?
NFTs are tokens that show ownership of digital assets. To own an NFT, you must purchase the token that backs it. Most NFTs are sold in cryptocurrency, which depends on the NFT’s blockchain. For example, an NFT on the Ethereum blockchain will be purchased in the Ethereum coin, Ether (ETH). NFTs can give you special holder rights such as the right to participate in an organization’s board of directors or an opportunity to make money by owning and selling them.
What are some unique features of NFT wallets?
NFT wallets are different from other digital wallets because they can:
- Connect to NFT marketplaces
- Show NFTs
- Track NFT data and relevant statistics
Are NFTs bad for the environment?
NFTs are not bad for the environment, but minting and transactions with NFTs can adversely affect the environment if not properly controlled. Due to the high computational power required to run a blockchain, many NFTs are minted using significant amounts of energy. However, blockchain networks that support NFTs like Algorand are going green, which can lead to more environmentally friendly NFT transactions.
How can I earn with an NFT wallet?
NFT wallets on your device will only make money if you have an NFT. You can profit from your NFT by either selling or betting it. Selling an NFT is easy as you simply buy or create an NFT, keep it in your wallet and sell it at a better price later. The money you earn from the sale will be immediately available in your NFT wallet.
With staking, you lend your NFT to the blockchain in return for rewards, which can either be paid out in the project’s original token, another NFT, or a crypto of the project’s choice. These rewards accumulate in your NFT wallet.
