How to Store NFTs Safely

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Contributor, Benzinga
February 11, 2022

Whether it is non-fungible tokens (NFTs) or cryptocurrencies, one of the most important jobs of any investor is to keep their assets safe. Regrettably, the cryptocurrency space remains a virtual minefield rife with scams and hackers.

Discord seems to be a hangout for a lot of scammers. Most scammers on Discord will DM you saying you have been whitelisted and you only have a limited amount of time to mint NFTs at an incredible price. Guess what happens when you go to the site, connect your wallet and pay 0.3 ETH to mint an NFT? Nothing! Well, 0.3 ETH is deducted from your wallet, but you never receive an NFT. 

If something appears too good to be true, it is most likely a scam. If you receive a DM in Discord, it is always good to check with the server admins to see if it is a scam. Unfortunately, the crypto waters are teeming with sharks eager to devour your wealth. Continue reading for more information on how to safeguard your crypto assets.

What is the Safest Way to Store NFTs?

When someone starts collecting NFTs, the investment can quickly add up to be significant. Because there is no shortage of people looking to take what isn't theirs, how and where you store your NFTs is critical. The sections that follow cover various storage options.

What is a Cold Storage Wallet?

When it comes to cryptocurrency wallets, you can choose from two types. The first is a "hot" wallet, which is linked to the internet at all times. The second is a "cold" wallet, which is only connected to the internet for the purpose of managing the wallet's assets.

An example of a hot wallet is the MetaMask wallet, available as a browser extension and mobile app. As a hot wallet, it is always connected to the internet, which is both good and bad. It’s good for convenience because it’s always connected and ready to go. On the bad side, always being connected to the internet makes it vulnerable to online attacks. 

A cold storage wallet is frequently a hardware device that can be connected to the internet when it is being used and disconnected when not in use. It could be a computer dedicated to the storage of cryptocurrencies. It could also be a hardware device designed specifically for storing cryptocurrencies.

Best Option: Ledger Nano X

The best cold storage wallet for NFTs is the Ledger Nano X. It has a massive storage capacity for up to 20 crypto apps. The Ledger Live app allows you to manage over 5,500 coins and tokens. You can use a USB cable to connect the Nano X to a PC or Bluetooth to the mobile app. The Nano X is more expensive than the Nano S ($149.00 vs. $59), but it is also far more versatile.

The security features of both Ledger wallets are impressive. The Nano X has two processors. The first is the STM32 MCU chip, which controls the connection between your computer and your smartphone. The second component is the Secure Element chip, which is in charge of security and user input. The Secure Element is a microprocessor chip that is used to store sensitive data and run secure apps. The chip acts as a vault, shielding what's inside from malware attacks.

What is The Easiest Way to Store NFTs?

A cold storage wallet provides the most security. However, because of that security, they aren't always convenient for actively buying and selling cryptocurrencies. This is where a hot storage wallet can help.

What is a Hot Wallet?

A hot wallet or hot storage wallet is connected to the internet all the time. In contrast, a cold storage wallet is only connected to the internet while using it. There is a definite trade-off between convenience and security. A hot storage wallet is more convenient but also vulnerable to online attacks. A cold storage wallet is much more secure but not as convenient. 

So, it is up to each individual to decide if you want security or convenience. To be fair, many people choose both and make the decision of how much to keep in their hot wallet versus their cold wallet.  

Best Option: Coinbase Wallet

The Coinbase Global Inc. (NASDAQ: COIN) wallet is the best option for those who want the convenience of a hot storage wallet. It is a good choice for anyone who needs a wallet compatible with decentralized finance (DeFi) platforms. The Coinbase wallet is also secure and has never been hacked.

Secure Enclave technology is a significant reason for the wallet's impressive security record. The Secure Enclave chip safely stores the private keys of the user. It is secure because it is isolated from the main processor and can keep sensitive data secure even if the application processor is compromised. The wallet also uses two-factor authentication (2FA) authentication via SMS or Google Authenticator. 

Another benefit of the wallet is the Coinbase NFT marketplace that is coming soon. It will be a peer-to-peer marketplace that will make purchasing, minting, showcasing and discovering NFT easier than ever. Coinbase announced the new marketplace on October 12, 2021, but it has not announced when the site will go live. Initially, the marketplace will only be open to U.S. users, but it plans to eventually go international.

How to Buy NFTs

You can access multiple marketplaces to purchase NFTs. Ethereum is the most dominant blockchain for minting NFTs. OpenSea and Rarible are two of the more significant Ethereum based marketplaces for creating, buying and selling NFTs. Solsea is a Solana-based marketplace where you can also buy NFTs using Solana (SOL). NFTrade is an Avalanche-based marketplace where you can also buy NFTs using Avalanche (AVAX). 

Because the Ethereum blockchain is the most common platform for NFTs, it will be used for this example. That being the case, you need Ether (ETH) in your wallet. If you don’t already have an account at a crypto exchange, Coinbase would be a good option. Coinbase has a user-friendly trading platform that makes it especially good for new users. 

Follow the instructions to open your account and connect your bank account. After you purchase ETH, transfer it to your Coinbase wallet. Connect the wallet to OpenSea or another marketplace that supports Ethereum-based NFTs. Once connected, you can browse various NFTs until you find one you want to purchase. You will discover that NFTs will be either an auction-style or buy-it-now listing. 

After you make your purchase, transfer the NFT to your Coinbase wallet. On OpenSea, click on your NFT to open it, and in the upper right-hand corner, there will be a transfer icon that looks like a present. Just click on it and paste in your ETH address from your Coinbase wallet.

When the Coinbase NFT marketplace launches, it will make it easier for the average person to buy NFTs. Because Coinbase has partnered with Mastercard, you will be able to purchase NFTs with your Mastercard Inc. (NYSE: MA) credit card or debit card. This feature will be especially useful for anyone unfamiliar with cryptocurrencies and will eliminate the need for them to open an account at a crypto exchange. 

Is Now a Good Time to Buy NFTs?

Are you ready to start building your NFT collection? The answer may depend on why you have decided to start buying NFTs. 

Is your primary reason for building the collection that it will be a speculative investment for you? Or, will you be purchasing the NFTs because you love them and not so much as an investment? They could be original works of digital art or other collectibles such as sports memorabilia. If the latter is the case, anytime could be a good time to start your collection. 

If possible financial gain is important to you, then when you start buying NFTs can make a huge difference. In this case, you need to do a good amount of research before purchasing. You will want to assess if a specific NFT you are interested in is selling at a reasonable price or a premium. You will also want to analyze the state of the overall NFT market. Is the market in the middle of a buying frenzy with skyrocketing prices? Or are NFT prices falling, and the overall market is cooling? 

When buying any asset as an investment, do your due diligence. Because NFTs are so speculative, careful research is especially important when buying them. If market research isn’t something you feel comfortable doing, you could seek the assistance of a professional analyst. They could possibly offer their opinions on the value of individual NFTs and or the overall market. 

Another option might be to look to social media for help. As mentioned above, if you take this option, be careful not to fall victim to scammers. NFT communities on Discord or Telegram may offer some insight into the state of the NFT market. Sometimes by asking questions or even just reading through other posts, you can build a better understanding of the market. If you use common sense and go about it methodically, buying and owning NFTs can be an extremely enjoyable experience.

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