Crypto

What are NFT wallets? Where are NFTs Stored?

NFT wallets

The NFT market has gained a lot of traction over the past two years. Its sales volume went from a few million dollars a month to multiple billions of dollars. Many newcomers have entered the NFT space through stories of children making money through NFTs, and the assumption that the NFT space is still in its early stage. 

With new people getting involved in the NFT space while having no experience with the blockchain and web3.0 world, a large portion of newcomers can get confused about what an NFT is or how it works. Even stranger for many is the fact that one cannot simply purchase an NFT with his credit card, checking out in the same way that one would with an online merchant. Purchasing NFTs requires multiple steps, which is more work than some might be willing to put in. 

A big question that many have asked is: Where are NFTs stored? and can I buy NFTs without a wallet? The short answer is that after NFTs are purchased, they need to be stored in a crypto wallet, like Metamask, but we will further answer this question by explaining what an NFT is, why a wallet is needed to prove the owner of the NFT, and finally some third-party solutions that exist if someone wants to buy an NFT without using a web3.0 wallet.

What is an NFT?

What are Cryptopunks and why are they so expensive?

Cryptopunks by Larva Labs.

An NFT is a token that is minted on a blockchain and that is unique from all other tokens. The big difference between a fungible token and a non-fungible token (NFT) is the fact that each token from a fungible token set is the same; it is interchangeable. You can swap one dollar out for a different dollar, and their value is the same: they are both worth one dollar. 

However, two NFTs from the same collection could have different attributes, artwork, and functions and therefore the value of the two NFTs can be different. Many people think of NFTs as “digital artwork”, which indeed is true in the sense that each NFT is unique and can only have one owner at a specific moment. It would be more appropriate however to describe an NFT as a digital collectible, with a limited supply and having clear proof of ownership and proof of creator through the blockchain. 

Since the blockchain is immutable, it is very hard to fraud an NFT art piece. It would be apparent by the fact that the copied NFT art piece would be created by a different wallet, giving  proof that the piece is not the original art piece minted by the original wallet.

The “minting” process for an NFT requires a gas (network) fee, where generally the wallet that pays the gas fees for minting becomes the owner of the NFT. This way, anyone can know when the NFT was minted and who minted it. This gives transparency about the digital asset in question.

To sum it all up: an NFT is nothing more than a digital collectible, where ownership and creation are secured by the blockchain.

Like any collectible, such as pokemon cards, people enjoy trading NFTs and even purchasing NFTs for real money. Some popular NFT collections are the Bored Ape Yacht Club and Cryptopunks. 

Do NFT wallets exist?

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The Bored Ape Yacht Club (BAYC) collection.

As explained before, an NFT is a digital asset that is stored on a blockchain. All transactions of this NFT will be stored on the blockchain. For the Ethereum blockchain, people can search at any moment to see which wallet owns which NFT using etherscan.io.

There are no wallets exclusively for NFTs, as technically there are no physical wallets that store only a certain currency. In order to record these transactions, we need a crypto wallet for both parties involved. Therefore, every NFT that has ever been minted is stored in a crypto wallet, so that the blockchain can give proper proof of ownership.

Therefore, every NFT that is minted has an associated wallet that owns it. That being said, sometimes companies can create solutions around this, where they hold a custodial wallet for their users, allowing the users to trade freely with each other without the need to use a wallet. 

Related: Crypto staking wallets – A review for staking crypto wallets for 2022.

Can you purchase NFTs without using a crypto wallet?

Beyond specific applications and blockchains that are specialized for NFTs (like the Flow blockchain), most NFTs might need a web3.0 wallet in order to be purchased. Of course, as the NFT space is expanding, there might be some third-party solutions in the near future. 

A great example is Madonna, who used a famous third-party service (MoonPay) to help her purchase her Bored Ape NFT. This third-party service comes at a premium, and more alarmingly has access to Madonna’s crypto wallet. Who is to say that the third-party service may decide to disappear, taking Madonna’s NFT with it? That is why third-party services come attached with some risk compared to the traditional method of purchasing NFTs using a crypto wallet.

So, what should I do if I want to enter the NFT space?

As the NFT space continues to grow, more third-party services and applications could surface to help people purchase NFTs without needing a wallet. However, taking the time to study the utility, security and transparency of having a web3.0 wallet when purchasing and trading NFTs may pay off in the long run.

We have seen many applications, like Celsius, locking up user funds and making them inaccessible to withdraw. These applications can fail and choose to take control of our NFTs. Why risk that, or even give anyone the opportunity to steal our NFTs? By having NFTs stored in our own wallets, we can avoid these problems altogether.

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