NFT domains: What are they and how they work
Explore how blockchain domains are helping simplify crypto transactions.
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Stored on a public blockchain, NFT domains simplify crypto transactions by replacing digital wallet addresses with easy-to-remember names. They also help enable censorship-resistance when used as URLs for websites created through the InterPlanetary File System (IPFS).
But before we dive into the details behind NFT domains, let's take a closer look at NFTs in general.
What's an NFT?
A non-fungible token — better known as an NFT — is a one-of-a-kind digital asset that can take the form of a graphic, audio file, video clip, GIF or even a domain name. They are digital certificates of authenticity that verify ownership on a public blockchain.
"Non-fungible" refers to the unique identifiers behind these cryptographic tokens. NFTs aren't interchangeable, meaning you can buy, swap and sell them with potential gains or losses in value. Contrast this with fungible physical money, which allows you to change one dollar bill for another without losing value.
What's an NFT domain?
Much like addresses used to identify houses within a city, domains allow people to find a specific website on the Internet. With an easy-to-remember name, a domain can connect people online with the products and services they are looking for.
NFT domains are similar to traditional domain names, with a few important caveats:
- No annual registration fees. NFTs are written on a public blockchain. This allows for people to own their NFT domain names outright — with no expiration and no need to renew.
- Simplified wallet addresses. NFT domains uncomplicate the multiple wallet addresses you might have, replacing them with a single memorable name.
- Cryptocurrency, blockchain and Web 3.0 useability. You can use an NFT domain name to receive cryptocurrencies from across blockchain networks and quickly log in to apps that support them.
Why buy NFT domains?
NFT domains are purchased by people wanting to simplify their crypto transactions by offering a single name to replace multiple wallet addresses. They are also used as URLs when creating censorship-proof websites through IPFS. These peer-to-peer websites run without centralised servers, and your new NFT domain can be used as its address.
Many people also buy NFT domains as an opportunity to profit from their resell.
What makes NFT domains valuable
NFT domains are unique identifiers with a number of uses. They can also be collected as speculative investments.
- Utility. NFT domains are bought for their use as a personal identifier. Replacing complex addresses from multiple wallets with a single domain name simplifies the sharing of payment information. You can also use them to host your own Web 3.0 sites.
- Scarcity. As each NFT domain name is unique, the scarcity of unique identifiers can be used as speculative investments. Reselling catchy NFT domains on secondary marketplaces can be profitable.
How to buy NFT domain names
- Sign up for an NFT marketplace. Look for collections of existing domain names for sale, such as OpenSea and Rarible. Submit a username, password and valid email address to get started.
- Set up a digital wallet. You'll need to connect a crypto wallet to the NFT marketplace to buy your new domain name. The popular MetaMask wallet is widely accepted by marketplaces.
- Add crypto to your wallet. You'll need to pay for your new domain name with cryptocurrency, like Ether (ETH). Check with the marketplace you've signed up with for available payment options. If you are paying with crypto, transfer it into the wallet you want to connect to the marketplace.
- Choose an NFT. Search on the marketplace for such terms as "domain" or "domain names" to find one you're interested in.
- Finalise your purchase. When you've found a domain name you like, select it and add it to your cart for purchase. You may have the ability to bid on the NFT domain if the seller has listed their NFT for auction. After purchase, confirm your transaction using your connected wallet.
After you've purchased a unique NFT domain name, it needs to be "minted" — or created and recorded — on a public blockchain.
Unstoppable Domains is a popular service that allows creators to mint NFT domains for free, whereas existing NFT domains can be purchased on mixed marketplaces like OpenSea.
Payment methods vary among marketplaces, and you're generally expected to connect your cryptocurrency wallet to buy existing or preminted NFT domains with Ether (ETH).
How to store and protect your NFT domains
After purchasing your NFT domain, it is stored on the marketplace you purchased it from until you decide to move it elsewhere.
Most platforms offer a built-in custodial wallet. With custodial wallets, the platform controls the keys to your wallet. From the custodial wallet, you can store your NFT on the site and easily relist your domain for sale.
To take full ownership of your NFT — or control the private keys associated with its storage — move it to a personal, noncustodial wallet.
Noncustodial wallets fall into two types:
- Hardware wallets. Wallets — like those offered by Ledger — are considered the safest way to store cryptocurrency and NFTs, including domain names, because they remain disconnected from the Internet.
- Noncustodial software wallets. Wallets like MetaMask and Coinbase Wallet allow for Internet connectivity and can be downloaded on your computer or mobile device. You can protect your assets by storing your private keys in a safe place offline.
Where can I buy an NFT domain?
NFT domain fees
When creating a unique NFT domain, you may need to pay a flat fee by the platform providing the service.
Gas fees apply to all transactions that occur on the marketplace:
- Minting your NFT domain
- Transferring your NFT domain in and out of your wallet
- Creating a collection on an NFT marketplace
- Listing your NFT for sale
Can I make money on NFT domains?
The value of NFT domains has grown alongside demand, and there's no guarantee that your domain will appreciate in value. Yet you have two main ways to potentially turn a profit with these crypto assets.
Buy and sell NFT domain names for a profit
Start by browsing your options for what's trending. The key is to buy low and sell high, similar to any other asset you intend to flip. Marketplaces like OpenSea allow you to create collections from preminted NFT domains and offer them for resale.
Create and mint NFT domains to sell
People can mint unique NFT domains from names or topics that could be of interest to a secondary party. You can mint trending keywords or popular subjects through an NFT domain service like Unstoppable or Ethereum Name Service. Once created, you transfer your NFT onto a marketplace for sale.
Creators can specify an amount to be credited to their wallet for the primary sale of their NFT. Creators also get royalties on each subsequent sale of the NFT domain name — a feature coded into the smart contracts used by the marketplace.
How to create and sell NFT domains
Steps vary by marketplace, but you can expect general steps minting and selling an NFT domain:
- Sign up with a marketplace. Look for a website that allows for the minting of unique NFT domains.
- Search for a name. Type trending or popular topics into the platform's search tool to see what's available.
- Choose a domain extension. Examples include .crypto, .bitcoin or .eth.
- Purchase the domain. Pay through your digital wallet with crypto, a credit card or other methods accepted.
- Mint NFT on a public blockchain. Confirm that your connected wallet is set up to handle the blockchain's network. While minting often occurs on the Ethereum network, some services use Polygon.
- Transfer the NFT domain to your wallet. You may need to pay a gas fee — like a transaction fee — depending on the network you've chosen.
- Upload your NFT domain for sale. Follow the instructions on your chosen NFT marketplace platform to create a collection. Set a price for your NFT, either fixed or through auction, and wait for offers to roll in.
What to watch out for
When purchasing NFT domains, be aware of potential risks that include:
- Marketplace security. If you plan to leave your NFT domain in a custodial wallet provided by a marketplace, carefully read its security protocols to understand how it safeguards your assets. And if it offers two-factor authentication, enable it in your settings.
- Potential scams. Take caution with any email, support request or embedded link claiming to be from an NFT marketplace. Marketplaces will never ask for personal information that you haven't already provided at signup.
- Financial loss. All investments carry risk, and there's no guarantee that your NFT domain name will retain or appreciate in value.
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