Can You Buy an NFT for a Hundred Swiss Francs? A Self-Experiment, Part 1

The plan sounds simple: to buy an NFT with a modest budget of 100 Swiss francs. And not just any NFT, but one that I can resell one day at a higher price.

Although I’m not a total stranger to the world of cryptocurrencies – I’ve invested a small part of my assets in crypto on a buy-and-hold strategy – I frankly don’t know anything about NFTs. So, my experiment starts with doing some research, during the course of which I stumble across some very interesting and insane facts.

Imagine that you had 70 million US dollars to spend. There’s a lot you could do with that kind of money. You, for instance, could buy an 83-room five-star resort on Lake Lugano or six private islands in Dubai or 280 Lamborghini Huracáns. Or you could buy a digital work of art – an NFT – on the internet. You would then own that artwork, but every other internet user would nonetheless be able to view, download, and share it.

That sounds completely absurd, and it is in a way, but it’s also a reality. In March 2021, the digital artwork “Everydays: The First 5,000 Days” by an artist who goes by the pseudonym Beeple was sold for an eye-popping USD 69.3 million, making it the most expensive NFT to ever change owners to date.

Care for some more crazy examples?

• Jack Dorsey, the founder and former CEO of Twitter, sold his maiden tweet as an NFT for USD 2.9 million.
• The original Nyan Cat meme (a GIF of a flying cat leaving a rainbow trail behind it) changed owners for USD 600,000.
• Cryptopunk #7523 (a digital portrait of a pixelated face adorned with a skullcap) was sold in June for USD 11.7 million.

But what are NFTs in the first place? And why do people pay so much money for them? NFT stands for non-fungible token, which means that an NFT is a non-interchangeable digital asset. NFTs are based on blockchain technology and are deeds to unique digital objects associated with video games, music, or videos, for instance, or to digital works of art, as in the aforementioned examples.

The most important feature of an NFT is its uniqueness. To give a little example, a conventional banknote is interchangeable. I can easily replace it with another banknote of the same value. The Mona Lisa, in contrast, is not interchangeable. Even a perfect copy of that painting will never be as valuable as the original Mona Lisa hanging in the Louvre, precisely because the copy isn’t the real Mona Lisa. And this is exactly what NFTs are all about. When I buy an NFT, I get registered in the blockchain as its sole owner. Other internet users can view, download and share my NFT, but the original doesn’t belong to them. It’s not so unlike the Mona Lisa. I can hang an art print of the masterpiece in my living room, for example. I then own an image of the Mona Lisa, but I don’t own the Mona Lisa.

But enough with theory. I want to buy an NFT now. On YouTube I find out that the easiest way to buy NFTs is via an online marketplace called OpenSea, a kind of eBay for NFTs. OpenSea runs on the Ethereum blockchain, which means that I have to pay for my NFT in cryptocurrency instead of with conventional money. I logically choose the cryptocurrency Ether, the native token of the Ethereum blockchain.

In order to pay with Ether, I first have to set up a digital wallet for cryptocurrencies. Two of the most popular wallets out there are Coinbase and MetaMask, the one I pick. My Ether that I bought with my credit card are stored safely in the wallet. Only I know the private key to the wallet, which consists of a good dozen randomly generated words. And I want the Ether to stay secure, so I don’t store the key digitally, I instead write it down and stash it in a secret hiding place.

I now hold 0.0238 Ether, for which I paid 100 Swiss francs.

But which NFT should I buy now? Perusing OpenSea, I see a fierce-looking cat wearing a gas mask and brandishing a squirt gun, a portrait of the rapper 50 Cent rendered in the style of Rembrandt, a snail with rainbow-colored eyes and tentacles sporting a Santa hat, a yellow dog with a mustache puffing a cigar, and a goat that looks like Elvis Presley. And I ask myself in earnest, “What the heck am I doing here?”, but at the same time I find it all somehow amusing. But out of the thousands of NFTs, how do I identify the one that will turn my 100 Swiss francs into 10,000?

So, it’s back to YouTube. Fortunately, there are thousands of videos there touting simple, sure-fire ways of becoming a multimillionaire with NFTs in a flash. While I click on the first video on the YouTube page, in the back of my mind I’m already thinking about whether I should order my new Lamborghini Aventador next week in Taweret blue or Nimbus gray.

But alongside videos with sensational titles like “Become a Millionaire with NFTs in 3 Easy Steps,” there are also plenty of serious instruction guides. Most of them steer me toward NFTs that belong to a collection. NFT collections bring the principle behind classical trading cards – think Pokémon or Panini soccer stickers – into the digital age.

Most NFTs in a collection are limited editions of items that all look similar to each other. During my search, for example, I come across a collection of NFTs that consists solely of portraits of dogs, all featuring a wide variety of different colors, facial expressions, hats, hairstyles, collars, and the like. The combination of such traits ultimately determines the rarity of an NFT. In my dog example, there are 1,251 NFTs with a green background, but only 24 with a virtual reality background. The latter are rarer and thus more expensive.

The collection, by the way, is called The Doge Pound, a dual play on the popular Doge meme that gave birth to Dogecoin and the hip hop group Tha Dogg Pound founded by Snoop Dogg. Pretty witty, huh? What I find less humorous is that the cheapest dog in the collection costs 2.95 Ether. That equates to around 10,000 Swiss francs and would bust my budget.

But I don’t allow myself to get deterred by that and continue my quest. A collection’s community – i.e. the people who already own an NFT in the collection – is a very important aspect. To learn more about the community, a prospective NFT buyer should look around on Discord and Twitter in search of answers to questions like: How large is the community? What’s the vibe within the community? Are there influencers or other celebrities who promote the project or are personally involved in it? It’s basically about gauging how popular the collection is and how much upside potential it has.

Many of the most popular NFTs are not just images that you can own, but also offer a genuine added value. Take, for example, the Bored Ape Yacht Club, one of the best known and most expensive collections. The cheapest ape at the moment costs around 230,000 Swiss francs. The owner of the image can not only use it as an avatar on his or her social media profiles, but also gets additional NFTs for free and will receive invitations to attend parties on yachts and concerts featuring international stars. An exclusive mobile game for BAYC NFT owners playable for ten days only will also soon be launched. Contestants will be able to win extremely lucrative prizes with their apes, so they say.

A surge of joy washes over me. My search is over at last and I’ll finally own my very first NFT. But disillusion sets in right after I click on “buy now”: it turns out that I can’t even afford the Rogue Society bot.

Have you ever heard of gas fees? Gas fees are charges that I have to pay to have my transaction processed on the Ethereum blockchain. The transaction must be validated by a multitude of computer nodes in a process known as “proof of work.” That costs money. Too much money for me. I would have to pay CHF 150 in fees to buy the Rogue Society bot that costs CHF 80, which adds up to a grand total of CHF 230.

Here’s something else I learned: gas fees aren’t based on the purchase price of the NFT, but instead depend on the capacity utilization of the blockchain in question and the complexity of the transaction. Over the past two months, gas fees on Ethereum for an NFT acquisition have very rarely been below CHF 100, as my research has revealed, unfortunately in hindsight.

I’m too impatient to wait around in the hope that gas fees on Ethereum will drop. But from my prior research I know that there are alternatives. I haven’t given much thought to them thus far, but now I have to. I switch to Solana, a relatively new blockchain that is reputedly less expensive thanks to its use of a different validation algorithm. Instead of the “proof of work” process that Ethereum employs, Solana uses a “proof of stake” algorithm. Proof-of-stake validation requires much less computing power, which drastically reduces costs as well as energy consumption, by the way. A typical Solana transaction costs a trifling USD 0.00025 on average. The NFT market on Solana is admittedly still small at the moment, but the NFTs there cost less to acquire.

New blockchain, new luck. Or rather new bad luck. My MetaMask wallet account that I opened for my Ether doesn’t allow me to hold any Solana. Yeah, of course, that would have been too easy. Over on YouTube, they advise me to give Phantom a try. Setting up a Phantom wallet goes just as fast as opening a MetaMask account. Now I simply have to send my CHF 100 worth of Ether to my new wallet so that I can buy Solana there.

You’ve guessed it, there’s hardly anything simple in this story. Of course a direct transfer doesn’t work. Fine then, I’ll first get my Ether balance paid out reconverted into Swiss francs. But surprise of surprises, that too isn’t so easy to do. I can only get my Swiss francs back through a cryptocurrency exchange or a cryptocurrency broker. What’s the difference between the two? Whereas conversion prices on a cryptocurrency exchange are set by the open market, a cryptocurrency broker sets buy and sell prices itself.

The path back to Swiss francs turns out to be not just another detour – I’ll spare you the details – but a costly one as well. In the end, the cryptocurrency broker disburses 61 francs to me. Now I could use that money to buy Solana directly in my Phantom wallet with a credit card, but the 4.5% fee is much too expensive for me. YouTube recommends the FTX cryptocurrency exchange to me as a cheap workaround.

Finally, 0.3 Solana land in my Phantom wallet, or will eventually because FTX informs me that I have to wait a week until I can retransfer the money I just deposited. The credit card payment first has to be processed, I’m told. Why does that take a whole week? Beats me.

But in all honesty, in a way I’m really happy about the forced break in the action. This entire undertaking has frayed my nerves. I still don’t own an NFT yet, but have already paid the price for my beginner’s mistakes. Of the 100 Swiss francs that I originally invested, 39 have already been eaten by fees. Discover next week in a new blog post whether I manage to finally get my hands on an NFT with my remaining budget.

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