One of the most exciting technological breakthroughs of the past decade, non-fungible tokens (NFTs) are digital assets that link ownership of any number of items, such as real estate, music, videos, or works of art. They are bought and sold online, frequently with cryptocurrency, and vary in price and demand depending upon the unique characteristics of the digital piece they verify. At a fundamental level, NFTs act as certificates of authenticity for digital and physical artifacts.
2021 was widely seen as a breakout year for NFTs, with the technology gaining a foothold in the public imagination through massive sales and widespread media attention. Overall, sales for the year reached $44.2 billion, an astonishing number that signaled a turning point for non-fungible tokens, which were first created in 2014.
One of the many advantages of NFTs is that they can easily be transferred between individuals. All that is required for this exchange is for both parties to have a digital wallet to serve as a holder for the NFT.
Because of the way that they can be sent from one crypto wallet to another, gifting NFTs is a relatively straightforward action and one that every NFT investor is capable of performing. In this article, we’ll show the entire process of gifting an NFT, from the initial purchase of cryptocurrency to the final presentation to your friend or loved one.
Table of Contents
Creating a Wallet
The first step in sending an NFT is to set up a crypto wallet. A digital wallet is essential not only to store the NFT you will buy but also to hold the cryptocurrency that you will use to make the purchase. Despite the abundance of wallets available such as Coinbase, Electrum, and Exodus, one name has always stood out above the others – MetaMask.
Created in 2017 by blockchain software company ConsenSys, MetaMask has since become one of the most popular wallets in the crypto community, with the company surpassing 10 million users in August.
In essence, MetaMask is a web browser extension and mobile app that allows users to interact with the Ethereum blockchain. This allows those with a MetaMask account to store Ether and other tokens, as well as interact with decentralized applications, also known as Ethereum dApps.
We’ve created a thorough guide to downloading MetaMask that can be found here. Keep in mind that Bitcoin cannot be stored on MetaMask because it is not compatible with the Ethereum blockchain.
Buying Cryptocurrency
The next phase in the journey towards making an NFT gift is to purchase cryptocurrency, which can be used to buy the NFT you want. While it is possible to buy NFTs through different cryptocurrencies such as Solana and Polygon, Ethereum is the most widely used token and is compatible with OpenSea, the world’s largest NFT exchange.
In MetaMask, anyone can buy Ethereum directly with a debit card or with Apple Pay by clicking “Add Funds.” You can also buy crypto from another exchange such as Coinbase or Kraken, and then send it to your MetaMask wallet.
Additionally, you can request tokens from a friend by showing them your QR code in person, or by sharing your MetaMask wallet address.
Connecting Your Wallet
The fun part begins once you’ve finished exploring your settings and adding tokens to your wallet. Now you can scour one of the many NFT marketplaces to find the perfect gift!
To connect your wallet to your NFT marketplace of choice, simply follow the prompts shown on the site. In OpenSea, clicking the wallet symbol in the top right corner of the screen will give you the option to link your MetaMask account.
Once you’ve purchased some NFTs, they will live inside your cryptocurrency wallet and can be found via your marketplace accounts (OpenSea, Rarible, etc.), or under the NFT tab on the MetaMask mobile app. MetaMask’s desktop app does not currently allow you to view your NFTs.
Choosing the Right NFT to Give
If you’re not an NFT enthusiast, finding the right token can be an overwhelming process as there are thousands of collections to choose from. While it is always possible to browse through a digital holiday gift guide, these can often be out of date outside of the Christmas season.
We’ve listed some popular themes below to stimulate your imagination and give you some preliminary ideas for NFT gifts. And remember, while purchasing from a verified collection can add a certain prestige to an NFT, there are tens of thousands of other images floating around on OpenSea that are created by unaffiliated artists.
Digital Art
Many of the first-ever NFT collections were created to showcase digital art, and the genre still lives on today in a variety of famous projects. As in the physical world, the array of different artists and styles has led to pieces of both little value and immense worth.
Buyers seeking to spend big bucks on top-tier artwork can look to creators such as Pak, Fewocious, Beeple, and Trevor Jones, who are considered masters in the space. It’s important to bear in mind that some of these NFT collections have astronomical floor prices, and thus aren’t for everybody.
Cheaper options for gift NFTs include the Art Blocks collection, which was one of the first generative art projects that achieved fame outside the world of NFTs. Currently, there are over 56,000 pieces available to choose from, with the lowest priced item listed for 0.179 ETH, equal to just over $350.
Trading Cards
NFT trading cards are just what they sound like – cards that exist on the blockchain in a digital format that represents proof of ownership for various images in the digital world. These digital collectibles often come in a series, with different cards representing various characters or players in the respective universe, which can be fictional or based on real people.
NFT trading cards can be divided into two main categories – historical cards and sports cards.
Historical Cards
Historical trading cards include some of the first NFT collections ever minted, such as Rare Pepes and Curio Cards. Although many admire the art in each digital file, these primarily have value for their historical significance.
Rare Pepes were released in 2016 and feature “Pepe the Frog,” the main character in the series who is often shown in various comedic situations that feature satirical takes on politics, culture, and finance.
Curio Cards began as an online art show and permanent gallery that launched in early 2017. Today, these cards are the oldest known example of crypto art on the Ethereum blockchain and the series features 30 unique digital trading cards from seven different artists.
Sports Cards
Thanks to the huge cultural appeal of NBA Top Shot, sports trading cards are far more well-known than their historical counterparts. Created by Canadian developer Dapper Labs, NBA Top Shot is the National Basketball Association’s foray into the digital realm.
This NFT collection is made up of trading cards that each represent a special moment from basketball history. Some highlights can be purchased for as little as a few dollars, while one fan spent a whopping $208,000 for a rare LeBron James dunk moment.
Other sports trading cards include the Sorare series for soccer fans and Candy Digital for football fans.
Virtual Land
Another category to consider is that of virtual land. Although Meta Platforms’ ultimate metaverse product is still years away from completion, there exist several blockchain-based games that can be accurately defined as metaverse platforms. A major part of all of these closed-world ecosystems is virtual land, which players can buy and sell on NFT marketplaces.
Decentraland and The Sandbox are popular games that both have land plots listed on OpenSea. Floor prices for these platforms can be relatively pricey, coming in at around 1.5 ETH, but cheaper options exist in the form of SuperWorld and Voxels.
Sending Your NFT Gift
Now that you’ve purchased an NFT, the next step is to send the token to the intended recipient. While an NFT can be sent directly from your wallet, most NFT marketplaces offer the option to transfer an NFT as long as your wallet is connected. Since OpenSea has an easy-to-use interface, many in the crypto community prefer to send their NFT directly through the site.
Getting the Recipient’s Wallet Address
The key step in sending any digital token, whether it’s a cryptocurrency or an NFT, is to obtain the recipient’s public wallet address. This is essential to ensure that the digital file arrives at the right location.
Wallet addresses are shared as either a string of alphanumeric text or a QR code. You can simply ask your intended recipient to send you their address in a message. This address differs from their private keys, and only allows those who have it to send them currency, not withdraw it, meaning it is not a security risk.
Keep in mind that your unique public address is located on the MetaMask account home page above your balance amount. This home page (pop-up window) can be reached by clicking on the MetaMask desktop extension in the top-right corner of your browser. Both the mobile and desktop versions have a button right next to the code that can be used to copy the address onto your clipboard.
Making the Transfer
Once you have entered the correct wallet code, navigate to your OpenSea profile page and click on the NFT that you wish to send. Click on the “Transfer” button that resembles a paper airplane, and then enter the correct address in the box.
Your wallet software should confirm for you that the wallet is compatible. If it isn’t, don’t complete the transaction. For example, if you’re sending an Ethereum-based NFT, you can only send it to an Ethereum wallet.
Because there’s no reverse option for blockchain transactions, double-check the transaction details and make sure that you have entered the recipient’s wallet address correctly. Once you’re certain everything is accurate, click the button to authorize the transaction.
After the transaction completes, always verify the receipt with the person you sent it to. If you don’t want to ask them directly, you can use verification sites such as Etherscan to make sure the blockchain transaction went through.
Transaction Fees
Investors new to the NFT space are usually unaware that any transaction that takes place on a blockchain incurs significant fees, also known as “gas fees.” These fees are in addition to the cost of the NFT itself and are paid to miners who solve the computational equations that validate the transfer.
Gas fees are known to fluctuate, so keeping tabs on fees until an opportune moment arrives could help reduce your expenses. Generally, transaction costs are lowest on the weekend and during weekdays in the morning and night.
Tax Implications
There are two main scenarios in which gifting an NFT would incur a taxable fee – high-cost gifts and an asset’s appreciation of value.
The IRS considers gifts surpassing $16,000 (or $32,000 if made by a couple) to be taxable events (unless the recipient is your spouse). So if you are unmarried and purchased your NFT for over $16,000, you would be obligated to pay between 18% and 40% in taxes if you transferred it as a gift.
Keep in mind that those limits are per recipient, meaning you could give several gifts up to $16,000 to different people without triggering the gift tax.
Capital Gains
If your NFT is worth less than $16,000, then the only tax liability will lie with the recipient when they eventually decide to sell. As with other asset classes, NFTs are subject to capital gains taxes. This means that any positive difference between the buying and selling price would be taxed. If your NFT is worth less than the initial price, selling would allow for a tax benefit at the end of the year.
Because NFTs fall into a gray area between cryptocurrencies, which are taxed as property with a long-term capital gains tax rate that varies from 0% to 20% based on income, and collectibles, which are defined by the IRS as “any work of art” and taxed at a higher rate of 28%, it’s sometimes unclear exactly what a seller owes to the government.
Presentation
If you’ve paid the gas fee and confirmed the recipient has received your non-fungible token, you are more than welcome to stop here and bask in your success. However, there will undoubtedly be some readers who wish to add a special touch to their gift, especially if it’s made around the holiday season.
Below are some ways that you can “gift wrap” your NFT by providing a physical object that compliments your digital gift and adds sentimental value.
Printing A Physical Copy
If you are going to meet your recipient in the physical world, giving them a printout of their NFT might be a nice touch, especially if they are brand new to the space. There are tons of companies that offer this service and cater specifically to NFTs, so it shouldn’t be difficult to add in a regular frame or a digital photo frame.
It’s even possible to reverse the process and give them a physical copy of their NFT first, then walk them through setting up their wallet later.
Gifting a Hardware Wallet
Additionally, owners can gift an NFT with a hardware wallet – a physical crypto wallet that functions as an offline storage device. These “cold wallets” are not connected to the Internet and come with NFT support and are considered safer than hot wallets as they can’t be hacked.
Ledger wallets are one of the most popular hardware wallet brands, and they offer several different product types.
