How To Gift Non-Fungible Tokens (NFTs)

NFTs can be a fun and unique digital gift for any occasion

NFTs on computer, in a holiday stamp
Photo:

The Balance / Alice Morgan

Non-fungible tokens, or NFTs, are a relatively new type of digital asset that represent digital ownership of an asset, commonly an image or video. While anyone can view the NFT, it’s only owned and controlled by a single digital wallet owner. NFTs are closely tied to the cryptocurrency ecosystem and may be stored in a shared wallet with ethereum or other compatible currencies.

If you have a friend or family member excited or curious about NFTs, giving one away as a gift could be a fun choice for their birthday, the holidays, or any other time of the year. Keep reading to learn more about how NFTs work and how you can gift one to someone else.

Key Takeaways

  • Non-fungible tokens (NFTs) are digital assets that are sold using cryptocurrencies and their ownership is verified on a blockchain.
  • NFTs can be anything—computer-generated avatars, sports highlights, or collectibles like art.
  • To gift an NFT you need to purchase one on an NFT marketplace using a cryptocurrency wallet.
  • Transactions on a blockchain are often final and irreversible, so double-check all information about the recipient before completing the transaction.
  • Spending cryptocurrency to buy an NFT may create tax implications for the gift-giver.
  • The value of the NFT depends on the demand for it. Certain artwork or gaming avatars have sold for millions of dollars but have lost value over time.

How To Get NFTs

NFTs are digital assets that are sold using cryptocurrencies and their ownership is verified on a blockchain. They are called non-fungible because, unlike cryptocurrencies, they cannot be used as a medium of exchange. That also means that while they can be bought and sold on marketplaces, they cannot be traded like stocks or cryptocurrencies. NFTs can be anything—computer-generated avatars, sports highlights, or collectibles like art.

Note

The value of the NFT depends on the demand for it. Certain artwork or gaming avatars have sold for millions of dollars, but have lost value over time. Also, not every NFT may appreciate in value or command a liquid market.

To gift an NFT, you have to first get the NFT into your own digital wallet. Next, you’ll need to buy cryptocurrency to make an NFT purchase. The most popular currency for NFTs is ethereum. Once you own ethereum and it’s in your wallet, you can connect to a marketplace like OpenSea or Rarible to purchase the NFT. You could also purchase NFTs offered as collectibles by specific brands, such as the NBA.

NFTs can either have a fixed selling price, or you need to bid for it in an auction (think eBay). In an auction, typically all bids are visible and some platforms may require valid bids to be higher than previous bids placed. The owner of the NFT would then make the sale to the highest bidder.

If you are new to cryptocurrency and NFTs and only want to send an NFT as a gift, the easiest way to start is with a digital wallet like MetaMask, which is free and works as a browser plug-in or mobile app.

Who To Give NFTs To

Only someone with a compatible digital wallet can receive an NFT. That restriction makes gifting NFTs to children who are minors tricky, as most exchanges, brokerages, and wallet apps will not let you create an account for a child below 18 years of age.

Before gifting an NFT, consider the responsibility of ownership that comes with the item. You should generally only give NFTs to an individual who understands what they are getting ownership of, how to access it, and how to keep it safe.

NFTs are popular with technology enthusiasts, cryptocurrency users, and investors. If you know someone who loves getting involved in the newest technologies or is already into cryptocurrency, they may truly appreciate getting an NFT as a gift. 

When choosing an NFT, you could consider purchasing a budget-friendly NFT or consider gifting partial ownership in a valuable one. Platforms such as Fractional allow for fractional ownership in rare and expensive NFTs.

How To Gift NFTs

Giving an NFT is very similar to giving someone cryptocurrency. To get started, you’ll need the NFT, a cryptocurrency balance to pay transaction fees, and the recipient’s public wallet address.

  1. Get the Recipient’s Public Wallet Address

    Start by getting the recipient’s public wallet address and confirming the details. If an NFT is sent to the wrong address or an incompatible address, it may be lost forever. Wallet addresses are shared as either a string of alphanumeric text or a QR code.

  2. Open Your Cryptocurrency Wallet That Holds the NFT

    Next, log into your cryptocurrency wallet that holds the NFT you want to give. Make sure to keep your wallet information private and secure, as anyone with the wallet’s password or private keys can access any currency and NFTs you own.

    Note

    To send the NFT, you will also need enough currency in your wallet to cover gas or transaction costs. In some cases, those network fees can be significant.

  3. Prepare the NFT Sending Transaction

    Once logged into your wallet, navigate to the NFT and choose the option to send the asset to another wallet.

    Enter the recipient’s wallet address in the correct box. Your wallet software should confirm for you that the wallet is compatible. If it isn’t, don’t send the transaction. For example, if you’re sending an ethereum-based NFT, you can only send it to an ethereum wallet. You can’t send to a bitcoin or other wallet directly.

    Depending on the wallet and network, you may have an option to pay higher fees for a faster transaction or lower fees for a slower transaction.

    Note

    When you go through a transaction, the gas price is an offer or a bid to the network to hasten the transaction. If you offer too-little gas, your transaction may remain pending and not get verified for a long time.

  4. Double Check the Details and Send

    Because there’s no reverse option for blockchain transactions, double-check that your transaction details are correct. Maybe even triple-check to be safe.

    Once you’re certain everything is accurate, click the button to send the NFT. This broadcasts the transaction to the network of computers supporting the blockchain for confirmation.

  5. Verify Receipt on the Blockchain

    Because blockchain transactions are public, you can view the transfer while it’s in progress and confirm that the NFT has landed in the correct wallet when the transaction completes. You can do this using a free blockchain explorer, such as Etherscan.

    The history of an NFT on the Etherscan blockchain explorer
    The history of an NFT on the Etherscan blockchain explorer.

    Eric Rosenberg

    Depending on the wallet you have, the recipient may not get a pop-up or notification that the NFT landed in their wallet. You can do the fun part of letting them know they have a new NFT.

What To Watch Out For: Rules, Regulations, and Reminders

In most cases, there are no special rules or laws around NFTs. But they're relatively new so there may be a lot of uncertainties associated with them. Plus, there are a few nuances you need to consider prior to gifting an NFT.

Tax Implications

There are potential tax implications that you may want to be aware of. First, cryptocurrencies work like money but are treated similarly to a stock investment for capital gains tax purposes. If you used cryptocurrency to buy and send the NFT, those could be taxable events.

Note

Gifting NFTs could also be subject to gift tax, but only if it’s worth more than the annual exclusion.

If the NFT appreciates considerably over time, the recipient of your gift could be on the hook to pay taxes if and when they decide to sell it. Capital gains on NFTs could be tricky, as rare NFTs may be treated as collectibles, which are taxed at a higher, long-term capital gains rate of 28%.

Transaction Costs To Consider

Transaction fees may add a significant cost to your gift-giving experience. Depending on network congestion, network fees may cost hundreds of dollars when sending an NFT.

These fees are in addition to the cost of the NFT itself, and you may have to pay network fees twice, too—once when you buy it yourself and again when sending it. Network fees are paid to the miners who support the blockchain, not the NFT marketplace or seller.

Creative Gift Presentation Ideas

Because you can’t put an NFT in a box and gift wrap it, you may want to come up with other fun or creative ways to present the NFT to the lucky recipient. Here are a couple of fun ideas to choose from:

  • Gift with a hardware wallet: If the recipient doesn’t have one, you can load the NFT into a hardware wallet and give them the wallet and NFT all at once. Ledger wallets are relatively low-cost among cryptocurrency hardware wallets and come with NFT support.
  • Print a copy to physically deliver: You can print a page showing the NFT along with instructions to access it or a note requesting their wallet address.

Benefits of Gifting NFTs

If you own an NFT that’s gone way up in value, gifting the NFT could save you on taxes compared to selling it and keeping the cash yourself. But mostly, giving an NFT is about engaging with your friend or relative in a fun way using exciting technology. Happy gifting!

Frequently Asked Questions (FAQs)

How do NFTs work?

Non-fungible tokens (NFTs) are digital assets whose ownership is verified on a blockchain. NFTs can be based on anything — original or custom artwork, sport memorabilia or even online gaming avatars. The transaction history and data associated with an NFT are made public on the blockchain and cannot be changed once verification is complete. Not only can an NFT owner prove their claim without a doubt, it can also not be stolen.

Where can I buy an NFT?

Non-fungible tokens or NFTs can be purchased using an NFT marketplace such as OpenSea, Rarible. Before purchasing an NFT, you will need to have a compatible cryptocurrency wallet and cryptocurrency funds to be able to purchase the NFTs. NFT prices can be decided through an auction or can be fixed. The value of an NFT depends on the demand for it. So an expensive NFT appreciate further or lose value over time. Keep that in mind before deciding to purchase an NFT.

Was this page helpful?
Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. NBA Top Shot. "Own the NBA's Best Plays."

  2. MetaMask. ”MetaMask FAQs”.

  3. Fractional.art. "Buy, Sell and Mint Fractions of NFTs."

  4. MetaMask. "How Do I Send, Receive, or Cash out an NFT?"

  5. IRS. "Frequently Asked Questions of Virtual Currency Transactions."

  6.  IRS. "2022 Instructions for Form 709 - Draft," Page 3.

  7. IRS. "Topic No. 409 Capital Gains and Losses."

Related Articles