Non-fungible Tokens (NFTs) are the latest trend in the digital asset world that is only growing in popularity by the day. The uptick in favorability has especially gone through the roof during the pandemic as many investors are actively seeking to buy NFTs. If you are someone who wants to know what NFTs are and if they are worth investing in, this article is definitely for you.
An NFT is a digital asset that can represent objects in the real world, just like art, music, in-game items, or videos. NFTs use the same blockchain technology as cryptocurrencies, but they are not a currency themselves. You can imagine these digital tokens as virtual certificates that you can use to prove the ownership of a physical asset.
The value of NFTs is largely determined by what the crypto community is willing to pay for them. As a result, experts are largely divided on whether NFTs are sustainable and worth investing in for the long run. This article aims to address all your queries about what NFTs are and how you can make a fortune by trading and investing in them.
How Is NFT Different From Cryptocurrency?
NFTs stand for Non-fungible Token, and the concept of it is solely based on the word non-fungibility. Fungibility generally refers to tradability, where, for instance, you can trade your existing physical money or bitcoin without affecting its overall value. However, NFTs are unique assets in the digital world that cannot be replaced at their exact value with something else.
How Does NFT Actually Work?
NFTs have their own uniquely identifiable codes that create digital scarcity. As it happens, scarcity can cause a price rise, if the product in question is in demand. NFT allows its buyer to own the item in its original form. Since it contains built-in authentication, it serves as proof of ownership. Sometimes these "digital ownerships" account for more than the item itself.
By and large, most experts agree that keeping the tokens safe is the most important factor in managing cryptocurrency. Just as cryptocurrency, NFTs are also held in wallets. Inside these wallets, there is a unique link that allows the content to be transacted with. As long as they are on the same blockchain, you can take NFT from one marketplace to another.
You can always store or access your NFTs through a digital or hardware wallet. There are online wallets such as Metamask, Coinbase or Alpha Wallet that offer protection through passwords. It is a standard way to protect your NFTs from possible cyberattacks. It is important to note that your private key is of utmost importance to protect everything that is in your digital wallet.
How Can I Buy NFTs?
If you are someone who is looking to build your own NFT collection, you will need to get a digital wallet that can allow you to store them. In addition, you might have to buy some cryptocurrency depending on the type of currency your provider accepts. Keep in mind that platforms such as PayPal, Kraken and eToro allow you to buy crypto using your credit card.
There are currently many popular NFT marketplaces where you can shop for rare digital items and collectables. For example, online marketplaces such as OpenSea.io, Rarible and Foundationare home to thousands of NFT creators and collectors. Buyers and sellers gather on sites like these to issue and sell their products.
It is advisable to be mindful of impersonators while shopping for NFTs on open marketplaces. There are many reported instances of customers falling prey to fraudulent dealers who often list and sell works without the owner’s permission. Since the verification processes on these platforms are not uniform, it is imperative to do your own research before investing in NFTs.
All You Need To Know About NFTs As Investments
Just like the other forms of investments, NFTs also entail the traditional principle of investing, where you would want to buy your collectables at a low price and sell them at a high price for a profit. It is important to be mindful of the fact that NFTs do not have an intrinsic value like stocks or bonds do.
There are undoubtedly some strong risk factors involving NFTs. As an investor, it is your job to take those risk factors into account before making a definitive decision on your investment. For instance, if you have a long-term investing goal with a view to making a fortune, you should find NFTs that fit your business portfolio.
Pros of NFT Investment
NFTs have exploded in popularity over the past few years, and there are strong reasons as to why you should consider investing in them. Here is a list of reasons that might make you more enthusiastic about investing in NFTs.
- Since physical collectables such as art have a strong record of appreciating value with time, digital art also tends to show promise when it comes to price appreciation.
- NFTs allow you to reach a wide range of potential buyers and sellers through its marketplaces. Thanks to its easy accessibility, anyone from around the world can participate in the transaction of NFT items.
- NFT has a feature called smart contracts which can allow the artists and creators to earn remunerations on the use and resale of their work in the future. This works as a great incentive for creators and artists since the feature can reward creativity.
Cons Of NFT Investment
Here is a list of reasons that might prompt you to think thoroughly before making a possible investment in NFTs.
- The risk factors surrounding NFTs are always high since they do not guarantee any income on their own. The valuations of NFTs are largely determined by market demands. As a result, even if your collectables have high values in the current NFT marketplace, it has the potential to lose significant values with time.
- The cost of creating and selling NFTs is not free. Thus, the fee that you accrue can amount to a greater number than the value of the item in question at times.
Conclusion
Although the popularity of NFTs is at an all-time high, it is safe to say that the technology is still in its early days of development. As a result, it is essential to do your own meticulous research and assess all possible risk factors before making a decision on an NFT investment.
Hope this article was able to answer any questions you might have had on NFTs. For more insight into the world of crypto, NFT and business in general, get tickets to our seminars where we dive deeper into these topics.