NFTs are the newest and hottest thing to invest in. NFTs became popular around two years ago but the first one sold was back in 2014. Since then, everyone is trying to grab one in the hopes it will make them rich. The sad truth is, they are just like any investment and prone to ups and downs. However, I would say they are higher risk as well. Let us dive in, explore what are NFTs, and are they worth investing in.
Disclaimer – I am not a licensed broker, tax advisor or lawyer. I am a guy who simply loves to invest. Consult a professional before any major purchases.
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What Is a Non-Fungible Token (NFT)?
An NFT, or Non-Fungible Token, is an asset that has been tokenized via a blockchain. An artist will create a design, use cryptocurrency to pay a fee to have it listed and it will be assigned a unique identification code and metadata. From here, it will go for sale and anyone can buy it. Like going to an art gallery or auction.
NFTs can be traded or exchanged for cryptocurrency, money, other NFTs, real estate, etc. Each piece of art that an NFT represents will have a value with it. You can use whatever means available to you to buy that piece as long as the seller agrees to that transaction. The most common way to buy an NFT would be crypto.
How NFTs Work
The process to create a NFT is called minting, wherein information of the NFT is recorded on the blockchain. The minting process entails a new block being made. The NFT’s information will be validated by a validator, and the block being closed. The process will often incorporate smart contracts that assign ownership and its transferability.
Each NFT will have its own unique identification number. An artist can make a run of one of their designs and sell a certain amount. For example, an artist can sell 100 copies of one print. Each print will have its own unique code to represent that NFT.
NFTs can be invested in but research is key. Right now, the popularity of this type of investment has waned quite a bit. You will still find new artists and new investors but I would be wary of buying an NFT. The liquidity of an NFT might be harder to obtain compared to cryptocurrency or regular stocks.
I would research a NFT before purchasing it and make sure its value and its continued value will persist in the coming months or years. Avoid hype NFTs from tiktok “influencers” or youtube personalities. They simply want you to buy a NFT to raise its value so they can sell theirs. Find a quality NFT on your own.
NFTs can be very useful in identity protection. Personal information stored on an immutable blockchain cannot be accessed, stolen or used by someone without your consent if they do not have the keys.
How Can I Buy NFTs?
Many NFTs require cryptocurrency, mainly ETH to purchase them. There are many market places that sell NFTs such as Rarible, OpenSea and SuperRare. These market places will have hundreds of NFTs you can purchase.
Are NFTs Still Worth It?
This is a tough question. As I said before, their popularity has waned quite a bit but I still do believe you can find a good investment with them. It is like going to a gallery or auction and finding a painting that has good value and will retain its value. In addition, you might get lucky and find a new NFT for cheap and a year from now that brand explodes and you suddenly are holding a work of art that is worth millions.
Do your research, do your research and as always, do your research!