What are NFTs and How to Invest in NFTs?

Technology continues to evolve rapidly, both in tangible and nontangible forms. The cryptocurrencies are no longer tech buzzwords, they are very much real, attracting attention of tycoons and celebs along with the mass. But what about the NFTs? Non-fungible tokens have been hogging the limelight these days but there is lack of clarity about their whereabouts. Before you invest in NFTs, you have to know what these are, how safe they are and if these are worth your time and efforts or not.

The basics of NFT

An NFT is described as a digital asset that may represent real-world objects such as videos, art, music, games and more. The NFTs are sold and bought online, mostly using cryptocurrency. These NFTs are usually encoded with the same underlying technology that is used to encode crypto tokens. NFTs came into the scene in 2014 but post 2018, they have been getting more attention than ever before. NFTs have unique identifying codes and so you can think of these as unique digital assets. The regular digital creations are not unique or scarce, for that matter. 

While many NFTs exist in some form the buyers like the idea of owning the source or original item. Since an NFT is made with embedded authentication it can be shown as a proof of ownership. NFT Collectors like that digital bragging rights more than the value of the items. 

Is NFT the same as regular Cryptocurrency?

NFT is made using the kind of programming used to create crypto coins. That is the only similar thing between the two. Physical money and various types of cryptocurrencies are fungible. They can be exchanged or traded. Fiat and cryptocurrencies are also equal in value. A dollar can be exchanged for a dollar. NFTs are quite different. Owing to the digital signature an NFT cannot be exchanged for another. 

So, how do NFTs Work?

NFTs do exist on a Blockchain. Most NFTs are held on Ethereum Blockchain. NFTs are minted or created from tangible and intangible items represented by digital objects. It can include videos, animations, Artwork, video games, music etc. Jack Dorsey, the co-founder of Twitter sold his 1st tweet for $2.9 million as he made it an NFT. NFTs can be deemed as physical collector’s items, but they are digital. The unique data of NFTs makes ownership verification and identification simpler.

So, who gains from using NFTs?

While anyone can buy NFTs, it is the content creators and artists who stand to gain from using these. They get newer ways to monetize their creations. The artists can think of options other than galleries or auction houses for selling their paintings. Besides, artists can also program in royalties which ensures they earn overtime an artwork is sold to customers. Artists relying on digital media as the preferred art mediums have gained from using NFTs. Examples include Jon Noorlander, and Mike Greg.

Brands like Taco Bell and Charmin have auctioned NFT art for charity fundraising. Some NFTs have been sold for very high amounts, making people question the worth of the items. Nyan Cat, a famous GIF NFT sold for a whopping $600,000. A LeBron James highlight NFT was sold for $200,000. In fact, it is not only the businesses but celebrities have also developed interest in NFTs. Lindsay Lohan and Snoop Dogg are two notable examples. 

How to invest in NFTs

Before buying NFTs, you have to do a few things.

  • Get a digital wallet for storing both the NFTs and cryptocurrencies.
  • You would have to buy some cryptocurrency. I most cases it is the Ethereum network token.
  • Using a hardware wallet is advisable for safety.

Once you are ready, it is time to explore the top NFT Marketplaces. The notable ones are Rarible, OpenSea.io, Foundation, Nifty Gateway, SuperRare etc. Most such marketplaces function like auction sites.

While these platforms are reliable and host plenty of NFTs, ensure you buy after verifying everything. Keep in mind that different platforms make use of different processes for verification. OpenSea, and Rarible, for example, do not need owner verification to list NFTs. 

How risky or worthwhile is it?

There are varying opinions even in the crypto sector and technology circles regarding the worth of NFTs. NFTs are quite new and there is a certain amount of risk element involved. Remember the worth of an NFT depends on how much someone else is ready to pay for it. The demand affects the price more than technical or economic indicators. Reselling an NFT bought at a high amount can prove to be tough. It can be hard to estimate the demand of an NFT. 

Literally, anyone can create an NFT without being well versed in nuances of Blockchain technology and crypt sector. However, the caveat is there is no guarantee he or she will be able to make money by selling these NFTs. In fact, plenty of NFTs made by people have not sold or fetched low rates. For your NFT to fetch a high price, the used media should have some USP. 

Summing it up

NFTs are useful for selling forms of digital art and similar collectables. The concept of using a unique digital signature and owning the product digitally drives the demand. NFTs may be utilized to tokenize real-world assets on large scale in future. This will make ownership of assets incorruptible and transparent. However, you should be aware of the uncertainty factors and allied loopholes. Since the technology is new, investing with caution is recommended. 

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