Of the various tech innovations of the last few decades, few have had the immediate impact of blockchain technology. This tech is the basis of cryptocurrencies such as Bitcoin or Ethereum.
Of course, these aren’t the only innovations that blockchain tech has helped to usher in. The latest trend that has swept up the attention of the world is non-fungible tokens or NFTs. These are digital works of art that are sold and verified using blockchain technology.
You may have heard of NFTs, but might still be uncertain: but is it worth investing in NFTs? In order to get an answer, we’ll need to talk a little about how the blockchain works, the value that NFTs have, and the personal considerations that you’ll need to weigh.
Ready to jump in? Read on and we’ll walk you through what you need to know.
What is an NFT?
Let’s start with the basics. Fungible assets (items that hold a value that someone can own) can trade for several other items without ever losing their value.
On the other hand, non-fungible assets are those that can only be held by a single owner, at a single time.
Non-fungible tokens are digital assets that exist in the virtual world. They take many forms but are typically seen in the form of art, music, videos, and so forth. When you purchase an NFT, you become the sole owner of that digital asset.
It’s the virtual version of walking into a gallery and purchasing the original version of a painting or photograph. Even if someone were to make a replication of your NFT, you own the true, original version.
Broadly speaking, NFTs switch hands via cryptocurrency purchases. This is where the blockchain technology we mentioned comes into play.
When you buy an NFT asset, it’s stored in a digital wallet in the same way that any digital cryptocurrency is. The proof of your purchase is backed up on the blockchain, providing a kind of eternal proof of purchase.
The blockchain is supported and kept up to date by a massive network of thousands of computers from around the world. This makes it near impenetrable to hack into, making your purchase process safe and reliable.
Why Invest in NFTs?
There are many reasons for investing in NFTs. You may have an interest in the arts, and want to purchase digital art that you can still own and display.
You may also be interested in supporting artists from around the world, and the structure that NFT provides allows digital artists to protect and get a proper sale for their work in the digital market space.
Of course, one of the main reasons people purchase NFTs is as a form of investment. Like all valuable forms of art, holding an asset of this kind gives you a different kind of financial advantage that isn’t tied to currency.
The Mona Lisa is always going to be valuable, no matter what the dollar is worth. The same could be said about virtual pieces of art in the future.
Does that make investing in NFTs now a smart move?
Like any form of investment, it’s really up to how much risk you’re willing to take on and your own read of the opportunity at play. Art of all sorts has historically been shown to accrue value over time, but whether that will be true of digital art is yet to be seen.
How to Make an NFT Investment?
Generally speaking, NFTs are sold on marketplaces created for the sole intention of selling this type of digital asset. These marketplaces often take on the appearance of a website like Amazon, but with NFTs taking up a place on the digital shelves.
These marketplaces might run differently depending on which you decide to join up with. Some might offer NFT assets at fixed prices, while others may auction off NFTs at a rising price, more like eBay.
Either way, demand generally helps set the price. The more demand there is for a certain kind of work, or the output of a particular artist, the more the price for that asset will rise.
Again, this is the key difference between investing in an NFT versus investing in something like bitcoin. All bitcoins are the same, and one is not more valuable than the other as long as they are of the same amount. An NFT is a unique and individual work, its value is its own completely.
Once you make an account with this kind of marketplace, you’ll link your digital wallet which contains bitcoin or whatever form of cryptocurrency you use.
While many NFTs are quite expensive, there are many different purchasing options. You may even want to look into fractional ownership, which allows you to split ownership of a very valuable NFT with other investors.
It’s a kind of joint ownership that makes this form of investing much more accessible to people with less wealth.
Once you make your purchase, the exchange registers on the blockchain and your new NFT will be all yours to own.
Basics of Investing in NFTs
Interested in owning an NFT artwork? You’ll need to get familiar with the ins and outs of investing in NFTs before browsing any of the exciting new digital artwork out there.
The above information can help you to understand how it all works and why this form of investment might be right for your portfolio.
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