Non-fungible tokens (NFT) have recently emerged as popular stocks to invest in. You’re in the right place as you’ll find out more about it and how you can start investing in it. Read on to know more.
What Is NFT?
NFTs are a form of cryptocurrency. Like others, it’s generated on blockchains composed of unique metadata and IDs, making each token one of a kind. However, they can’t be traded easily for another of its kind as the value each token holds differs. (1)
Instead of representing a fixed value, each NFT represents a certain object’s value like real estate, artwork, and other assets. Because of this, you can’t trade the token of the “Mona Lisa” for the token of a humble 100-square-meter property since their value vastly differs from each other. (1)
The keyword there is non-fungible. Note that fungibility refers to the ability of an asset or good to be traded or interchanged with other goods and assets of the same type. For example, the US dollar is a fungible currency. Say that you have a USD$100 bill. You can easily trade it for USD$100 worth of coins or AUD$1,348.50. (1)
It will be easier for people not to think of NFT as a currency or commodity—even if they’re referred to as stocks sometimes. Instead, they should think about NFT as ownership certificates. For example, if you buy the NFT for the “Mona Lisa,” that NFT will be sent to you, and it will act as proof that you own the asset.
Aside from real-world assets, NFT can be assigned to digital assets as well. For example, you can put an NFT even on a social media post. Recently, someone bought the first social media post of a social media founder on its platform for USD$2.9 million in an auction. (2)
How to Start in NFT
Before you can start selling or buying NFT, you need to secure a few things. First, get yourself fully educated by joining NFT communities like the NFT Club. Next, get a crypto wallet and load up some Ether (more on this later).
The next step is to find the marketplace of your choice. Many online retail companies and even sports associations have already started selling and auctioning NFT assets on their online shops. On those marketplaces, you can begin buying and selling.
In regard to Ether, it’s the main cryptocurrency you can use for NFT. To get some, you have three options: You can mine them yourself. You can go for cloud mining or rent someone to mine for you. Or you can just buy them.
How to Earn from NFT
An investment isn’t an investment if you won’t get anything out of it. To get your return of investment (ROI) from your NFT stocks, you must treat them as rare collectibles. Unlike most commodities, the value of works of art and other unique items increases when time passes. Their value exponentially appreciates depending on their rarity as well.
So the most common strategy to earn from NFT is to speculate, buy, hold, and then sell. Don’t just carelessly ride the NFT hype and randomly collect assets. Find anything of low-value today with the potential to be valuable and in-demand in the future. Then get those items placed in auctions and sell them for a higher price.
What Are the Downsides with NFT?
The biggest dilemma in NFT is its unregulated state. Currently, anyone can assign an NFT on anything. This process is often referred to as minting or tokenizing. While it’s good that the marketplace can grow because of the lack of restriction, it makes it difficult for investors to know which tokens can let them profit in the long run.
Aside from that, there’s also the piracy issue. Since almost everyone can mint digital works with little to no effort, it’s easy for other people to steal others’ works and sell them in the market. In addition to making original creators lose potential earnings, it also allows buyers to receive ingenuine or stolen digital assets, which may depreciate the value of the items they collected. (3)
Also, it doesn’t help that the system is shrouded by anonymity. Even if you see a stolen work in the market, you can’t take legal action or enforce anything if the user is anonymous. And since the blockchain is similar to an immutable ledger, anyone who mints an asset first becomes its digitally de facto owner, complicating things. (3)
How to Invest in NFT Smartly or Safely
One of the best courses of action is to only buy or invest from reputable entities to avoid such complications. Currently, many high-profile companies are joining the fray to generate their own NFTs.
For example, if you want to start with safe investments, you may collect NFT sports cards from reputable sports associations. Another great option is to get a few pieces from renowned Hollywood actors and international singers.
Also, as always, it’s always critical to diversify your investments. Don’t just stick with one source of assets. You may want to pick up a few tokens from these sources, among many others:
- web media
- interesting projects
On the other hand, if you’re not ready to spend money or Ether yet, you may start picking up some free NFT airdrops. They are free tokens you can get from some organizations and communities. While they are free, they’re also limited and can gain value in the future.
What Is the Future of NFT?
In all honesty, a few experts think that this is a fad that will fade away after a few years. In contrast, some believe it’s the future of the online marketplace. Aside from making it easier to sell, trade, and auction off digital goods, the rise of NFT could also strengthen the value of cryptocurrency. And you might already have an idea how much success early adopters of cryptocurrency experience.
Regardless if you profit from NFT investments or not, you still can savor the fact that your money won’t just disappear in thin air. You will still own assets, even if they’re digital or physical. Aside from that, you can also utilize the act of buying NFTs as a way to support the company or artist you like.
- “Non-Fungible Token (NFT) Definition,” Source: https://www.investopedia.com/non-fungible-tokens-nft-5115211
- “Jack Dorsey’s First Ever Tweet Sells For $2.9m,” Source: https://www.bbc.com/news/business-56492358
- “NFT Art Auctions Have A Piracy Problem,” Source: https://www.newsy.com/stories/nft-trend-leads-to-fraudulent-art-auctions/