NFTs, also known as non-fungible tokens, are a relatively new thing, but something that is becoming increasingly interesting to anyone seeking an alternative investment. If you’re wondering whether to invest in a new NFT project, read on for some useful tips.
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What are NFTs?
You may be familiar with NFTs as digital collectibles. Some are famous, like the Bored Ape Yacht Club and art sold by NFT artist, Beeple. There are many more NFTs, however, that are not famous and probably worth very little. But what are NFTs?
NFTs are smart contracts. The non-fungible bit means it can’t be swapped for anything else. An NFT signals ownership of a digital asset. Anything can be turned into an NFT, even real estate, but NFT artwork is very common. The seller is tokenizing an item, so it can be traded more easily and cannot be replicated.
A regular image, such as a screenshot of a tweet sent by someone famous, isn’t worth anything because ownership can’t be proven. But an NFT of the first tweet sent by the founder of Twitter, Jack Dorsey, was sold for more than $2.9 million. Lots of people could have screenshot that tweet, but only the person who bought the NFT, aka, the digital representation of the tweet, owns it. And since ownership can be proved by a blockchain entry, it can now be sold to another investor.
The Pros of Investing in NFTs
The beauty of investing in NFTs is that anyone can do it. You don’t need any special experience; all you need to do is visit an NFT marketplace such as okx.com or look out for NFT releases by someone you are interested in. For example, some bands have begun releasing music as NFTs. Fans buy them because they love the band. It’s less of a financial investment and more of an emotional investment.
Any investment in an NFT is completely secure because it is recorded on a blockchain ledger. This means it can’t be duplicated or altered. Ownership is transparent and fraudulent transactions impossible. That’s not to say NFT crimes are unheard of; they are, as we’ll mention below.
The Cons of Investing in NFTs
Because NFTs are not a typical asset class, like property, stocks and shares, or gold, the market can be volatile. There is no guarantee that if you invest in an NFT it will appreciate. It may lose value, just like crypto, and there are numerous cautionary tales of people who have lost a lot of money on NFT investments.
One example of a celeb who made a poor NFT investment is Logan Paul. He spent more than $600k on an NFT, which is now worth $10. The much-hyped Bored Ape Yacht Club is another example of when NFTs tank. Several famous people lost big money on that investment.
Another downside of buying into NFTs is that you need to own Ether first since most NFT sales take place on the Ethereum platform. If you don’t own or are willing to buy Ether, your purchase options are limited.
Are NFTs a good investment? The answer is…it depends. Do your research and don’t rush into buying an NFT unless you can afford to lose your money.