NFTs, or Non-fungible tokens appeared first in 2014 and did not make many waves until 2021 due to multiple factors. It is now a hot cake in the blockchain world so many are taking a stake in it.
NFT has paved the way for many creatives to show their art to the world and make profits. Creators keep sending more and more billion-dollar digital assets to different NFT marketplaces.
Events like Beeple’s art piece sold at $69 million triggered the interest of many private investors and tech companies. You’ve probably heard about it through art pieces sold in dollars at auctions.
The big questions remain, what exactly is NFT? How does it work? Is it a worthy investment? Here’s why there is so much fuss about NFT and how it works.
What Are NFTs? How Do NFTs work?
NFTs are non-fungible tokens which means they are uninterchangeable for another. No NFT that has the same value as another one. As a result, they are unique and immutable.
You can exchange 1BTC for 1BTC and 1ETH for 1ETH. This means that the cryptocurrencies are fungible and interchangeable with one another with the same value. You will not have the same value if you exchange an NFT for another NFT.
Non-fungible tokens are well secured through smart contracts and represented with unique information on the blockchain. This makes the ownership of the asset secure and immutable. An NFT can secure digital or physical assets to make them more efficient.
So here is how it works. NFT is not what you get for buying a digital asset. What you get is the digital asset. It protects your assets from theft or mismanagement through the blockchain system. NFT keeps the proof of ownership and records every transaction on the blockchain. The system records transactions on the train so anyone can access them.
It is also Ethereum-based which means it works mostly on the Ethereum network. NFT is decentralized and managed by a network of computers just like other cryptocurrencies.
Are NFTs a Good Investment?
One of the main reasons why NFT became popular is because people saw how much money they can make through the system. Celebrities and influencers started talking about it and putting it up on social media to create more awareness. You can make an NFT from almost anything digital or physical and make money from it by selling.
Now the basic principle of investment can be seen in NFT. You create them for assets that are limited and valuable. The scarcity makes it valuable so people want to make it their own. Their market value is determined by what the blockchain community is willing to pay for them. This is why people auction them so the highest bidder takes away the bounty or asset.
If the crypto community no longer values an asset that you own, it is no longer valuable. Nobody wants it. People who want to buy your NFT are also doing it as a form of investment so if they don’t see any value in it, they won’t give up their money for it.
NFTs are great investments. You only need to find the right assets to invest. This can happen in two ways;
Collect valuable assets and hold on to them for a long time when there is probably none of its kind in existence.
Buy valuable collectibles from the community and auction them at a higher price.
Marketplaces To Buy NFTs
There are many NFT marketplaces where creatives and collectors put up their creations for display or sale. They have their niches so you want to define your niche before looking for an NFT marketplace to sell or trade your asset. You can buy NFT with a credit card from these marketplaces. Check out some of the most popular NFT marketplaces;
- NBA Top Shot
- Theta Drop
NFTs are great investments. You can tell from the multiple million-dollar sales that creators and artists have made from it. What makes NFT a great investment is the value and security it offers. Do research before buying an NFT regardless of how promising it may look.