Why NFTs Could Be a Smart Investment
For those who pay attention to all things digital, NFTs or Non-Fungible Tokens have quickly become appealing investments.
While many investors have paid incredible prices for digital art, others are interested in how this technology can function alongside real estate, fashion, and countless other sectors.
With highly accessible NFT marketplaces making it easy for people to get involved, even if you’ve never used a crypto wallet before, it doesn’t take much effort to learn the basics needed to invest.
But with the medium still in its early days, figuring out why to invest in NFTs isn’t always straightforward. Here, we consider everything you need to know about navigating the market and buying NFTs.
What are NFTs?
At its core, NFTs are tokens created on a blockchain network that offer verifiable ownership of digital assets. Although the art world has attracted most of the headlines to date – such as digital artist Beeple and his $69 million sale – NFTs can verify ownership of real-world items too.
Typically based on the Ethereum network, NFTs often feature code known as smart contracts. This makes it possible to sell NFTs, verify transactions and even generate income through royalties every time an NFT you create is sold.
Another important factor is that no two NFTs are the same. Unlike fungible items like cash or cryptocurrency, it’s not possible to replicate an NFT. This feature gives NFTs intrinsic value and helps determine the asset’s ownership.
What Makes NFTs a Good Investment?
The NFT market has exploded with popularity in recent times, as people from all walks of life have bought into the latest NFT projects. But what makes NFTs a good investment? While investing in NFTs is still in its infancy, there are numerous exciting aspects to consider.
Secured by Blockchain Technology
The blockchain is a type of digital ledger that makes your NFT ownership completely secure using cryptography. Essentially, this network comprises individual blocks that form a timestamped chain, making it impossible to alter after a transaction has been made.
When you buy NFTs, purchases are recorded on the blockchain, ensuring you can always prove that you own a specific digital asset. While NFTs are usually associated with the Ethereum blockchain, it’s possible to buy NFTs using other cryptocurrencies.
Since the blockchain is publicly available, anyone can verify the legitimacy of a specific NFT. This way, when it comes time to sell your digital asset or buy someone else’s, the system enables greater trust between each party.
Collectible Digital Assets
While collecting a physical asset like a rare painting or classic car has long been possible, achieving the same with virtual items was far more difficult before the NFT market arrived. Without a way to verify whether a digital asset was unique, how could it hold any value?
Blockchain technology and NFTs have now made digital artwork a hot commodity. In fact, some of the world’s best-known artists have become NFT creators, with leading auction houses putting these fascinating items up for sale and collecting life-changing sums.
Massive global brands have also given fans the chance to purchase a must-have digital collectible. One of the most successful NFT projects to date is NBA Top Shot, where over a million basketball fanatics have traded iconic video highlights.
Explore the Digital Economy
As more and more people become familiar with the digital world, NFTs could play a central role in the internet’s future, often referred to as Web 3.0. Supported by tech like artificial intelligence and machine learning, these tokens may form the next-generation economy.
For example, your digital wallet could power the widely discussed metaverse. With this digital representation featuring shops, gaming, live events, and more, NFTs could determine how you interact with these virtual properties.
Although we haven’t reached the stage where most people are spending their time in a virtual landscape, investing in NFTs now could set you up with rewarding assets that personalize your online experience.
What are the Risks of NFT Investing?
Ready to purchase your first non-fungible token? Becoming the new owner of a hyped-up NFT project might be a wise decision. However, like any kind of investing, there are risks to consider whether you’re buying digital art or in-game items.
Highly Speculative
When an NFT project is launched, the value of its items can go through the roof. But as numerous investors have discovered, sometimes the latest must-have virtual artwork drops quickly in value overnight. Naturally, this means your investment can become almost worthless.
Although this might occur for several reasons, the entire cryptocurrency space remains highly speculative, making it a risky endeavor in terms of your personal finance. If you’re looking to get rich quick, most NFTs will not change your life. Most investors understand NFTs today require a discerning eye that always comes with uncertainty.
Regulatory Risks
NFTs and cryptocurrency have become a global phenomenon, but they might not always stay that way. With the decentralized nature of these technologies sometimes at odds with traditional financial regulations, there’s a risk that regulatory action could impact the NFT marketplace.
Earlier this year, the high-profile crash of stablecoin TerraUSD led to widespread concerns from federal authorities. Meanwhile, the collapse of Celsius – a cryptocurrency lender – only created more uncertainty about the space. With regulation expected in the years ahead, future results from investing remain indefinite.
Deceptive Practices
Making the ideal NFT investments can deliver an incredible windfall. Yet the lack of regulation in the space means there’s far greater exposure to fraud and scams involving NFT sales. Perhaps the most common scam is called a “rug-pull,” where developers promise incredible returns to early investors yet disappear before any become a reality.
Pump-and-dump schemes are another common scam. Here, cheaters artificially inflate the price of an NFT project using misinformation before selling their assets to turn a quick profit that leaves everyone else exposed. When investing in NFTs, always look out for deceptive practices.
Chat with the Experts
The world of NFTs is hugely exciting, but you should always understand the space before investing your income. However, with NFT online marketplaces streamlining access, doing your research into the latest must-own items can deliver outstanding dividends.
If you’re looking to learn about non-fungible tokens and use them in your next online marketing campaign, the highly experienced team at First Page can help you appreciate the ins and outs of this dynamic space.
Reach out to our friendly team to start a conversation about this next-generation technology. We’ll ensure you know how virtual assets will benefit your operation and help you stand out from the competition.
