Do You Think Non Fungible Tokens Are An Important Investment?
The non fungible tokens, also known as the NFTs have been an important inclusion in the cryptocurrency sphere. They were introduced just a couple of years ago and since then it has gained a lot of momentum. Since it is still a new segment, many people often wonder whether to invest in them or not. Even if they make up their mind to invest in the NFTs, they often want to give a second thought on whether the investment will be a profitable one.
But before we proceed to analyze whether the NFTs will prove to be an important investment, we need to know a bit about them. So here we go!
What Are NFTs?
The NFTs or the Non-Fungible Tokens are a unique kind of token that are never interchangeable owing to their individual distinctive attributes. To put it simply, the NFTs possess unique attributes that makes it nearly impossible to be exchanged or replaced.
The NFTs are ERC-720 compliant and they are mostly used in storing the cryptocurrency collectibles or crypto collectibles such as arts. This offers a means of proving the ownership and authenticity and also helps in the crypto gaming. The Non fungible tokens are also known as the tokenized versions of the real world assets.
Since 2017, the NFTs have gained much momentum after the cryptocurrency game going by the name Crypto Kitties had been launched. The game was one of the earliest pioneers of NFTs and offered the players the capability to collect and store the genetic materials in addition to breeding and selling the virtual cats. This seems to be so fun!
In the same year, during the month of December, the Cryptokitties transactions on the Ethereum (ETH) network had skyrocketed. This amounted to over 12,000 transactions that resulted in an increase in the fee for birthing of the kittens.
The non fungible tokens are also instrumental in the growth and developments of the digital lands. This has resulted in the enabled ownership of the lands in the digital space. The economic potential for the digital or virtual lands are much more significant owing to the fact that it enables the investors to build up a rigid and secure business for advertising or the online sales in the digital world.
What Do You Receive After Buying An NFT?
As an NFT can only bear one owner at a time, when you purchase an NFT, you actually buy the exclusive ownership of a specific digital asset. However, this does not mean that you own the exclusive rights as to who gets to look or share the particular art work.
For instance, the most expensive NFT that has been sold till date is the Beeple’s Everydays: The First 5000 Days, a 5,000-piece digital collage. Vignesh Sundaresan, the founder of bitcoin ATM provider, Bitaccess and Metapurse NFT project, is the owner of this NFT.
While Mr. Sundaresan is the official owner of this particular NFT, this image has been copied, shared as well as seen by millions of people all across the globe. This is considered as a fair game indeed. So, when you purchase a NFT, it is quite similar to buying an autographed print. The autograph gets exclusively signed by the creator for you but anyone and everyone can view the work but cannot reproduce.
An NFT can be any digital asset. The categories that they have been included in are:
Why Should You Invest In The Non Fungible Tokens?
The non-fungible tokens have proved to be a much more profitable form of investment based on some of the following reasons.
- Creates A Value For The Tokenized Asset
The NFTs have created a medium where the physical objects such as the art works offer a way to be tokenized. This eliminates the duplication of the art work and hence limits ownership to the artists. This in turn creates a shortage for the art work and thus preserves the value for it.
- Offers More Liquidity To Investors
Tokenizing the assets offers the investors more liquidity over the assets when they require it. For instance, when a digital land owner decides to rent out his/her digital space to the influencers or the advertisers for a fee, while still maintaining the ownership of the land. In this case, the Digitalland still belongs to the owner. However, a part of it is liquified as rent.
- Has Growth & Development Potential
The non-fungible tokens possess capacity for the growth and development of the land sector. Pegging the NFTs to the land pieces has proven to have great potential for growth and development. For example, in real estate, the controlling and owning of the digital lands offers you the power to decide what exactly you want to do on your land. You can either decide to rent it out or build up a solid and secured business for advertising or online sales.
Is Non Fungible Token Investment Worthy Enough?
NFTs are appealing to the risk-taker investor and offer a unique, high-stakes opportunity to make some of the heavy profits. However, you need to be warned as this is something that occurs very rarely. This is not much flashy and devoid of the same cultural cache. If you are looking out for a much more reliable way to invest your money, then you need to consider investing in an index fund in place of a Pop-Tart cat GIF.
But if you still want to take your chances and enter into the world of the NFTs, then you are required to open a digital wallet at the very first place. This wallet will serve as the store house where you can store all your cryptocurrencies and your NFTs. After this, you would have to reach out for the non-fungible tokens in platforms such as OpenSea.io or Rarible. Both the platforms are pretty reputed and you need to choose the one that you think serves your purpose. When you have already decided your platform and the NFT, you need to purchase the correct cryptocurrency for that particular NFT and then pay for it.
After you have completed this much, all you need to do is wait for the confirmation as now it is all about the waiting game. As the value of your non-fungible token is absolutely dependent on the amount someone is willing to pay for it and your Pop-Tart cat is at the mercy of the market.
The CEO and co-founder Devin Finzer of OpenSea stated in a blog,
“NFTs represent the building blocks for brand new peer to peer economies, where users have greater freedom and ownership over their data, and developers can build powerful, interoperable applications to provide real economic value to users.”
He further added,
“Investors are gradually becoming aware of NFTs but awareness in general is still low. Most people are still unable to wrap their heads around the real concept of blockchain. It’s still early days. Also, like cryptocurrencies, this is an unregulated space. So even though there is a lot of hype around cryptos and NFTs, it is best to avoid getting sucked into the euphoria. Most investors are better off sticking to established assets like equity, debt, gold, real estate, etc. If one really has to invest in this space, it’s better to be cautious, understand this space first before deciding to invest.”
Associated Risks To Consider
When considering investment in the NFTs, the financial advisors often opine that there remains a lot of risks in the NFT space owing to the fact that anyone and everyone can create NFTs. There are a couple of phony and non-precious NFTs that are floating around in the internet posing to be the most precious ones.
Similar to the art, the NFTs also require a keen and sharp eye that is trained enough to decide if an NFT is even really worthy for the investments. In addition to this, there are a couple of other related frauds such as the Wash Trading where a whopping number of accounts operate in pairs to pump up the price of the NFT to make them seem much more valuable than they actually are. This is a literal fraud risk.
The hackers possess the capability to copy an NFT token. After this, the unsuspecting people can end up purchasing the fake NFT that practically bears no value. The people must know and be sure of how to check the authentication of an NFT token prior to purchasing it digitally. In the crypto draft bill, the government is planning out to define the non-fungible tokens and furthermore focusing on providing an outline on the same. This move is sure to boost both the investors and the players in the cryptocurrency space.
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