Should I invest in NFTs?

Should I invest in NFTs?

by Danielle Marie

What are NFTs?

What in the world are NFTs? NFT stands for non-fungible token, which basically means that they’re one of a kind, uniquely different and not interchangeable. An example of a fungible token would be a Bitcoin whereby each one is perfectly interchangeable with one another. One of the things that makes NFTs so unique is that they are secured using blockchain technology, meaning that they can’t be altered or deleted. You know for a certainty that on-chain data cannot change or be altered at a later point in time. The blockchain network can be used to track the entire ownership cycle for the life of an asset. This means it takes the reputation of the buyer completely out of the equation as everything can be verified on the blockchain.

NFTs can be used for many different uses including:

•         Intellectual property
•         Digital Identity
•         Personal medical data
•         Ownership documents
•         Tickets
•         Gaming
•         Art
•         Membership

The most common use of NFTs currently is as Art and for use inside of blockchain gaming. 

Art NFTs

Art NFTs offer you the exclusive access and ownership of established and up and coming artists. The artworld has enthusiastically embraced the NFT world because it is creating financial freedom by allowing artists to bypass traditional gallery systems and interact directly with their audiences without having to go through gatekeepers. NFTs allow artists to collect royalties in perpetuity on future sales whilst also avoiding commissions from galleries and auction houses.

Many millions of dollars have been made by early investors in exclusive launches of digital images like Crypto Punks and Bored Ape Yacht Club with ownership becoming a flex with influencers and celebrities alike. There are still many opportunities to make money with NFTs on new projects, but they require research, and the market is still very volatile. So, it’s always advisable to actually like the projects you’re invested in, in case the market changes.

Gaming NFTs and Play to Earn Gaming

Blockchain based gaming has exploded in the past year with fortunes being made and potentially millions being lifted out of poverty by the simple act of playing games on their phones. One of the most popular games is Axie Infinity, which is a Pokémon like game whereby you battle your Axies and win tokens in return. Each Axie is a completely unique NFT which can be bought and sold for a profit in the marketplace whilst winning tokens can be sold on exchanges for fiat. You can also breed your Axies and then also sell the baby Axies as well. One particular Axie sold for over half a million USD at the time. There are new play to earn games emerging everyday and NFTs are slowly being integrated into the established video game world.

Metaverse Land NFTs

Metaverse in current times refers to a highly immersive virtual world when people come to socialize of which there are many exciting options. The main way to make money now is to buy and sell land NFTs. In the more established metaverses like The Sandbox and Decentraland, virtual properties are selling in the hundreds of thousands, many more than an actual property in real life, some even in the millions. Each piece of land is an exclusive digital asset NFT which can be verified on the blockchain to ensure authenticity. Many virtual real estate tycoons will be made as our future transitions more online. 

How to buy NFTs

If you’ve ever bought anything on eBay, then you know how buying NFTs (Non-Fungible Tokens) works. Most NFT marketplaces function like an auction house, where buyers bid for items they want. You place a bid for an item, and wait to see whether you win. There are dozens of online marketplaces for trading NFTs. Currently, the largest NFT platform is OpenSea, which mainly uses Ethereum but also supports over 150 other cryptocurrencies. Other NFT markets that have a wide variety of art and collectibles include: Binance NFT, Rarebit, and Crypto.com. Whether it’s digital artworks, collectibles, skins for video games, or website domain, there’s a marketplace that has exactly what you’re looking for.

STEP ONE – Set up your digital wallet

Create a cryptocurrency wallet that is compatible with the NFT marketplace of your choice. Each market has its own unique set of requirements for cryptocurrency wallets. Unfortunately, there isn’t just one wallet that works on all websites. Crypto wallets aren’t only used for buying NFTs. You’ll need somewhere to store your NFT once you’ve made your selection.

STEP TWO – Transfer your crypto to your crypto wallet

Some exchanges offer built-in wallets that you get when you sign up for an account so it is easy to do an internal transfer, but there are also third-party wallets like MetaMask. If you have a non-custodial wallet like MetaMask, you have the option of purchasing ETH in app or sending from your account. Some wallets you will have to have already pre-purchased your crypto and will need to transfer it before you make your purchase. 

STEP THREE – Connect your wallet to an NFT marketplace

Once connected, you’ll be able to browse the marketplace’s NFTs. Browse the marketplace and pick out your NFT – whether it’s a piece of art, NBA Top Shot, or something else. However, beware of gas fees! Before you buy with ether, always check the gas fees. You may not always be able to buy your desired NFT when they’re low because gas always operates by supply and demand. For example, you may be really interested in an auction that is ending within the next 10 minutes and if gas fees are super high, you will, unfortunately…. just have to suck it up. 

STEP FOUR – Buy your NFT

Click ‘Buy Now’, or place a bid if the NFT is at auction. Congratulations you just bought your first NFT!

You might have started out by not knowing anything about cryptocurrencies but now you’re able to open up a wallet, transfer currency to your wallet, sign up for an NFT marketplace, and explore it. This may be new and a trying experience at first, but this technology will help shape the future of everything we do in the future. 

Should I Invest in NFT’s?

NFTs aren’t really quite ready for investment by the masses, and there are several things you need to be really comfortable with when you invest in them. For one thing, the process to buy a non-fungible token (NFT) is complicated. You need a non-custodial wallet, plus some crypto to get started. You then have to go through a lot of hoops to get your wallet connected to an NFT marketplace. NFTs are susceptible to crypto hacks and scammers, which have become increasingly prevalent and sophisticated. You also need to take into consideration the valuation process. NFTs are unlike stocks or bonds where you generally know the value of an investment. A successful NFT only has a lot of value because other people think it has a lot of value, so it’s really only as valuable as someone is willing to pay for it. 

While there are many risks involved with investing in NFTs, there is also a lot of potential to make incredible gains. Collectible items such as art have historically appreciated in value, and digital representations have the potential to exhibit the same price increases but exponentially. This is because the buying and selling of NFTs as digital assets yields access to potentially far greater numbers of buyers and sellers than has been available in the past. There is also the added bonus that smart contracts can be used to ensure that artists and creatives get paid for their work in the future based on its usage and resale, which has never been possible before now. There is also the bonus for investors who are betting on an overall long-term rise in the value of the underlying cryptocurrencies like Ether. Buying cryptos like ETH to invest in strong NFT projects could be a very good thing indeed as you benefit not only from the appreciation of the NFT over time but of the underlying crypto over time. A big downside to ETH though, is the fees for purchasing NFTs. On Ethereum, you might need to spend upwards of $100 or even $200 just to make a transaction happen. That’s why so many people are starting to mint their collections on Layer 2 networks like Polygon or other networks like Solana and Cardano.

For the average investor, its a risky investment, unless you’re just looking to buy into it for its art and you’re ok with not ever seeing that money again. There’s a lot of inherent risk involved with NFTs. Knowing that NFTs represent speculative investments just like cryptocurrencies, you’ll need to decide how much exposure you want to have to them. Most experts agree that most long-term investors would be best off investing in cryptocurrencies and NFTs as only a small percentage of their overall portfolio. However, if you are an art fan, do the research and invest with a more of a risk off approach, your NFT collection could perhaps become one of the most lucrative investments you own. 

Increase your knowledge with this article by Danielle Marie – Cryptocurrency vs Blockchain for Beginners.

This article was first published in WFO magazine in 2022 Issue 4. Read the original here: Should I Invest in NFTs