The traditional method of buying a collectible is changing. Traditional methods are riddled with issues, and the NFT concept is revolutionizing the entire market. An NFT is unique and offers investment security to the buyer. We are going to look into what an NFT is, what forms of an NFT there are to purchase, and do they represent a good opportunity for an investment or are they just a passing fad.
What is an NFT?
NFT is an abbreviation of ‘non-fungible token’. ‘Non-fungible’ means that we cannot exchange one item for another because it is unique. A good example of this is to imagine a piece of art. This art piece is not identical to another as both have unique properties. When thinking about a fungible item, however, these items can be traded for each other. A good way to imagine this is to think about a $10 note or a Bitcoin, which is exactly equal in value to another.
But what is an NFT? NFTs are tokens that are present on the blockchain and will represent the ownership of a unique item. This can be helpful in many ways. When trying to track who owns a regular digital file can be difficult because it can be copied and distributed with relative ease. Proving who is the original owner is what is important. Imagine that you made a piece of digital art, which would essentially be a JPEG file on your computer. It is possible to create or mint an NFT out of this. The NFT that represents your art contains some unique information on it, such as a file’s unique fingerprint, token names, and symbols. The token is stored securely inside the blockchain, the creator of it now has ownership. Tokens can then be sold by making a blockchain transaction. The blockchain ensures that the information on the token never gets tampered with. It is also possible to find out who owns the token currently, as well as be able to see its transaction history.
It is important to note that a piece of art, for example, is not kept inside of an NFT, or on the blockchain, but instead, its key attributes are, such as the fingerprint or hash of the file, the token name, symbol, and it is possible to link a file which is held on IPFS. NFTs become a little weird when a piece of art in the form of an NFT is bought, as you don’t get a physical version of it. Most of the time, anyone can download a copy for free.
The NFT only represents the person who owns the piece, with this information being stored securely in a blockchain so the information can’t be tampered with, which makes ownership incredibly secure. Some say that NFTs give you digital bragging rights, and to make it even more peculiar, while the token owner will now own the original piece of artwork, the creator of it owns the copyright, as well as the rights to reproduce it. So, it is possible for an artist to sell their original artwork as an NFT but also has the option to carry on selling prints.
How can you enter this world?
You can sell your own NFTs online. These can be either NFTs that you have bought or made yourself. You can also hire an artist to make some for you. Once you have some of your own, you can sell them online. You can set up your own store using a website builder to display the latest collection of digital assets you have for sale and start making some money.
Why are Some NFTs More Valuable than Others?
Some NFT’s sell for millions of dollars, and some sell for just a couple of dollars. The worth of an NFT is valued at what people are willing to pay for it. So if somebody will pay $2000 for a certain NFT, then its value is $2000. Demand drives an NFT’s value, so it more or less becomes worthless if nobody wants to buy it. In short, an NFT is a smart contract that lives in the security of a blockchain. A contract for an NFT will store the unique attributes of an item, keep a history of ownership, and it is possible to program an NFT so that royalties will be given to the creator each time the ownership is changed.
NFT’s Aside from Artwork
There are plenty of up-and-coming NFT artists, and especially a lot of the best NFT artists to look out for in 2022 are very exciting. But aside from a digital form of art, it is possible to sell concert tickets, in-game items, real estate, domain names, and just about anything which is unique and ownership of something can be proved through an NFT. A highly recognized example of this is when Jack Dorsey, who is one of the founders of Twitter, sold the first tweet that he ever made, as an NFT. Anyone who looks at his profile is free to see the very same tweet, but since it became an NFT, it can only have one owner. Incredibly, the person that bought the tweet paid more than $2.9 million to become its owner. You could even be the owner of a YouTube video and sell it as an NFT, even though it is free for everyone to watch.
NFT’s are Not to Be Confused with Cryptocurrency
NFTs often get confused as a cryptocurrency because both concepts require the use of blockchains. This would be like comparing a piece of artwork to a dollar bill. They are both very different from each other even though both are printed onto a piece of paper. Cryptocurrency is just like fiat currency, ie this $10 bill is worth as much as another $10 bill, and this is true with the likes of Bitcoin. An NFT is different, much like a piece of art will be of different value to another – they are unique. A piece of artwork may well be replicated, but more often than not, the piece will have a unique id, #10/100, for example, and an NFT can work just the same.
A piece of art can be the ‘same’, but with its unique id number, the values of them can differ from piece to piece. A #1 in a collection is far more likely to be worth more than #20,000.
An Overview of NFTs, and do they make for a Good Investment?
For argument’s sake, you can think of an NFT as something that is collectible but in digital form. The traditional idea of investing in a collectible is by purchasing something in its physical form and watching its value appreciate over time. Common collectibles such as wine, coins, classic cars, comic books, and trading cards are all considered as great investment opportunities, as they are more than likely going to go up in value if kept in good condition. Over time, these items will become scarcer, and rarity is a major driving factor in the value of an item. Also, it may be impossible to buy something new from a creator if they cease to produce new items, adding further value to a piece.
Traditional methods of collecting come with a high level of risk attached to them, as there are extremely good forgeries being made, but an NFT can be traced right back to its creation date. This priceless layer of security makes an NFT a solid investment, one of the best investments to survive a stock market crash, and certainly something that will catch on more and more.