NFTs or non-fungible tokens look to explode out of Ethereum in 2022. These digital assets from art and music to tacos are selling in huge numbers. But are they worth the hype? Read this article to know more and to know who started it.
Table of Contents
What is an NFT?
• As it is non-fungible it means that it is more or less unique.
• It can never get replaced with anything else.
• It is data that is added to one file creating a unique signature.
• It means basically that anyone who owns a digital file will have it marked with some code for differentiating it from other digital replicas.
How does NFT work?
• NFT is present on a blockchain.
• It is one distributed public ledger.
• It records transactions.
• People are aware of blockchain to be the underlying procedure that makes crypto possible.
• Mostly NFTs are held typically on the blockchain of Ethereum.
• But other blockchains also support them.
• Any NFT can be created or well minted from some digital objects representing not only tangible items but also intangible ones such as art, videos, GIFs, sports highlights, virtual avatars, collectibles, music, designer sneakers, and so on.
• Even the tweets count.
• Jack Dorsey the co-founder of Twitter sold his very first tweet as one NFT.
• It was over $2.9 million.
• NFTs are mostly like items of the physical collector. It is only digital.
• So rather than getting hold of any actual oil painting to put on their wall, buyers receive a digital file.
• They will have exclusive rights of ownership.
• NFTs will be having only an owner at one time.
• The unique data of NFT makes it very easy to verify the ownership as well as transfer all tokens among owners.
• The creator or owner will be able to store certain data inside them.
• For example, artists will be able to sign all artwork by including the signature in one metadata of the NFT.
Ways of investing in NFTs
Regardless of if you are an NFT collector or any cryptocurrency investor, there are many ways of investing in NFTs.
Invest in NFT projects through NFT coins
• NFT coins are cryptos that are created by some NFT projects that are used within their DApps and GameFi ecosystem.
• Well-known examples are MANA, SAND, and AXS.
• NFT coins come with a wide variety of use cases such as governance voting, in-game currency, etc.
• In a few situations, investing in a native token of any NFT project will not be very risky compared to NFT investing.
• Trading tokens’ fees are lower significantly compared to trading NFTs.
• Often token markets are having better liquidity.
• So NFT coin investing can be a perfect option for anyone looking to add support to some specific NFT project without purchasing NFTs.
Use cryptocurrencies to purchase NFTs
• If you are already having Ethereum or BNB in your crypto wallet, then you can buy the NFT directly in which you have interest in the NFT marketplace.
• Moreover, Binance NFT has a huge variety of NFTs available on its marketplace.
• These are NFT avatars, mystery boxes, art collectibles, and so on.
Conclusion
NFTs are considered to be risky as they have an uncertain future. Not enough data is available for judging their performance. As they are new, it will be worth investing a little amount if you wish to try them now. It is a completely personal choice to invest in NFTs. It will be worth considering if you are having money to spare and if any piece is holding some meaning to you.
Yet remember the value of an NFT is entirely based on what anyone else is agreeing to pay for it. So demand will be driving the price instead of fundamental, economic, or technical indicators that usually influence prices of stock and form all bases for the demand of an investor. It means that any NFT may get resold for something less than you actually paid for it. Also, you may be unable to completely resell it if no one wishes to have it.
Keep in mind that NFTs are also subject to tax like cryptos used for buying the NFTs. Always try approaching NFTs as you would do in case of investment. Research well, understand all risks and once you decide to invest in NFTs, proceed cautiously.
