NFT stand for Non-fungible token. As the name, Non-fungible suggests that it is rare and unique and can’t be replaced by something else. It is like a patent or copyright. NFTs can be anything like digital art, in-game unique characters and even an autographed tweet by the founder of Twitter. Most NFTs are a part of the Ethereum blockchain.
Ethereum, like Bitcoin, is a cryptocurrency, but its blockchain also enables these NFTs, which hold additional information that allows them to function differently from, say, an ETH coin. Notably, other blockchains can implement their forms of NFTs.
What Do People Think of Getting into Crypto Trading
A large number of new investors entered the crypto markets because of the COVID lockdown. It was made quite clear by the surge in crypto markets in October and November. Still, there are lingering doubts in minds of many people that are thinking of getting into crypto trading.
Firstly, many people believe that they are too late because they missed the initial surge in cryptocurrencies back in 2016-17. They believe that the early investors got lucky and got in the right time. It might be true in some cases, however, timing the market is extremely difficult.
Secondly, the unexpected and uncontrolled volatility of the market can scare a lot of new investors. We can always hear stories about people who lost all their hard-earned money in one sweep.
Thirdly, with the addition of different blockchain networks and numerous new features, the crypto market can be seen by people as more complicated than it is.
Whatever reason it may be, the fact of the matter is, that many people are doubtful about the idea of crypto-trading. What they are looking for is a new asset class at a manageable price. And, NFTs can very well fulfil the demand.
Should You invest in NFTs?
Sure, you should, but you have to keep in mind the risk associated with it. According to NonFungible, around $250 million in NFTs were traded in 2020. This represents a 299 per cent gain over the previous year. So, what are the risks associated with it?
Firstly, the volatile and unpredictable nature of this new market. Despite the fact that many experts believe that NFTs are here to stay, many others believe that the industry is a bubble.
Secondly, the risk of fraud and theft. One of the primary benefits of NFTs is that they enable digital artists to claim ownership of their work. But, that does not mean that they are immune to fraud and theft. Unfortunately, there are already cases where the very same thing has happened.
Thirdly, there is an issue with Copywrite. When you buy an NFT, you will most likely not own the rights to that artwork. In many circumstances, the artist maintains the copyright and is entitled to money if the object is sold. Some NFT buyers haven’t realised this and believe they’ll be allowed to do anything they want.
How to invest in NFTs?
You can buy or sell NFTs through a dedicated NFT marketplace, similar to Amazon but for digital assets. These markets are similar to the exchange system for buying and selling cryptocurrencies and equities. They are used to acquire an NFT at a predetermined price or as a virtual auction. As a result, the prices of NFTs placed for sale via auction are volatile, shifting in value based on demand. Hence, the bigger the demand, the higher the price.
To bid on these digital assets, you must first create and fund a cryptocurrency wallet on an NFT marketplace. A wallet must be funded with the cryptocurrency required to purchase the desired NFT. For example, an NFT based on Ethereum blockchain technology may need the purchase of Ether tokens.
To sum it up, NFTs are not very different from cryptocurrencies. They have their rewards and risks associated with them. Therefore, you should keep these risks in mind before jumping into the battle.
Also read: Will The Blockchain Gaming Revolutionise The Future of Video Games?
