NFTs are non-fungible tokens or digital assets, each unique from the next. The premise behind investment in an individual “store of value” is you can do so without physical ownership or maintaining storage. Go to https://www.bbc.com/news/technology-56371912/ for the fundamentals of NFTs.
It makes overhead on the open market for sellers simple, and buyers only need to invest in . . . we’ll figure that out.
How Can NFTs Be Explained – Let’s Try
Non-fungible tokens or NFTs represent virtual assets in a similar context to digital currency or cryptocurrency that operates via a blockchain network. With that functionality transferring is secure, rapid, and at a minimal price point as it goes from one wallet to the next.
The blockchain network allows a degree of transparency. Where NFTs differ from cryptocurrency is every NFT is individual; no two are alike. That essentially allows a store of “real-world” value in whatever that asset is.
Crypto, like bitcoin, is fungible. When you swap two of these coins, there’s no difference in your holdings. You still have the same value in your wallet.
When you switch NFTs, one will not have a relationship with the other. They are non-fungible. The value in the wallet will change. That seems to be the fundamental concept to grasp before investing in NFTs.
Only invest in something once you understand the premise. Let’s look at non-fungible assets as investment opportunities more closely.
How Do Investments In NFTs Work
When a non-fungible token (NFT) is created for ownership of an asset, the value depends on what the owner assigns that specific asset, whether it be a digital drawing or another virtual exhibit. Go here to learn about NFTs.
Each is unique in value, no two are the same, nor can you switch one as an equal swap for another. NFTs can be sold and purchased comparably to items in an auction; you can’t exchange these for products or services like with cryptos.
Seasoned investors have yet to research the NFT market heavily, or perhaps investigated is a better word. It’s a relatively “freshman” asset category, but the response thus far is that there are no physical “assets” to be had with this class.
The suggestion thus far is that anyone below a “speculative” client should avoid serious participation until (quote) “the regulatory haze dissipates and there is a more real-world designation for the purpose of NFTs issued.” (end quote)
Otherwise, it makes more sense to just have fun with these in a “collectible” context with the ideology that perhaps one day they’ll become valuable.
What Risks Are Associated With Investing In NFTs
You may be wondering, “are NFTs a good investment?” The first thing to be aware of with NFT investing is that it is highly risky. In order to avoid scams, it’s vital to pay attention for authentic sellers on the marketplace and be wise to copycats or posers acting as favored tokens.
There is every chance that a legitimate NFT marketplace can be hacked with the recommendation that clients who buy NFTs transfer them straight away into a secure wallet unless these will be flipped immediately.
A priority before becoming an NFT investor is to educate on the platform thoroughly by following these steps:
- Gain insight into the purchasing process
- Where to legitimately buy the tokens
- Research the reputation (star power) and “track record” of the owner before becoming involved in the investment
- find out how to authenticate ownership
- learn wallet safety and security
The marketplace is equipped with tools, and there are tips to follow to ensure safety when investing like:
- Investigating the security protocol for the marketplace
- Always research owners’ backgrounds
- Don’t divulge sensitive information to solicitors unnecessarily
- Take measures to authenticate the rarity of an NFT
Before you spend any money, educate, become informed and always speak with a financial advisor about your intentions. At its current stage, this is the sort of investment where you should only use the money you can afford to lose.
The indication is the priority with NFT investing is researching the individual behind the NFT project. This is a primary consideration because the market value will typically be determined by those referenced as “the community.”
This begins with the owner interacting with their fans or supporters and ultimately comes down to the purchasers and the sellers. As with anything, demand drives value, and that’s true with NFTs.
It’s wise to stick with an investment style that’s worked well for you thus far. If you’re a client who buys and holds for the long term waiting on the right moment a few years down the road to sell for the most reasonable profit, do that. Someone else might prefer to jump on a gallery piece while it’s in its prime and sell it straight away for fast cash.
In light of the fact that NFTs haven’t been assigned a regulatory designation just yet (US), the wise thing to do, especially for someone new to investing, would be to hold tight until the powers that be get things figured out on their end.
You can certainly participate, but ensure you’re not taking it far too seriously or investing your life savings. Keep things light, enjoy a good time with communities you like, and be careful not to get involved with scammers.
The initial “boom” being seen right now with NFTs can be addicting, but it’s speculative. It’s not authentic investing at this point. It’s genuinely wise to keep your participation simple.
NFTs are a very young concept, one I am only today becoming familiar with. I have learned that these digital assets need to be prepared for authentic investment opportunities. From all official standpoints, regulation has yet to be designated.
As a fun, entertaining collectible activity, it’s a good practice run until things become more official.
Eventually, find that community that excites you and whom you wish to support, heed caution, and use what you can afford to lose possibly; perhaps you’ll find yourself with a valuable and impressive selection of NFTs. Until then, be patient.