NFTs, or non-fungible tokens, have exploded in popularity recently. Even if you don’t fully understand what NFTs are, or how they can make you money, you’ve probably at least heard of them at this point. After all, NFT was even named “Word of the Year” by Collins Dictionary!
But what is this elusive, confusing, newfangled concept in the world of investments and portfolios? Do you need them? Are they worth it? What should you know?
Read on to learn everything about NFTs - from how to invest in NFT stocks and assets, to what you need to be cautious about, to how NFT real estate works. We’re covering it all, here.
What is an NFT?
NFT stands for “non-fungible token.” They’re backed up using the blockchain, which means they can’t be stolen, falsified, duplicated or otherwise used in a fraudulent manner. NFTs are used as proof of ownership for a digital asset such as an image, song, video and so on.
The term is often used interchangeably with the digital artifacts they’re used to prove ownership of. However, if you buy a video that exists online, that video is distinct from the NFT, which proves you’re the owner of the video. Digital artifacts cannot be owned without an NFT, so the two are often referred to as “NFTs” in casual discourse since they’re technically inseparable. You may be asking yourself, "Who is buying NFTs?" The answer is, lots of people- and some with very deep wallets. To fully understand how to invest in NFTs, you need to first learn how they work.
How do NFTs Work?
The blockchain is a decentralized network of databases, all of which contain the same information about a given exchange or unit. It’s used to secure cryptocurrency and is extremely robust.
If you wanted to falsify a transaction, you’d need to successfully hack hundreds, perhaps thousands, of databases and trick them all into storing the same information. However, when a single database is attacked, all of the connected databases immediately respond by restoring the damaged one to its proper state. This is the system that secures NFT ownership, making them virtually “real” digital assets that can be owned and traded just like real-world objects.
How to Invest in NFTs
Investing in NFTs is fairly straightforward.
If you want to know how to invest in NFT stocks, join a stock NFT marketplace. Investing in NFT stocks successfully means understanding the stock niche you’ll invest in, which is another topic entirely. The bottom line is this: before you invest in NFT stock, make sure you understand now non-fungible tokens are translated into that world.
Look at the ones you like and are interested in, and try to:
- Develop a sense of which ones are valuable
- Understand which ones tend to become valuable
- Find out which ones tend to remain and become more valuable
- And so on
The best way to start is to simply access an NFT marketplace and begin learning about the digital artifacts themselves.
To invest in NFTs, complete the following steps:
- Simply open an account within an NFT marketplace.
- Create a digital wallet and fund your account.
- Begin browsing the available NFTs.
Buying an NFT
To buy an NFT, all you need is a digital wallet with currency that’s accepted by the seller and used within the market you’re operating in. If you want an NFT that’s purchased with a currency you don't have, you can exchange your currency for the accepted one. If a given digital artifact doesn’t exist within the NFT market you’re working in, you can enter other NFT markets.
OpenSea is the leading marketplace for NFTs currently, with a wide range of digital assets.
Selling an NFT
To sell an NFT, first, you have to own one. You can buy or create NFTs. As many people do, you can build up quite a business by creating and selling NFTs. Investing in them and selling them when the price goes up is how investors make money selling NFTs.
Creating an NFT
NFT markets have become havens for digital artists of all kinds to make money and live out their artistic ambitions. NFTs can be books, art, video, and more. If you have a knowledge or talent that can be translated into a digital artifact, you might have the potential to be a successful NFT creator.
Real Estate NFTs
NFT real estate is a somewhat of a strange topic when you first begin learning about it. There are digital “locations” in virtual realms that are bought and traded using NFTs. But some physical real estate has been purchased, usually only in part, using the value of digital assets verified through NFTs. This essentially means using NFTs as a currency to be traded for another currency that can be used to buy real estate. The easiest way to understand it is this: there’s money to be made by trading NFTs for cash and then using that cash to buy a property.
Benefits of NFT Investing
Are NFTs worth it? They certainly have been for some. The benefits of investing in NFTs are as significant as they are novel. Matching the right type of investor with the right NFT can make for very profitable investing. To determine if NFTs a good investment, think about the benefits NFT’s provide:
- Large ROI: Investing in the right NFT project can provide huge gains over time.
- Data Authenticity: The Blockchain is very secure and shows clear ownership of all NFTs.
- Low Barrier for Artists: If you're an artist, NFTs might be an easy way for you to make money.
- New & Exciting: NFTs are novel and fun and it's easy to take part and feel like you are part of something in the early stages of growth and adaptation.
Disadvantages of NFT Investing
Nothing in this world is perfect. There are a few disadvantages to NFTs you should be aware of.
- Copy Cats: There are reports of NFT ripoff artists, so make sure you do your research on each project. Additionally, NFTs can be copied and pasted, calling into question the real value of them.
- NFT Bubble: NFTs could be a fad, and many are comparing them to the dot.com bubble. It's uncertain what value NFTs will hold in the future.
- Environmental Impact: NFTs are added to the blockchain, which uses a good amount of energy. Many are opposed to NFTs.
Are NFTs a Wise Investment?
Are NFTs worth it? No investment is 100% guaranteed bulletproof. However, few experts disagree with the blockchain bulls out there who claim the security system for these tokens is unbreakable. There’s a chance that NFTs could be a passing fad. However, there’s also a good chance that they’ll increase in value if you make the right investments. Some NFTs have sold for millions of real-world money, and that's something the critics of NFTs simply have to live with.
NFTs provide exciting new opportunities for investors. Researching more about them can help you determine if you want to dip your toe into investing in NFT stocks to further diversify your portfolio.
But NFTs aren’t the only way you can branch out with your investment strategy. Learn how you can get into the world of high-quality, turnkey real estate investments through Connect Invest today.
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