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If you are new to the world of cryptocurrency, you may have heard the term NFT before.
But what does it even mean?
And more importantly, should you consider investing in them?
In this blog post, we will explain everything you need to know about NFTs – from what they are, to how to invest in them.
We’ll also discuss the pros and cons of investing in this new type of asset so that you can make an informed decision about whether or not it’s right for you.
Table of Contents
What is an NFT?
NFTs, or non-fungible tokens, are digital assets that are unique and cannot be replaced. They’re like virtual collectibles you can buy, sell or trade like any other asset. NFTs are on a blockchain, a decentralized ledger that records all transactions.
NFTs have been gaining in popularity lately due to the rise of cryptocurrencies and the growing interest in digital art and gaming.
For example, the popular game CryptoKitties allows players to buy, sell, or trade virtual cats that are each represented by an NFT.
Similarly, the online art platform SuperRare allows artists to sell their digital artwork as NFTs.
So why are NFTs so popular?
One reason is that they’re scarce and thus have the potential to be quite valuable.
Another reason that NFTs are interesting is because of the utility value that can be attached to them.
For example, you could use an NFT to represent a ticket to a concert or a virtual world.
Some people believe that NFTs will revolutionize the way we interact with the digital world.
Many traditional industries may also start adopting NFTs.
The real estate industry could start using NFTs to represent ownership of property.
NFTs are still in their early days and it’s hard to say where they will go from here.
But one thing is for sure: they’re providing a new way for people to interact with and invest in digital assets.
So if you want to learn about the world of NFTs, be sure to do your research and understand the risks before investing.
Is an NFT the Same as Cryptocurrency?
NFTs, or non-fungible tokens, use the same blockchain technology but are not technically classified as cryptocurrency.
They are non-fungible, meaning they are unique and cannot be replaced by another token.
On the other hand, cryptocurrencies such as Bitcoin and Ethereum fall within the same token category.
NFTs are can represent digital assets, such as art, music, or videos. While cryptocurrencies are tokens that help blockchains run.
With these, you can purchase goods and services, or trade for other assets.
NFTs are not the same as cryptocurrencies, but they are similar.
You can decide to buy, sell, or trade both NFTs and cryptocurrencies which are digital assets.
And both NFTs and cryptocurrencies are stored on a blockchain.
All cryptocurrencies must be identical for them to be convertible.
NFTs benefit from their unique qualities. This is because NFTs can represent assets that are one-of-a-kind, like a piece of digital art or limited edition access to utility functions.
Unlike Bitcoin or Ethereum, which can be divided into smaller units, NFTs cannot be divided or exchanged for other assets.
This divisibility is one of the reasons why Bitcoin and Ethereum have value. NFTs, on the other hand, have what is called “intrinsic value.”
Intrinsic value is the value that an asset has because of its usefulness or rarity.
How To Invest in NFTs?
If you’re interested in investing in NFTs, there are a few things you need to know.
First, it’s important to understand that NFTs are still a new and emerging asset class.
As such, they come with a higher degree of risk than more traditional investments.
Before investing in NFTs, be sure to do your research and understand the risks involved.
You should also have a clear investment strategy and know what you want from your investment.
General tips for investing in NFTs:
Start small: When investing in any new asset class, it’s always best to start small and gradually increase your exposure as you become more comfortable with the asset and the market.
Diversify your portfolio: Don’t put all your eggs in one basket.
When investing in NFTs, be sure to diversify your portfolio across several different assets and platforms.
Do your research: Like any investment, it’s important to do your research and understand the risks involved before investing.
Read up on the history of NFTs and the projects you want to invest in.
With these tips in mind, you should be well on your way to making smart and informed investments in NFTs.
Steps to investing in an NFT
Find a reputable NFT marketplace: There are several different NFT marketplaces where you can buy, sell, or trade NFTs.
Some of the more popular ones include OpenSea, Rarible, and SuperRare.
Create a web 3.0 wallet: To store and manage your NFTs, you’ll need a web-based wallet that supports the ERC-20 token standard.
Some popular options include MetaMask, Trust Wallet, and Coinbase Wallet.
If you are buying from another blockchain, you would need to use their native web 3.0 wallet.
Deposit funds into your wallet: Once you have your wallet set up, you’ll need to deposit funds into it so you can start buying NFTs.
The easiest way to do this is by purchasing Ethereum (ETH) with a credit or debit card on a site like Coinbase.
If you buy from another blockchain, you’ll need to purchase their native currency.
Choose the right asset: When investing in NFTs, it’s important to choose the right asset.
Make sure you select an asset you’re comfortable with that aligns with your investment goals.
Complete the transaction: Once you’ve found the right asset, the next step is to complete the transaction.
You can do this using a cryptocurrency exchange or NFT marketplace.
Be sure to carefully review the terms and conditions of the transaction before completing it.
How To Sell An NFT?
If you are ready to sell an NFT, you will need to take the following steps:
Decide where you want to sell: You can sell your NFT on popular platforms such as OpenSea, Rarible, and SuperRare.
You would want to ensure the marketplace supports the type of NFT you own.
Price your NFT: When setting a price for your NFT, consider the following factors: the rarity of the asset, the demand for the asset, and the current market conditions.
Create a listing: Once you’ve decided on a price, the next step is to create a listing for your NFT. You can do this in the marketplace of your choice.
Be sure to include clear and concise descriptions of the asset and any pertinent information potential buyers might need.
Wait for a purchase or promote your listing: The final step is to wait for a buyer to purchase your NFT or promote your listing to attract more buyers.
Once a buyer has been found, the transaction will be completed and the NFT will be transferred to the buyer’s wallet.
Pros And Cons of Investing in NFTs
The benefits of investing in NFTs include the following:
- You cannot replicate NFTs, which makes them a scarce asset.
- They are stored on a blockchain, which makes them immutable and secure.
- You can buy, sell, or trade NFTs 24/7 on several marketplaces.
- They can unlock networking and collaboration opportunities with other NFT owners.
- You may obtain a distribution or intellectual property rights if it is written in the NFT’s smart contract.
However, there are also some drawbacks to investing in NFTs.
First of all, they’re still a relatively new technology and there’s no guarantee that their value will continue to increase.
Additionally, since NFTs are on a blockchain, they can be quite difficult to sell or trade due to the high transaction fees associated with blockchain transactions.
Finally, it’s important to remember that NFTs are still subject to the cryptocurrency market’s volatility.
Should I Buy an NFT?
There is no easy answer to this question. It depends on several factors, including your investment goals, risk tolerance, and the current market conditions.
If you support an artist or creator, find benefit in networking with a community, enjoy the utility, and/or can clearly articulate the appreciation potential, then buying an NFT might be a good idea for you.
However, if you’re not comfortable with the risks of investing in NFT and only want to invest to join the hype, then you might want to reconsider.
If you’re considering buying an NFT, be sure to do your research and consult a financial advisor to ensure that it’s the right decision for you.
Disclaimer:
We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!
