NFTs are all the rage in recent years, and rightly so. They represent a new beginning, where digital creations will become more mainstream, and decentralized tokens can represent anything from art to real estate. If you’re wondering where its value comes from, you’ve come to the right place. This article will explore why NFT is a good investment option.
What is an NFT And Why is it so hyped up?
NFTs or non-fungible tokens are cryptographic assets that stand on a blockchain and have unique metadata that keeps them separate from each other. They can represent anything from digital art to real-world assets, such as real estate. NFTs offer a way to represent real-world assets like never seen before. Besides, they are recorded cryptographically on a blockchain, which makes them tamper-proof. In other words, securing it further is no way to change NFT ownership without the owner’s consent.
NFTs are getting a lot of attention lately, and here are a few reasons why:
1. NFTs raise the value of tokenized assets
NFTs prevent the unauthorized replication of digital art and tokenized assets such as real estate. The uniqueness of each NFT makes them rare, increasing their value.
2. NFTs represent a changing paradigm
We’ve entered an age where a blockchain can store, record, and manage all our transactions. And NFTs are a practical form of this shift to decentralization, which applies to all domains like art, asset management, finance, etc.
3. Major brands are already using NFTs
Many global organizations and famous brands are already venturing into NFTs for different purposes. For instance, by tokenization, IBM uses NFTs to improve transparency and ownership.
Why is NFT an Ideal Investing Option Now?
There are many reasons why NFT is a good investment option right now:
Opportunity for creators
Digital collectibles and artwork were considered cheap till NFTs were introduced. But with the arrival of NFTs, digital creators have the opportunity to earn the revenue they deserve for their efforts. NFTs allow digital creators to reach more people fast through various digital means, which is a benefit when trying to monetize it.
Scarcity
NFTs are unique since they cannot be replaced or replicated. This makes them more valuable, and hence their value rises accordingly. Further, the original creator of an NFT can charge a royalty fee on each sale of the NFT, allowing them to earn even more.
Secure
NFTs are stored on blockchains through strong encryption methods, keeping all transactions safe from fraud. This makes it a secure investing option.
Decentralized economy
NFTs enable decentralized businesses to flourish. For instance, NFT gaming is one industry that has benefitted from NFTs. Games like Decentraland, Axie Infinity, and Sandbox allow players to buy in-game assets using cryptocurrency and allow them to trade off these assets, letting developers earn from the resulting transactions.
Further, play-to-earn blockchain gaming models offer in-game rewards for completing tasks. These rewards are usually cryptocurrencies or digital assets.
What is the best NFT to invest in?
There is no shortage of NFTs today, but out of the thousands of collections released so far, some have turned out to be popular for various reasons. Here are some of the top NFT collections to invest in.
1. Cryptopunks
Cryptopunks is a collection launched in 2017 by Larva Labs and is the first NFT token initiative on the Ethereum blockchain. Punks are characters generated by a computer algorithm and represent humans, apes, aliens, and zombies doing different activities.
Yuga Labs, the famous maker of another NFT collection, BAYC, acquired Cryptopunks in March 2022, raising its value manifold. At the auction, Zombie punks earned more than $8 million.
2. Axie Infinity
Axies are creatures in the blockchain game Axie Infinity. Players of the game need to own Axies to play the game; hence, the NFT collection is among the most popular. The prices of each Axie vary, but on average, one NFT costs around a hundred dollars.
3. Bored Ape Yacht Club (BAYC)
The Bored Ape Yacht Club by Yuga Labs is the most successful NFT collection. These are a collection of cartoon monkeys with varying qualities and expressions, with the lowest price being around $300,000. Its native token, ApeCoin (APE), is listed on major crypto exchanges, and some big celebrities, including Eminem, and Snoop Dogg, are among the owners of this collection.
4. VeeFriends
VeeFriends is an NFT collection released by entrepreneur Gary Vaynerchuk, the CEO of VaynerMedia. These NFTs also act as a token to participate in Gary’s conferences. The conference, named VeeCon, was the first in the world to use NFTs as tickets. VeeFriends website adds that the NFT collection represents a project with useful intellectual property and a supportive community.
Market Efficiency
When it comes to market efficiency, NFTs offer an advantage. NFTs, ensure that intermediaries are no longer needed and improve supply chains. Further, it allows processes to flow better and tightens security because of the digitization of assets.
NFTs make it easy to simplify the authentication process—once they are verified using blockchain, you cannot change them. Not just that, NFTs allow artists to approach the market directly without intermediaries. They can earn and charge a royalty fee on their NFT for each subsequent sale.
Environmental Impact
Most NFTs exist on the Ethereum blockchain, which uses a proof-of-stake consensus mechanism. This mechanism does not need a huge amount of energy to function and is therefore not considered harmful to the environment. For a clearer picture, each NFT transaction consumes 0.03 kWh of energy, equivalent to 3 hours of YouTube streaming.
Conclusion
As you saw NFTs offer many advantages that make them a great addition to your investment portfolio. Besides, it has many features and practical applications that raise its value. We can definitely see more NFT adoption in the coming years.
Frequently Asked Questions
Two major risk factors involving NFTs are:
(i) Scams
Sometimes people sell NFTs on marketplaces pretending to be owners. They offer replicas of real NFTs, and the uninformed buyer may fall for the duplicate NFT. Since blockchain transactions are irreversible, there is no way to get the money back once a sale goes through. So it is important to verify the authenticity of NFTs before buying them.
(ii) Volatility
NFTs are volatile assets, and their prices fluctuate depending on various factors. So if you’re purchasing an NFT, be aware that their prices may rise or fall next minute.
A few years ago, when digital space was not as prominent as today, NFTs were considered a fad. But the world has come a long way since then. Today, NFTs not only represent digital art but act as a key to many applications in a variety of domains. So we can say NFT is not just a fad but is here to stay.
Many factors determine whether you should buy NFTs.. First of all, if you love digital artwork and appreciate its value, you can go ahead and buy it. There can be other reasons to buy NFTs, such as earning profits. If you know that an NFT can fetch a high price in the market, you can buy it early on and wait till its prices rise before selling it.
Besides, if NFTs represent a real-world application, such as a conference ticket, you have every reason to buy them.
They are viable long-term assets because you can easily trade them without restriction. Some NFT marketplaces have fees for selling them, though even those based on Ethereum have come up with lazy minting as a way to circumvent fees.
Their authenticity and proof of ownership record give owners a sense of security around their assets.
Our society has already transitioned to digital form in most domains of life, and NFTs are an instrument that will let people earn money while enjoying the experience. Undoubtedly, NFTs will be a sought-after investment in the coming years.
