Technology has evolved with time. However, with the hit of the pandemic, digitization has increased. It has resulted in the speedy evolution of technology. One such innovative outcome of the evolution of the technology is the introduction of NFTs in the market.
Non-Fungible Tokens (NFTs) have been in the market for the past few years. With the increasing craze of digitization, people are getting more fascinated with cryptocurrencies and NFTs. NFTs have created their place in the market within a short period. People are running like crazy to buy these digital assets.
But the question is – whether your investment of thousands of dollars is worth it or not? Are these NFTs worthy of investing dollars? What will be the value of NFTs in the coming 4-5 years? Before getting the answer to these questions, it is necessary to know what NFTs are and what is the history behind them.
So, without any further dues, let’s get started to learn about NFTs in detail!
What are NFTs?
NFTs are the digital assets that represent the ownership of a particular art piece, music file, video game elements, audio files, or video files. They are frequently sold and bought on different online platforms.
They are often mistaken and confused with cryptocurrencies. But the reality is that cryptocurrency is a whole different thing. People use cryptocurrency to purchase NFTs online. Similar software is used for encoding both NFTs and cryptocurrencies. Blockchain records the value of a non-fungible token.
Although NFTs have been in the market since 2014, their popularity increased since 2017. According to the recent data, it is calculated that an approximate amount of $174 million has been spent on NFTs to date.
Unlike physical money or any cryptocurrency, NFTs are unique and one of a kind. As the name “non-fungible” suggests that you can’t exchange an NFT with another NFT. You can either buy or sell them using your bitcoin or any other cryptocurrency.
Now, the question arises – why are people willing to spend dollars on any image or video file when they can download it? The answer to this question is simple. NFT provides the buyer the ownership of the original object. In addition to this, an NFT also has an in-built authentication to prove the ownership. After you achieve the ownership of an NFT no one including the owner of the NFT marketplace can change or edit it.
How do NFTs Work?
You must already be familiar with blockchain as a public ledger that keeps a record of all the digital transactions. Blockchain keeps the records of all NFTs. NFTs are generally minted (created) from either tangible or intangible digital objects like paintings, art pieces, GIFs, music audios and videos, digital game elements, etc. In other words, NFTs are the digital goods that you can buy with your digital money.
Nowadays, people are even selling their tweets as NFTs. They are just like purchasing any item from a grocery store. But they are in the digital format. For instance, if you have purchased an NFT of a painting, you can store it digitally instead of using it by hanging it on your wall.
They can even represent the physical identity of an individual or the ownership of any property in the digital format. These NFTs have proved to be a boon for all artists. As they now have access to digital platforms to showcase and monetize their artwork. Using blockchain technology, artists can easily monetize their artwork by selling it directly to the consumer in the form of NFT.
NFTs can be bought through a digital wallet that is capable of holding NFTs and cryptocurrencies. Later, you can buy cryptocurrencies like Bitcoin, Ether, etc. from digital platforms like Coinbase, Kraken, PayPal, Robinhood, etc. These cryptocurrencies are then used for purchasing NFTs.
History of NFTs
As it is said that necessity is the mother of invention, blockchain was introduced back in 2008. When a financial crisis stuck different nations causing the recession. At that time, before the emergence of art-based NFTs, the idea behind blockchain technology was to use it for keeping property papers, coupons, shares, and digital collectibles safe and secure. Blockchain was introduced with a vision that the financial decisions will never be given to a few hands who would plan to destroy the whole economy to satisfy their greed.
The history of NFTs started in the year 2014 when they were introduced to the market for the first time. The man behind the creation of the first-ever non-fungible token named “Quantum” is Kevin McCoy. Quantum is an art piece depicting an octagon filled with different shapes and patterns. These shapes have a circular motion with the same center point. This unique artwork is one of a kind. There’s no duplicate image of this amazing NFT. Even today it is on sale with a price tag of seven million dollars.
The creation of Quantum introduced NFTs in the digital marketplace. But their craze and value increased rapidly in 2021. Over the past 12 months, NFTs have been on the boom. People are going crazy after NFTs, and artists are making large bucks with this growing craze.
Investment in NFTs
Thorough market research is a must before investing money in NFTs. You know that cryptocurrency investment and NFT have an uncertain future. Here are some tips that will guide you toward the correct investment options in NFTs:
- Proper research of market conditions and trends is necessary before investment. Being a newbie in the NFT marketplace, you must always seek advice from experienced and trusted people.
- Read more. There’s no age of learning rather, the person who is open to learning new things achieves heights of success. So, keep learning to get more knowledge about NFTs before investing your precious time and money.
- Don’t trust anyone easily. New reports of scams are recorded daily. Don’t make a fool of yourself by investing your money based on random people’s advice. Do your research, and then invest your money.
- Regulate your investments regularly, because without regulating these digital assets, there are high possibilities of losing your precious money.
- You should only invest your money after understanding the value of that particular asset in your life. For better returns, first of all, it is necessary to check whether you are selecting a quality asset for your investment or not.
Future of NFTs
Yes, that’s what most people are wondering right now. What’s the future of NFTs? Well, talking about the future of NFTs we can say that the future of NFTs is uncertain. We can never predict the future on a non-fungible token. The massive increase in the craze of NFTs among people has benefited a lot of artists. As a seller, you might have a great future in NFTs. But do you think for an investor it is a good option of investment?
Have you ever wondered – what will happen to all your money when the NFT link will disappear from the blockchain? Or how will you get back your money if any hacker hacks the NFT platform? Investment in NFTs is prone to risks.
I’m not saying that it is a bad idea to invest your money in NFTs. But what I want to say is that it only has a future as long as it returns the amount of your transaction along with some interest. That’s what investment means. Investment is the amount of your savings that will multiply your money. And if your money is not multiplying then what’s the point of investment.
The future of NFTs is unpredictable, but if you are interested in investing your money in the NFT marketplace then make sure to invest a small amount at an early stage. In case, anything bad happens, you won’t feel bad about losing a small amount, but losing millions of dollars can be a real pain. Moreover, while investing in NFTs also make sure to invest for the short term. Long-term investments can be harmful with an unpredictable future of NFTs.
Values of NFTs
The value of NFT is the most confusing thing about an NFT. The next question is – do NFTs hold value? The answer to this question is a straightforward “No”. Now, you must be wondering how. So, to clear all your doubts let’s get into a detailed discussion.
You must have heard about notaries. NFTs are simply digital notaries. That means NFTs don’t hold any value. The artwork or music video that you have bought against your cryptocurrency investment is actually what holds value. NFTs are just simple digital documents that prove your ownership of a particular digital asset.
Are NFTs Worthless?
Now that you know everything about NFTs, it is clear that anyone can easily purchase NFTs. But that doesn’t mean that it’s safe to purchase them. NFTs are generally secure because of the security measures of blockchain technology, but at the same time, they can be hacked too. Similarly, there are many other risks associated with the purchase of these non-fungible tokens. Read further to know about these risks in detail, it will help you in making a smart choice before investing.
Investment in NFTs is as risky as investing in mutual funds. However, you can’t compare mutual funds with NFTs. They are new to the market and their performance cannot be calculated for long-term investments. They don’t have a certain future, that’s why it is not safe to invest a large amount of money in NFTs.
Contrary to this, NFTs are also prone to hackers’ attacks. Blockchain technology makes it difficult for hackers to attack with its distributed nature. But that doesn’t mean that is completely safe from hackers. Despite so much security, some hackers prove that they can hack anything.
Another risk associated with NFTs is that your token becomes inaccessible when the platform hosting that NFT closes. Because NFTs are stored as a link on the blockchain platform. The disappearance of this link from the blockchain means that you have lost your NFT and thousands of dollars that you had spent on it.
Sometimes it becomes difficult to resell an NFT, unless and until someone wants to purchase it. You might not get the expected value of your investment. Non-fungible tokens are also very controversial because they are highly impacting nature. A lot of energy is used in creating an NFT because it requires high computing power.
This large energy consumption is very harmful to nature and the environment. A single NFT transaction needs an amount of energy that approximately equals the amount of electricity utilized in a normal household in one and a half-day. Thinking about this in the long term might be extremely harmful to our environment. It’s not only about earning money. If we keep on ignoring its harmful effects just to focus on earning money, then another pandemic hit is not very far away.
As it is said that the future of NFTs is uncertain, do you think it is a good idea to invest your precious savings into something that has unknown future possibilities? That’s why we always say – think before you act (invest).
We hope that this article gives you all the information regarding the NFTs. However, despite all these risks associated with NFTs, their market is continuously increasing with each passing day. Every day a new member joins the NFT marketplace either a buyer or seller. NFTs have become popular not only among artists, but they are also very popular among many gamers and different brands.
These sellers are earning a large amount by selling their arts and videos as non-fungible tokens. However, with so many people playing in the NFT market we would still suggest you think twice before investing in the NFTs. Investment in NFTs depends on your luck, if your luck doesn’t work well there’s a large possibility that you might lose all your money. We would advise you to think practically and then invest your money to enjoy its worth. Good luck!