Is it smart to invest in NFTs?

Are you considering investing in NFT after hearing stories of people claiming to make passive income from the digital token?

NFT statistics show a significant increase in the trend as they made headlines in 2021. Currently, there are between 15,000 and 50,000 NFT sales every week. And as an average foreigner, you may find NFT quite confusing. But the big question is, “Is investing in NFTs a smart move?”

Well, that’s why this guide was created to help you make the best decision about NFT.
So, let’s dive into it.

What is an NFT?

NFT stands for non-fungible token. And it is a digital asset which means real objects like music, videos, artwork and game items acquired and traded online. They are generally encoded using software similar to several cryptocurrencies.

Cryptocurrencies are digital currencies that can be released, saved, or traded without creating a personal or business bank account. But you can store them on digital programs like mobile apps or hardware.

“Fungible” is an economic term used to refer to an asset or good that can be exchanged for another. An example is the dollar bill which can be exchanged for another of equal value.

So, non-fungible is the exact opposite. It simply means something that cannot be exchanged for something with the same value. For example, you can hardly exchange one art for another because their value is very subjective – and the need for NFT.

A non-fungible token reveals an exclusive right to certain digital assets: tweets, music, artwork or game subscription. As an NFT, there may be fluctuations in its market value which may change from the original price at which you bought it. NFTs have created new ecosystems that support the trading of these assets.

Since 2014, they have been regularly traded online using cryptocurrency. An NFT marketplace is where anyone can engage in NFT trading i.e. trading digital artwork as a relatively unique digital asset which has been a plus considerable for the cryptocurrency industry.

How do NFTs work?

Unlike cryptocurrency, most of the content of NFTs is tied to the source of the asset, wherever it is stored, from the blockchain instead of being stored there. So anyone interested will follow the link to learn more about the product.

Essentially, the original owner of the content is relying on their own server to prevent activity from continuing without changing anything.

Copyright: Photo by Dylan Calluy on Unsplash

Why investors are considering NFTs

As you deliberate on why NFTs should be your next investment, here are a few reasons why people are considering it.

1. Rarity and uniqueness

Value increases when there is a scarcity of options to consider. Think of NFT like searching for a particular pair of sneakers, only to find one pair in a store.

NFTs can only have one owner. Therefore, with this belief comes a sense of scavenger scarcity, which encourages potential buyers to zero in on a particular coin, fearing that their choice of NFT may belong exclusively to someone else.

In addition, NFTs cannot be tampered with. And it has a better chance of holding its value since most sellers will only have a handful of items that can’t be found anywhere else, making it a solid platform for investment.

2. Safety and Security

The security of a product is a determining factor in determining whether it will attract investors. The blockchain functionality model retains its market value, and there is no need to worry about missing data that can affect its value.

3. The NFT market is decentralized

The decentralized nature of the NFT marketplace allows creators to earn directly from their efforts. Therefore, the intermediate factor does not occur to modify the process.

Additionally, as the NFT is transmitted, the original continues to earn commissions. This decentralized system sets the NFT market apart from others.

4. Benefits of Resale

Investors consider NFTs largely because the assets in them are resalable for quick returns. And since they are not available anywhere else, the returns will be taken into account when investing in the right NFT.

Is investing in NFTs a smart decision?

As an NFT investor, you will find opportunities to make huge profits on your investments. However, this does not always happen.

You will need to create a digital wallet where you can store NFTs and cryptocurrencies. After that, you will need to search for platforms with NFTs where you can buy your favorite assets with the right cryptocurrency. You will have to wait for the highest bid to make a profit.

The Motley Fool adds that people with an eye for music, art and other creatives who like to organize and get into NFTs will find it worth it. However, consider the uniqueness of the coin, the creator of the asset, and the history of the asset before making a final purchase.

NFTs are perfect for all good risk takers who want to invest in a unique and uncommon idea. And with a perfect decision, you will often get huge returns for your efforts.

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