What are NFT’s? A Guide for New Investors in the Space

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NFTs were valued at $100 million in 2020. In 2021 alone, their value has grown to $21 billion. At this rate, NFTs will be more valuable than cryptocurrencies despite the hype. The trend, therefore, presents a perfect opportunity for early adopters to invest.

A good return on investment comes after prudent research. Understanding NFTs will help you to stake your money and start owning some of the most valuable digital assets in the market today. The prices are still low and affordable to students. It is a chance to enter the world of business and at the same time grow your assets while still in college. 

Information on NFTs is scanty because of the relative age of the investment sector. Anyone who dives into the field early will reap big before it is flooded. Students and freelancers can take the chance to make headways, creating room for huge future returns. 

What are NFTs?

The full word is Non Fungible Tokens. The word is drawn from the term fungibility to mean commodities or items of the same kind that can be traded. The basic idea is barter trade, though you can convert the value of the commodity into money. 

Bitcoin, one of the most popular cryptocurrencies, is a fungible asset. You can trade one bitcoin for another or convert it into money. NFTs on the other hand are non fungible. It means that you cannot replicate the assets under any circumstance. 

NFTs are non fungible because they possess very unique characteristics. The fact that these characteristics cannot be replicated makes the assets even more valuable. Still, the NFTs can be traded on blockchain platforms like bitcoins. Because the value cannot be split or replicated, they appear as tokens on the block-chain system. 

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The ownership of bitcoins and other cryptocurrencies changes upon purchase. Tokens are unique in that their ownership is time-stamped. The token only represents digital ownership. 

NFTs are represented as pieces of information. The information is packaged in an interactive format, enabling people to interact and interrogate the commodities. The block-chain platform allows buying and selling but the nature of the commodities does not change. Consequently, they maintain their unique characteristics. 

Hosting NFTs

The most popular block-chain site for tokens is the Reuther platform. The platform is similar to Bitcoin and Ether, among others. However, it captures unique features that allow trading in tokens or NFTs. The token captures the details of artists, the commodity an artist offers, and how to acquire the asset should the need arise. 

It is always prestigious to own an asset that no one else in the world has. It is a similar case with paintings by iconic artists. A replica of the painting can be sent over the internet. The original painting is worth millions of dollars. 

Artists are using NFTs to gain more control over their work. You create a digital contract to engage all potential buyers and users of your product. With greater control, you earn more from your digital work.

A painting artist has to cede 30% of his earnings to the gallery. A digital contract works differently. You take home 90+ of the earnings from your work because you have eliminated expensive middlemen. You also set the terms for using your work, helping you to avoid expensive agents. 

Artists earn from the primary use of their products through formal contracts. Individuals and institutions that would like secondary ownership or usage also pay a fee. NFTs, therefore, expand the revenue base for artists dealing in digital products. The commodities are significantly increasing revenue share for artists trading in digital assets. 

Investing in NFTs

NFTs are similar to commodities placed on supermarket shelves. As attractive as these products may appear, you must determine their value before purchase. Each of the NFTs is owned by an artist or creator. Determine its value before buying or investing. 

Investing in NFTs is similar to the stock market. Do not dive into the sector before due diligence. Understand the company or individual behind the product. Evaluate the market value and prevailing trends before staking your money. Despite the hype and craze around NFTs, you must make a sober decision when investing. 

Basic information about a product or brand can be found on the internet. Google, Facebook, Twitter, and such social platforms will give you an idea of the reputation of the artist as well as his product. Has he engaged in boardroom battles with producers or promoters? What are people saying about the artist and his brand? Is the product worth the valuation on the NFT platform? You avoid buying overpriced tokens. 

Research on a token should consider the performance of other items in the market at a similar time. The price could appear high but is low or underperforming compared to others in the same market segment. Remember that rising tides lift all boats. As such, the trend should reflect unique performance. 

Check expert opinion about the product. The opinion can be found on blogs, media outlets, and personal social media accounts. You should also consult your investment advisor to guide you into making the right NFT investment decisions. You avoid excitement about a product yet it does not capture its real value. 

Questions to ask when investing in NFTs

Due diligence helps you to enjoy short and long-term value for money after investing in NFTs. Here are simple questions to guide you when investing. 

  • Are the price and value short-term or will it be sustained over a while? Avoid tokens selling in a bubble that will result in poor market performance. 
  • Is the product marketable beyond the current platform or market? For instance, a song can be used on radio, ads, movie production, etc. Such expansive marketing adds to its value. 
  • Is the token transparent? Have you unearthed information that owners were hiding? Such secrets devalue a token. 
  • How are other similar tokens performing? It helps you to gauge the best value. 

Buy tokens that will guarantee value for money based on your financial goals. Due diligence will protect your money from scams and investment bubbles. Invest early to enjoy low prices and the potential for huge future returns. 

Author Bio

Anna is an educational freelance writer at My Paper Writer. She helps students with homework on different topics and for diverse grades. She also shares excellent tips on how to create the best college experience.

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