As the digital currency landscape expands, certain assets, like non-fungible tokens (NFTs), are seeing remarkable growth in value. While NFTs have existed for some time, their surge in recognition began earlier this year when notable personalities delved into the market. Since then, the momentum for NFT transactions has consistently risen.
Many specialists believe the NFT sphere contains an element of speculation. It's challenging to pinpoint whether NFTs are sustainable investments or gauge their staying power. Thus, it's wise to approach NFTs as you would any other investment, always being mindful of your decisions.
In this piece, we'll dive into understanding this asset. We'll outline the process of investing in, creating, and understanding the potential risks of NFTs. Additionally, we'll weigh the advantages and drawbacks of venturing into NFT investments.
NFTs, or non-fungible tokens, are digital units recorded on a blockchain, signifying ownership of unique digital items like images or videos. Each of these tokens carries a distinct value, making them inherently incomparable and without a set market rate.
Consider an original piece of art; it's a unique item with no standard market rate, much like an NFT, making it challenging to turn into cash swiftly. It's noteworthy that NFTs are primarily associated with the Ethereum cryptocurrency.
Though cryptocurrencies and blockchain technology have existed, NFTs entered the scene later. Despite their late entrance, investments in NFTs are flourishing, with some fetching millions.
However, it's essential to understand that NFTs lean more towards speculative ventures than stable investments. The buzz around digital currencies has spilt over to NFTs. If you're contemplating diving into NFTs, it's prudent to tread lightly, investing minimal sums. The nature of NFTs, given their novelty and unpredictability, doesn't guarantee regular income streams like interests or dividends.
NFTs operate on blockchains like Ethereum, representing digital items like GIFs, Art, Music, Collectibles, Videos, and even video games. In some instances, even tweets evolve into NFTs.
Each NFT boasts unique ownership rights, ensuring that at any given moment, only one individual possesses a specific NFT. These tokens carry distinct data, making token transfers smooth. Owners can embed specialized info within an NFT, such as artist signatures within the NFT's metadata.
Artists gain fresh avenues to capitalize on their creations with NFTs. Contemporary artists aren't bound to auction houses or galleries anymore; they can directly offer their work as NFTs to enthusiasts, often yielding higher profits.
Artists can also embed royalties, ensuring they earn a fraction with every resale of their creation. Beyond art, NFTs open up varied revenue streams. For instance, brands like Charmin and Taco Bell utilized themed NFTs for charitable fundraising.
NFTs and cryptocurrencies share a foundation in their technology. You can store both in a digital wallet. The way NFT transactions operate mirrors how you'd transact with Bitcoin, ether, or even dogecoin, with every move being traceable on the blockchain.
Imagine purchasing an NFT. The blend of private and public keys empowers the seller to pass the asset over to you. Once this is done, a vast computer network confirms the deal. The item then registers under a particular unidentifiable wallet. By possessing the wallet's keys, you govern its contents.
Once your transaction wraps up, guarding your wallet details and private keys is crucial. Misplacing these is akin to saying goodbye to your NFT. For added protection of your NFT, always lean on a fortified, encrypted online connection.
While both NFT assets and regular stock shares can be bought and sold, NFTs tap into decentralized finance. This differs from stock shares, which lean on conventional stockbrokers and exchanges. Using a crypto wallet, trading can happen directly, sidelining the need for intermediaries.
Specific online platforms are tailored for NFT transactions. Though each forum has distinct operations, you can easily purchase or trade NFTs on these platforms.
The most common way to earn from an NFT is to acquire it at a lower rate and sell it for a profit. Yet, they lack a fixed price tag.
A wise move is to invest in digital artworks that will grow in value over time. Still, it's prudent not to go all-in on a single NFT but rather diversify across multiple tokens.
Opensea, an NFT platform, thrives on Ethereum, allowing users to use the blockchain and trade unique tokens with cryptocurrency. This marketplace boasts a plethora of digital treasures, from in-game assets to digital masterpieces. To smoothly engage with Opensea, you'd benefit from a web3 cryptocurrency wallet like Metamask.
SuperRare acts as a digital hub for NFTs, a space where you can exchange authentic digital treasures. Remember, having ETH coins on hand is essential, as SuperRare seamlessly meshes with the Ethereum network.
Nifty Gateway: Owned by the renowned crypto exchange Gemini, this NFT marketplace features primary zones where celebrated artists unveil their masterpieces. Its secondary zone is a hotspot for art enthusiasts to resell these unique pieces. Fund your Nifty account using Ethereum or effortlessly via the platform using your credit card.
NBA Top Shot, a specialized NFT marketplace, exclusively caters to NBA fans, offering dynamic collectables a notch above the classic trading cards. Some cards spotlighting stellar moments have stolen the limelight. For instance, a card capturing LeBron James' iconic dunk against the Houston Rockets fetched an astounding sum surpassing $200,000.
Dive into the diverse NFT online arenas and pick the platform that resonates with you. Please set up a digital wallet and load it up with cryptocurrencies, primarily Ethereum.
But keep in mind not all NFTs are accessible across every platform. For instance, you can only find an NBA Top Shot on its designated platform. Each forum might have distinct payment prerequisites, be it fiat money or crypto.
Upon integrating a digital wallet with an online venue, you've registered with that platform. From here on, the investment world is your oyster.
Think of the digital wallet as your virtual money pouch. But unlike its tangible counterpart, it's designed for cryptocurrencies. Ideally, you'd want a wallet safeguarding your cryptocurrency offline, say on a USB drive. Such 'cold' wallets, inactive in the online NFT scene, offer an added layer of security.
When opting for a digital wallet, make sure it gels with your chosen NFT platform. For instance, while Opensea aligns with Ethereum, your purse should cater to your cryptocurrency preference, like how MetaMask is a go-to for Ethereum enthusiasts.
Ethereum is the favourite for many NFTs, meaning most platforms are on board with Eth coins. Having an account on a crypto exchange paves the way for easy Ethereum procurement, ready to be transferred to your desired NFT venue.
With a well-stocked digital wallet, procuring an NFT becomes a breeze. Most platforms adopt the auction model, meaning the top or sole bidder takes the prize. So, brace yourself to place a compelling bid.
Acquiring NFTs from primary marketplaces offers an edge – the potential to flip them for profit as their worth escalates. Some in-demand NFTs have fetched over fivefold their original price.
Yet, pinning down an NFT's value in a primary market can be tricky. Contrarily, you get a clear picture in secondary markets by contrasting your prospective buy with its past transactions.
Even with basic computer know-how, crafting your NFT is simple. The critical decision lies in selecting a cryptocurrency compatible with your NFT.
Similar to selling NFTs, setting one up requires a digital wallet.
Moreover, you'd want a platform to establish your NFT. Open Sea stands out as a popular choice. Here's a handy guide to kickstart your NFT journey with Open Sea:
You're not locked in post-creation! Feel free to tweak your NFT, be it an audio clip, a visual, or even a video. To perfect your creation, adjust it to your heart's content. When crafting multiple NFTs using an identical token, remember to label each with a unique sequence number and title.
When your NFT masterpiece is ready, simply click 'Create.' It's essential to authenticate the NFT creation message in your digital wallet. And the best part? Open Sea lets you create NFTs for free! But remember, they do take a modest 2.5% cut on every transaction.
Platforms like Open Sea also guide you in listing and promoting your NFT. You can even link your NFT to social media channels to boost visibility. Want real-world NFT inspirations? Consider:
A primary concern when diving into NFT investments is the potential of selling at a loss or, worse, being unable to sell the asset. Given that NFTs serve as digital collectables, it's only sometimes a given that you'll find an immediate buyer. While today's market may seem limited, the horizon promises broader avenues for trading. If you're eyeing optimal returns, consider crafting your own NFT. The costs are minimal, and any revenue you generate from its sale is sheer profit.
NFTs serve as a modern channel for trading digital art and collectables, offering a fresh way to exchange items like paintings and collector cards.
Looking ahead, NFTs promise to transform how we assign value to tangible assets, ensuring clear and untampered ownership. They could be pivotal in car ownership documents, property titles, and business permits.
Michael "Mike" Goldstein, CFP®, ChFC®, is the Founder and CEO of SecureGold Financial Advisors. With over 20 years in the financial industry, Mike specializes in Gold IRAs and precious metal investments. Inspired by his family's history and the financial wisdom of his grandfather, Mike is passionate about helping individuals secure their retirement through stable and guaranteed assets. A Certified Financial Planner™ and Chartered Financial Consultant®, he's a trusted voice in the financial community.