I have been fascinated by crypto for a long time now, and I enjoy sharing what I have learned about it on ToughNickel.
NFTs have gained a lot of attention recently even outside of the crypto world. Twitter CEO Jack Dorsey sold a token about his first tweet for three million dollars. But what is an NFT?
What Are NFTs?
NFTs are digital assets that are traded on a crypto blockchain. The name is short for non-fungible token. If a token is non-fungible, that means it's unique and cannot be replaced or copied. A one-dollar bill is fungible because it can be replaced with any other one-dollar bill. It’s the same with most cryptocurrencies, one DOT is the same as any other 1 DOT, for example.
Every NFT is unique and cannot be replaced with another token. NFTs are also not divisible. This is different from cryptocurrencies like Bitcoin because you can own 0.00001 Bitcoin. With NFTs, you either own the whole NFT, or you donn't. Think of it like a ticket to a football match—each ticket is for one person, and you cannot buy half a ticket.
Most NFTs exist on the Ethereum network. Other blockchains are also able to implement their own NFTs, and some already have, but most are on Ethereum.
What Can NFTs Be Used For?
NFTs can be used anywhere virtual goods—like digital art, code, videos, music, or in-game items—are being sold. Of course, you can just download a photo or a piece of art from Google images without needing to buy it, but if you want to use the photo for commercial gains, then the owner of the photo needs to give you that right. An NFT can work as a certificate to prove you have certain rights to an asset.
In-Game Item NFTs
Currently, NFTs are mostly being used for in-game items. There are games, like Decentraland, that have a marketplace where users can trade items for their avatars as well as virtual land and real estate. Those are NFTs in the game. In-game items already have an established market. In 2020, a skin for a weapon in CS:GO was sold for more than 100K. Using NFTs and smart contracts makes it more convenient to trade such items.
NFTs as Digital Collectibles
NFTs are also used as digital collectables. One famous example is CryptoKitties. These are unique virtual cats that you can collect and trade with other people just for the sake of collecting. This may sound weird, but collecting and trading Pokemon cards is pretty much the same thing, aside from the fact that Pokemon cards are tangible while CyptoKitties are digital.
Humans are naturally obsessed with ownership and love to collect things for the weirdest reasons. Just think of how many little kids are collecting rocks that look good. Maybe in the future authors and the like won't give autograph sessions in bookstores anymore but instead sell signed eBooks as NFTs.
NFTs as Certificates of Authenticity for Real-World Items
Real-world products can also be tokenized. NFTs can be used as certificates of authenticity of real-world assets. Nike is planning to soon sell NFTs with their shoes so that customers can prove that their shoes are authentic and not counterfeit.
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In the future, if someone wants to sell you their Nike shoes, but they can't give you an NFT for them, then you'll know they may be trying to sell you cheap fake. This tech can be used for other kinds of products too. NFTs could also be used as tickets for events—each seat at a given event would have its own unique NFT.
Are There Any Good NFTs to Invest in Right Now?
Hell no! Investing in NFTs is like investing in Pokemon cards. It’s possible to make a lot of money, but the chances are against you because you have no idea how much someone might pay for an NFT of a random drawing in the future. Buying an NFT is like buying any collectible. It's value could go up, but only if it remains desirable or demand increases for it in the future.
Anyway, at the moment, NFTs are not really for normal people like you and me. Most NFTs that have some value are being sold for hundreds of thousands of dollars because their market is booming irrationally right now. That also means that most of them could crash soon because such wild growth in value usually doesn't continue indefinitely.
Not to mention—the market is currently overflowing with scammers trying to earn quick money. Some content creators are selling useless NFTs with no real use or even unique content. Others are selling NFTs for assets they don't actually own the rights to.
Buying NFTs with the intent to sell them for profit is extremely risky and highly speculative. Of course, if you really want to own an NFT or support a content creator by buying one of theirs, then do that. Buying them as an investment, however, is not really a sound strategy.
How Can You Invest in the NFT Market Wisely?
NFTs will likely revolutionize the digital world, but individual NFTs could still become worthless. So, if you want to make money with the NFT market, your best bet would be to invest in NFT infrastructure instead of investing in NFTs directly.
Enjin is a platform that allows game developers to tokenize and sell in-game items on the Ethereum network. In order to create NFTs on the platform, users need to use their native cryptocurrency called Enjin Coin. If you think that NFTs will become more popular in the gaming world, then you could invest in Enjin Coin.
Another promising NFT investment opportunity is Rarible, which is a marketplace for NFTs of all kinds, like digital art and more. Anyone can easily create and sell an NFT on the marketplace, making it possible for people without a lot of technical know-how to make their own tokens. The RARI token serves as a governance token, so it is basically a stock for the platform and may grow in value depending on how popular the marketplace becomes.
What Does the Future Hold for NFTs?
Anyway, if you plan to invest in NFTs, be aware that the market is highly irrational and that NFTs are booming like crazy, similar to Bitcoin in 2017. Anything that rises so much in popularity in such a short time is at high risk of crashing down soon.
Still, in the long term, Enjin Coin and RARI could become much more valuable, but if you want to invest in them, it may be a good idea to wait until their prices fall, which may happen when NFTs are no longer the newest get-rich-quick scheme.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2021 Krypton Currency