The most expensive NFT in the world sold for over $69 million. They've been popping up in the news, in mainstream media and even at the Australian Open, but what is an NFT?
This is a question that a lot of people have been asking lately, as the popularity of NFTs has been on the rise.
In this article, we will discuss what NFTs are and why you might want to invest in them. Keep reading to learn more.
What Is an NFT?
Non-fungible tokens, or NFTs, are digital assets recorded on a blockchain. Each and every NFT is completely unique and different from any other token in the world.
NFTs come in many forms including digital artwork, virtual collectibles, and music. Despite their "visual" nature, they cannot be replicated. The original NFT can be verified and authenticated the same way comparing a knock-off handbag to the real thing could be.
They can be used to represent anything from virtual game items to real-world collectibles like art or baseball cards. They hold value because they are scarce and unique.
The Australian Open's limited release of commemorative Art Balls are great NFT examples: not only are they unique, but they directly correlate to merchandise and physical items.
Are NFTs Cryptocurrency?
Is an NFT the same as, say, bitcoin or ether? Not quite. While NFTs are cryptographic assets, they do differ from cryptocurrencies.
Both exist on the blockchain; however, NFTs should likely be considered more of a subset of cryptocurrencies.
Cryptocurrencies are fungible. $1 of bitcoin equals $1 of bitcoin.
NFTs are not fungible, and their value goes beyond monetary.
Perhaps one of the best ways to think of NFTs is the same way you might think of collectibles like cars, antiques, or even baseball cards.
A great example is artists like Snoop Dogg putting out unique art or experiences as NFTs, simultaneously removing any middle man from digital publishing.
Are NFTs Safe?
Just like any investment, there is always market risk involved when investing in NFTs. However, as they are based on blockchain technology, NFTs are cryptographically secure and difficult to hack.
Digital assets have not had a great rep in their start due largely to price volatility, token scams, and hacks. However, blockchain networks like Bitcoin and Ethereum have only strengthened over time and are nearly impossible to attack.
Cryptocurrency and other digital assets are better regulated these days and are even subject to tax.
Why Do People Invest In NFTs?
There are a few reasons why people invest in NFTs. Firstly, they are a new and exciting technology. When something is new there is often a lot of anticipation around it which can drive up prices.
Secondly, NFTs represent an investment opportunity. Their value is not just based on economics but also on what people are willing to pay for them. They can be thought of as collector's items in many ways.
As NFTs become more popular, the value of these tokens is likely to continue to increase.
Are you still wondering, "What is an NFT?" And, more importantly, "Should I be investing in them?" Talk to a qualified cryptocurrency advisor.
The team at Mercer Street Financial has experience dealing with cryptocurrency and non-fungible tokens and specializes in advising on crypto and NFT investing. Schedule a consultation meeting today.
Editors' Note: This article was originally published in May of 2021. It was most recently updated in February of 2022.
