What is an NFT?
NFT’s are booming at the moment, people are making hundreds of thousands selling these digital pieces of artwork, but what exactly is a NFT?
NFT stands for Non-fungible token. Which essentially means something that is not interchangeable with another thing. For example money is a fungible item because if you were to give someone $10 and they gave you two $5 bills back you would still have $10 regardless if it was the same bill you had in the beginning; this is because both are worth $10. Something that is non-fungible just essentially means that it cannot be swapped for something else as there is no other item that is truly the same. Think of an autographed book or possibly something with sentimental value to you.
So what’s with all the hype?
Collectibles have been around for a long time, since around the early 20th Century, so why are NFTs so special?
Collectables of all kinds have always been popular, but they all share a common flaw, which is fakes. Trading cards are easily reproduced, sometimes identical to the original cards. NFTs are different. There are some people who assume you can take a photo or screenshot and you own a copy as well, however with the introduction of blockchain technology, you are unable to do this.
This is because all information stored on a block chain is publicly available to view and is unchangeable. This is where NFTs start to become valuable.
So let’s say you own an NFT, great… What do you do with it? Really you have two options and that is to sell it or hold on to it. Why do either though.
Re-selling NFTs; at the moment is a pretty good investment if you pick the right project, some are blowing up. however ; of course; there is always risk involved in making an investment, especially when NFTs are undeniably volatile, so always make sure you do your own research and due diligence.
Holding on to NFTs is also the other route you could take, obviously you can choose to sell at any point but you may want to hang on to your tiny piece of art that cost you $400. There are a few reasons why you would do this and that because you may genuinely like the artwork or enjoy being involved in the community or it could be for the utility. The what?
There are a lot of projects out there that advertise what are called roadmaps. Plain and simple what the project designers aim to achieve in the future. Some benefits are really cool such as private parties exclusive to community members.
I think it is important to remember that the world of NFTs; and crypto for that matter is still very young and there is so much time to see where all this technology will go.
There are a few ways to purchase an NFT. Before anything however you are going to need a crypto wallet and some crypto. The majority of projects use the crypto-currency called Ethereum. Again regardless of your interest in NFTs only invest money that you understand you may lose as of course it is possible.
Once you have your wallet set up and have your crypto in there, you can start researching projects that interest you. Marketplaces like Opensea are great places to start. If you are looking for pre release NFTs however you will need to find the projects before they become available on the secondary marketplace. There are loads of blogs out there that show up and coming releases such as nftrealeses and nftcalendar
When you find a project you like, join the community on twitter and discord. In my opinion it’s great to get a feel for the community. Things I like to look for when researching a project is a great community on discord and twitter, a roadmap, a list of project founders as well as actually liking the artwork. Enjoying the pieces you are picking up makes the process so much more fun.
As always this is not financial advice, always do your own research!