What is an NFT and Why Should You Invest in Them?
Unless you’ve been living under a rock, you’ve probably heard of NFTs – discussed by everyone with a passing interest in investing. But if you haven’t taken the time to research this cutting-edge innovation, you’re likely a little confused about what it all means.
NFT stands for Non-Fungible Token – a new type of digital asset that can represent everything from art and music to real estate. With these virtual items available online to buy, everything available in this new marketplace has a unique identifying code.
So, what does it mean? NFTs have changed the concept behind digital ownership, as scarcity has been introduced to the equation. Compared to standard digital items that can be copied infinitely, you can now buy original items and prove that you are the genuine owner.
How do NFTs work?
Before you get excited and start buying NFTs, it’s important to understand how the technology works – like what is a non-fungible token? These digital assets exist on the blockchain – an electronic database that stores information as a public ledger.
While different types of information can be stored on the blockchain, it’s primarily used to record cryptocurrency transactions. Why does blockchain matter? As a decentralised record-keeping network, all blockchain users retain control of the information collectively, ensuring the data entered cannot be altered or reversed.
This is important in NFTs because buyers and sellers need to have total confidence that the digital asset in question is verifiable as the original item. With blockchain technology, NFTs can be quickly certified for authenticity.
What Are NFTs Used For?
As we’ve established, NFTs are a type of digital asset where ownership can be fully verified. But what real-world application does this technology have? While new concepts are being developed every day, the following industries have already felt a significant impact.
The rise of NFT crypto art has definitely captured the biggest headlines. With many of the world’s leading artists and musicians using this approach to market their digital assets, some of the prices paid have been mind-blowing.
Perhaps the best-known example involves the artist, Beeple, with his collage titled Everydays: ‘The First 5000 Days’ fetching a staggering USD $69 million when sold at Christie’s auction house. This instantly placed Beeple amongst the three most valuable artists alive.
In addition, celebrated musicians such as Kings of Leon, Grimes and Deadmau5 have also released exclusive songs and merchandise as NFTs. This gives their loyal fans a chance to buy otherwise unattainable memorabilia.
As the virtual world and fashion have increasingly collided over the last few years, NFTs have proven the perfect gateway for continuing this fascinating exploration. For example, lovers of luxury brands must constantly navigate convincing counterfeit products when looking to purchase.
However, NFT technology can be adapted to make verifying ownership of these items incredibly convenient. Meanwhile, non-fungible tokens are also a great way to drive interest in new products.
Recently, virtual sneaker brand RTFKT Studios partnered with emerging artist FEWOCiOUS to produce a series of new shoes complemented by limited-edition merchandise. With potential buyers able to try the shoes virtually on Snapchat, the company sold 600 pairs for a total of USD$3.1 million.
NFTs rely on what’s known as ‘smart contracts’, which are essentially a series of coded rules that must be met before money can be transferred. Because these smart contracts exist on the blockchain, the network can permanently store all the information required for an NFT transaction.
This allows buyers and sellers to easily verify the chain of title with absolute confidence, reducing the need for middlemen when organising property sales. With less paperwork to deal with, transferring homes and businesses between parties could become so much easier.
Although these ideas sound theoretical, NFT-lovers have already started selling their homes using this technology. Alongside a wealth of other sectors, expect to see more innovative examples like this soon.
How to Buy and Sell NFTs
Ready to start investing in NFTs? Getting your head around the inner workings is definitely a challenge for someone unfamiliar with cryptocurrency and blockchain technology. But a selection of reliable marketplaces makes it supremely easy to get involved.
In the emerging marketplace of NFTs, the dominant platform is undoubtedly OpenSea. Based on the Enthereum blockchain, users can buy and sell everything from art and sports cards to domain names and items for virtual worlds.
OpenSea also allows creators to generate their own NFT for the blockchain – known as minting – and start selling without needing to code anything themselves. While the platform takes a 2.5% commission from every sale, this is a straightforward way to launch an NFT.
Meanwhile, OpenSea was the first gas-free marketplace. This means you won’t have to pay blockchain fees when making trades, which is usually a stumbling block for those new to cryptocurrency.
Rarible is another comprehensive NFT marketplace that offers many similar features to OpenSea. While you’re bound to find some incredible digital art, there’s also photography, music, games and more.
In fact, luxury travel brand RIMOWA recently launched NFTs for their high-quality luggage. Alongside leading artists like Jake Ross, Benny Cools, and Christian Dückminor selling their art on the platform, securing an original creation might turn out to be a wise investment.
If you’re interested in listing your own NFTs on Rarible, you must first go through the approval process. However, you’ll be able to set your own fees once accepted.
If you’re in the market for art created by some of the world’s most imaginative artists, SuperRare is the platform for you. With this carefully curated marketplace teaming up with a load of household names since its launch in 2018, they’ve so far generated more than USD$107 million in NFT sales for artists.
Part of what makes SuperRare so unique is just how exclusive the platform remains. With a seller fee of 15% and an invite-only philosophy for sellers, the platform produces exhibitions, projects and special releases that generate global headlines.
If you’ve got plenty of cash to sink into NFTs, head over to SuperRare and see what luxury digital assets are available to purchase.
How to Create an NFT
Looking to mint your own NFT? The process is straightforward with a user-friendly marketplace like OpenSea or Rarible. To start, you need to open a crypto wallet and link it to your account. Some reliable wallet options include Coinbase, TrustWallet and Torus.
Next, head to the create page and upload your NFT with a supported file type, such as JPG, PNG, MP4 or WAV. After you craft a captivating title and description for your NFT, you can then place your item into a collection, add unlockable content and more.
Finally, select the blockchain that you want to mint your NFT on. While Ethereum is the most popular choice, there are also options like Polygon, Flow and Tezos.
Top Reasons to Invest in NFTs
If you’re keen to start investing in NFTs, there are a host of awesome reasons why you should launch into this exciting digital space today. Consider these incredible perks and add a new element to your portfolio.
Establish Alternative Investments
As new forms of investments like cryptocurrency and NFTs have hit the mainstream, using these avenues to diversify your portfolio could be a smart idea.
For example, people who already own plenty of traditional stocks are keen to discover more about these innovative digital products. While there’s plenty of market volatility to remain aware of, the likes of cryptocurrency, NFTs and blockchain technology appear to be sticking around for the long term.
If you have a firm belief that this technology will play an essential role in shaping the future, establishing these alternative investments now could be a great choice.
Own Digital Assets
People around the world collect paintings and sculptures, but being the genuine owner of an original digital asset is definitely something outside the norm. While this might mean purchasing an NFT from your favourite visual artist or musician, there are other ways to get involved too.
As a recent example, the NBA has crafted its own marketplace known as Top Shot. Here, they give dedicated fans the chance to buy, sell and trade iconic moments from the sport as NFTs.
If you consider yourself a massive LeBron James fan, owning an official piece of NBA history is a fascinating way to show your support. In fact, this new form of trading card collectibles is proving to be a huge success.
Engage in Cutting-Edge Tech
While blockchain technologies such as cryptocurrency and non-fungible tokens already make exciting investments, getting involved early with how these game-changing systems impact the future is incentive enough for some people.
Whether you want to purchase digital art, buy luxury fashion, collect rare items or preserve ownership of important documents, there’s no shortage of compelling use cases for NFTs.
By getting involved with this highly interactive community and learning the ins and outs, you must discover an insightful investment opportunity that helps you turn a massive profit.
You’re Directly Supporting Creators
It’s no secret that many artists have found it difficult to make a living in the internet age. For example, piracy has simply become a cost of doing business for professional musicians.
Despite new ways to reach consumers, such as social media and crowdfunding platforms, visual artists also have a hard time demonstrating the value in their work and generating income.
However, the rise of NFTs has seen thousands of artists around the globe have access to new and highly lucrative revenue streams. As this blockchain-based way of buying art removes mediators, those creating the work see more of the rewards.
The Growing Pains of NFTs
Just like any newly adopted technology, there’s bound to be some hiccups along the way. As NFTs have gone from being a niche part of the Bitcoin blockchain to a worldwide sensation, it pays to know about the ongoing issues before getting immersed.
There’s always risk involved when it comes to investing. But NFTs are particularly speculative as determining the real and long-lasting value of digital assets is virtually impossible.
While some NFTs are based on items with tangible value – like a once-off song – others are based on hedonic values. This means they generate their worth from how much emotion and history is involved – like a super rare baseball card.
Considering these two concepts, figuring out what a fair NFT price is simply left up to the supply and demand of the market. While NFTs look set to have a big impact in the future, it’s unclear what value these assets will have long-term.
NFT crypto art has taken the world by storm. But the nature of the market is largely moving in the opposite direction to environmental protections.
As cryptocurrencies like Bitcoin and Ethereum require a huge amount of energy to process transactions – magnitudes more than credit cards – people looking to get involved with NFTs are concerned about the cost to the climate.
However, steps are being taken by these cryptocurrencies to limit their energy consumption. In fact, Ethereum aims to reduce its usage by 99% before the end of 2022.
When you’re dealing with a system as decentralised and largely anonymous as NFTs, security breaches and control issues are par for the course until the kinks can be figured out.
With some artists reporting how their work has been minted and sold as an NFT without their consent, ensuring you’re buying the genuine original is something to be wary of.
Fortunately, leading marketplaces like OpenSea and Rarible have implemented measures to deal with copyright infringement and plagiarism. However, always understand the risks before spending.
Chat to the Experts
Ready to kickstart your investment journey? Check out the Superist NFT collection to own a piece of digital marketing history. Meanwhile, catch up on the latest when it comes to understanding the trends of NFTs in the future.
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