The popularity of NFTs surged during the pandemic, leading many investors to wonder whether they should be bought. As the price of cryptocurrencies and other digital assets has soared, artist collectors and speculators, among others, have piled into the movement. (Rossolillo, 2022) The jury is still out on whether this is an unsustainable bubble about to burst or the birth of a new long-term investment asset class, but NFTs themselves offer hope for artists and are being applied in the business world. To help investors better understand NFTs, the following sections describe NFTs in detail.
What is NFT?
NFT stands for “Non-Fungible Token”. (Gailey,2022) NFTs are used to secure ownership of unique assets – typically digital assets such as artwork, musical compositions, or props in video games. These tokens are built and managed on the blockchain, the same digital ledger technology system used by Bitcoin and other cryptocurrencies. Think of these digital tokens as a kind of virtual certificate similar to a physical certificate or title that you can provide to prove that you own a physical asset (such as real estate). They are digital proofs of ownership originally designed for digital assets and art. (Rossolillo, 2022)
Why did NTF suddenly become popular?
Experts believe that the explosive prevalence of NFTs shows that the adoption curve of new technologies is unpredictable and that there are many factors contributing to the growth of NFTs in 2021. Thanks to the bull market in Bitcoin and Ethereum, many new investors piled into cryptocurrencies in 2021. There are a lot of celebrities talking about them, too, especially on social media. Take the Boring Ape Yacht Club. Jimmy Fallon, Steph Curry, Paris Hilton all bought them. So, if you buy a Bored Ape, you will be a part of many famous celebrities. With the limited number of boring apes available for purchase, about 10,000, people rushed to buy them. From a social point of view, these two aspects are their value. (Gailey,2022)
Are NFTs a good investment?
Experts say non-cryptocurrencies are not ready for prime time investing, and you need to be really familiar with several aspects of cryptocurrencies before you find yourself owning one. First, the process of buying non-financial bonds is complicated. You need an Ethereum- compatible cryptowallet and some Ethereum to get started, and you must connect your wallet to an NFT marketplace. (Gailey, 2022) NFT is also vulnerable to cryptographic hacks and scams, which have become increasingly common and sophisticated. Then there is the question of value and utility. Unlike stocks or bonds, you usually know the intrinsic value of an investment. A successful NFT is similar to a strong brand in that a lot of value is assigned to it by others, so it is only valuable if others are willing to pay for it.
The Future of NTFs
So, are NFTs here to stay or simply a fad? Experts are still divided on this. Some were shouting bubbles. Nonfinancial bubbles are already controversial here. The $69 million Beeple NFT sale marks the start of serious media attention. (Gailey,2022) If this psychological bubble cycle is correct, public enthusiasm and greed should come soon. As for the positive effects of the NFT digital bubble, we are still in the early stages and investors may have enough time to make some money before the bubble bursts. (ROSS, 2022) While others claim that NFTs will create new ownership opportunities and regroup old ones. Meanwhile, creators and artists claim this is the next form of monetization. “What’s really valuable is the technology behind NFTs — smart contracts for blockchain technology,” Boneparth said. (Gailey, 2022) There is no limit to the potential of NFTs in the future, especially when they cost a fraction of what they are today.
Reference:
1. Alex Gailey, (February 14, 2022 ). "3 Experts Explain Why NFTs Are So Popular, and What They Mean for Crypto Investors". Retrieved May 8 th , from, https://time.com/nextadvisor/investing/cryptocurrency/are-nfts-good-investment/
2. LOGAN ROSS. Contributor, Benzinga. Published: January 25, 2022. “ARE NFTS A SCAM OR A DIGITAL BUBBLE? ” Retrieved May 8 th , from,https://www.benzinga.com/money/are-nfts-a-scam-or-a-digital-bubble/
3. Nicholas Rossolillo, (Apr 7, 2022 ). “How to Invest in NFTs. Retrieved May 8 th .”from, https://www.fool.com/investing/stock-market/market-sectors/financials/non-fungible-tokens/how-to-buy-nft/
