What is an NFT?
Important Note: This is not personal advice. If you are not sure whether an investment is right for you please seek advice. If you choose to invest, the value of the investment will rise and fall, so you could get back less than you put in.
NFT stands for non-fungible token, simple terms unique and cannot be replaced. An NFT represents a digital asset that represents a real-world object such as a video or artwork. Since 2014 it has become a popular way to buy and sell digital works.
How Does an NFT Work?
An NFT exists on a block which is distributed public ledger that records transactions. NFTs are built in a similar way to Bitcoin or Dogecoin using the Ethereum blockchain to store information such as purchase and payment history. NFT’s represent anything digital; you can buy anything from drawings, music to videos. Currently selling digital art is getting more popular as individuals look to be the first people to purchase artwork before it mass use of NFTs. Artists no longer have to rely on galleries or auction houses to sell their art, they can sell directly to the consumer. Artists can program royalties so they receive a percentage of sales whenever their art is sold to a new owner. The Bored Ape Yacht Club a wildly popular collection of NFT is already the third-most valuable collection with $1.5bilion in all-time sales according to CryptoSlam.
How to Buy NFTs?
To purchase an NFT you will need a digital wallet that will allow you to store NFTs and cryptocurrencies. Secondly, you will need to research currencies your NFT provider will accept as this will need to be purchased before purchasing an NFT. You can buy cryptocurrencies using a payment card on platforms like Coinbase. Keep in mind fees for cryptocurrency transactions.
Check out my What is Cryptocurrency? blog if you are unsure what cryptocurrency is.
Should I Buy In NFTs?
NFTs are risky due to their uncertain future and lack of historical data to judge their performance. NFTs are not regulated and the NFT value is solely based on how much someone is willing to pay. Prices are driven by demand rather than technical or economic indicators. All these points mean the resale of NFTs may be less than it was purchased for. It is worth researching the market first and making a personal decision whether you are willing to lose your investment if prices do come down. There will be a certain element of risk like with any physical collectable.