Of all the cryptocurrency news that made headlines in 2021, the sudden rise in NFT art was perhaps the most dramatic. While this form of asset had been available for some time, it wasn’t until this year that these unique tokens took off and made sales records. But what makes NFTs valuable, and are these tokens worth your investment?
Below you’ll find an outline of what NFTs are and how they relate to the world of cryptocurrency. We’ll also offer some insight into how NFTs may pave the way for the future of blockchain innovation.
What Is NFT Art?
Each NFT is a piece of digital media, such as a photograph, illustration, screen capture, or song made for exchange on the blockchain. NFTs can be traded on marketplaces in various ways, such as auction style or just using a simple buy-it-now price. Users can also place offers on NFTs in a range of cryptocurrencies. These marketplaces also assist to verify that the pieces are authentic and actively seek to remove fake pieces.
The value of NFT is in part due to it being a non-fungible token (hence NFT). A fungible token will have the same value as every other token of its type. NFT tokens, however, can have value independent of each other. Thus, their value can be unique to each piece rather than tracking another asset on the market or, as is the case of Bitcoin, difficulty in mining new tokens.
Why Are NFTs So Valuable?
When you look at how the NFT art marketplace functions, it doesn’t seem very different from physical art auctions, with the primary difference being that the assets are purely digital. As early critics have pointed out, it’s always possible to copy a piece of digital media, whereas it’s almost impossible to make an exact duplicate of a physical painting. So, where does the value come from? Why are people paying millions to own NFTs?
The underlying reason is scarcity. While the eventual owner can duplicate the image countless times over, the token serves as a certificate of authenticity. The buyer becomes the owner of the image, and the blockchain ledger records the transaction. Some buyers want to show support for artists or show off their acquisitions, while others treat their purchases as an investment to sell later, as crypto traders do with coins.
Are NFTs A Safe Investment?
Buying art through NFTs is still a relatively new development, and it’s hard for anyone to forecast long-term results. Moreover, as with all investments, buyers have to assume the risk that they could lose money. But the nature of NFTs has led some critics to dismiss them as a fad that carries even more risk than speculating on cryptocurrency.
If you want to make your own judgment, we suggest looking at how the NFT market itself is performing. From celebrities to the unknown, artists have been enthusiastic about embracing NFTs, and several marketplaces have sprung up to support them.
NFTs Beyond Art
The underlying technology behind NFTs is about keeping authentic, unalterable, and verifiable records of ownership for these tokens. NFT supporters hope to use it as a proof-of-concept model for broader property rights. They suggest that the NFT model could be applied to any transaction, eliminating any doubt over who owns what.
On paper, it could be a solution to many problems. For example, records would be impossible to falsify, and many recordkeeping forms would be significantly simplified. However, if this does happen, NFT investors could be on the ground floor of this new wave. Even then, it’s impossible to tell when—or even if—this will happen.
Aus Merchant Helps You Navigate The Future Of Money
While the NFT market has created new investment opportunities for those on the forefront of technology, there’s still a lot that even the seasoned crypto trader may be unfamiliar with. That’s why you need an experienced advisor on your side.
That’s why Aus Merchant is here.
We provide guidance and investment services for individuals, crypto traders and firms of all sizes. We can help you research and hold assets, execute trades and prime brokerage services to help you reach your financial goals through crypto. Reach out to our team and learn more about how we can assist you in building your portfolio of both cryptocurrency and NFTs.