Since their emergence in 2017, NFTs have been sparking a lot of debates about their benefits and risks connected with them. NFTs, or non-fungible tokens, are tokens that cannot be exchanged one for another without losing their value. There are no identical NFTs. That’s why NFTs are used as a digital certificate of authenticity.
What Can NFTs Represent?
NFTs can represent just anything: paintings, photos, pieces of land, or any other objects. NFTs are proof of the authenticity of an object recorded on a blockchain.
Can an NFT be copied? Yes, of course. But as an example, if you copy Mona Lisa, your copy won’t have the same value as the original. The same works with NFTs. An NFT copy won’t have the same value as the original.
All information about NFTs is recorded on a blockchain. So, this information is maintained by thousands of computers that have the blockchain downloaded. It means that nobody can forge the data or change it.
Are NFTs Regulated?
While cryptocurrency is becoming increasingly regulated, this is not the case with NFTs. For now, there is no specific regulation in this sector. We know some cases when former employees of NFT marketplaces were sued for insider trading. But those cases were dictated by different laws. NFTs are not regulated, and as long as a person doesn’t breach one or another aspect of the existing legislation, it is ok to buy, sell, exchange, or create NFTs in any amount.
What Is the Reason for NFTs Popularity?
If NFTs are nothing more than a certificate of ownership, why are they then so popular? First of all, it is a new technology. The adoption of new technology is always an unpredictable process. Additionally, there were many processes that boosted NFT adoption.
2017 was the year of the increasing popularity of cryptocurrencies and the Bitcoin and Ethereum bull run. Investors were interested in everything connected to crypto, including NFTs. At that time, the NFT standard became a new medium for artists and all types of creators to get ownership over their creations and monetize them.
A lot of celebrities were talking about NFTs thus contributing to the buzz. Jimmy Fallon, Stephen Curry, and Paris Hilton were among those who bought the Bored Ape Yacht Club NFTs. NFTs are unique and limited in number - these were two more factors that made people compete for purchasing them. In other words, these two aspects were making NFTs valuable from a social perspective.
Are NFTs a Good Investment?
From the investor’s point of view, investing in an NFT is even riskier than investing in cryptocurrency.
The main question is about the NFTs value and utility. The thing is that most cryptocurrency projects try to solve some problems that we face, to deliver some value. It is not the case with NFTs. On their own, NFTs don’t bring any value and don’t solve any problems. They just give their owner the proprietary rights, and this fact is recorded in a blockchain.
NFTs are not ready for serving as an investment. The process of purchasing an NFT is pretty complicated. You need a special wallet. Then, you need to have some crypto in it. After that, you have to connect that wallet to a marketplace. Only then, you can check what NFTs you can purchase.
Another problem is that NFTs are very vulnerable to hacks and scams, and their number is rising.
For an average investor, buying an NFT is, probably, not the wisest investment.
On the other hand, many people don’t worry about financial benefits when they are buying NFTs. They are buying non-fungible tokens just because they are fun or they deliver some emotions. In such a case, it is pretty fine to invest in NFTs, especially if you are ready for the fact that you may never see your money again.
Do NFTs Have a Future?
For sure they do. Another thing is the direction that this technology may take. Many experts believe that NFTs will take care of ownership rights and copyright. Some people believe that the future of NFTs is in the gaming industry. And the most optimistic ones insist that NFTs will be used in plenty of fields, including financial, real estate, etc - options are still to be explored.
Bottom Line
Even though nowadays, investing in NFTs may be too early, this technology is very promising. Once we explore its entire potential and possible applications, it will be widely used in most walks of our lives.
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