As of 2022, there are about 360,000 people who own NFTs in the world. That relatively low number might surprise you considering how much press NFTs have gotten recently.
But what are NFTs and should you buy them while the concept is still new? It’s important to understand the basics before diving into a non-fungible token purchase.
The following guide will explore how to buy NFTs, what they are, their benefits, and their drawbacks.
What Are NFTs?
NFTs are digital assets such as art, music, videos, video game items, and much more. They’re typically bought with cryptocurrencies and sold online. NFTs use also the same type of blockchain technology used for crypto.
Non-fungible tokens got their start in 2014 but they’ve only recently gained steam. In 2021, the NFT market had a massive value of $41 billion.
NFTs tend to be totally unique or extremely limited and use specific codes for identification. The limited supply should raise an NFT’s value in theory. Check out the digital machinist NFT for an example of how they work.
Some NFTs aren’t original works and might be things like video clips from NFL games or securitized forms of artwork on Instagram. While anyone can view items like those, buying the NFT gives you ownership because of the built-in authentication.
Advantages of NFTs
Unlike other fine art, anyone can purchase NFTs in a variety of price ranges. They’re accessible to everyone and the tokenized assets transfer very easily from one person to another.
Owning an NFT is safe because they’re secured by a blockchain. The blockchain digitally signifies your ownership to make the asset more protected. Ownership is also more transparent because of blockchain technology.
It doesn’t take much money to buy your first NFT and some creators even give out works for free occasionally. So, it’s a low-cost way to diversify your portfolio and learn more about blockchain tech at the same time.
Disadvantages of NFTs
NFTs aren’t actually an asset class but rather a technological way to signify ownership. Because of this, some NFTs get over-hyped and the price becomes volatile.
It takes a lot of energy to generate NFTs because the Ethereum blockchain that supports them uses “proof of work”. Just one NFT transaction takes the same amount of electricity as a standard home over one and a half days.
Several NFTs require you to make your purchase using ETH. If you want to purchase NFTs in the US Dollar, you’ll have a much smaller selection of NFTs to choose from.
Should You Buy NFTs?
So, what are NFTs exactly and should you buy them? They’re a digital asset and their value largely depends on their supply. They come in many affordable forms and might be worth testing out to diversify your portfolio and learn more about blockchain.
It’s hard to say where the NFT journey goes from here but it’s certainly an exciting time to invest. Check out our technology and finance categories for more awesome information and helpful tips.
