NFTs are sometimes touted as an easy way to make money due to some high-profile cases of investors earning huge profits.
But like any form of investment, it’s essential you carry out due diligence before parting with your money as there is no guarantee you’ll even get your money back.
What are NFTs?
NFTs (non-fungible tokens) are unique validated proofs of digital ownership which cannot be replicated. They differ from fungible tokens such as Bitcoin tokens which are all equal in value and interchangeable with one another.
Like physical art, an original NFT can be copied but will always hold its value over a reproduction. And the value of any particular NFT is driven by demand for it. But while real art can be passed off as an original even though it’s fake, NFTs are digitally validated and cannot be altered, so confirming the authenticity doesn’t require a trained eye.
Investing in digital art
In practice, getting started is as simple as creating a crypto wallet, buying some currency and heading to a site that sells NFTs in your chosen coin.
But it makes sense to find out more about what you’re getting involved with before you part with your cash. As you would expect, there are risks involved and some buyers have purchased NFTs only to find they never receive their file – or get one that poses a risk to their computer.
Investing in digital art should be treated the same as any other type of investment. Traditional traders research past performance of an asset and consult the economic data calendar to learn about global events that might impact its future.
This same level of detail is required when considering investing in NFTs to ensure you buy from trustworthy sellers. If you’re new to crypto and digital investments, it’s perfectly natural to be cautious. But there are ways to invest in NFTs while limiting exposure to risk. Consulting with a lawyer specializing in NFTs is the best way to ensure your interests are protected.
NFT stocks
NFT stocks are an alternative for those tempted to dip their toe in the NFT waters but who are wary of investing in assets they don’t fully understand.
With NFT stocks, rather than investing in an individual piece of digital art, you’re buying stock in a company that deals in trading or creating NFTs. This is becoming a popular choice among investors who want to explore NFT investment through more traditional means that they are confident in using.
One of the things that makes investing in NFT stocks more appealing to many is that major global brands such as McDonald’s and eBay operate in the sector. This gives investors the confidence they’re less likely to have if buying from a company they haven’t previously heard of.
Are NFTs the future of art?
Only time will tell. The idea of NFTs replacing physical art is a non-starter. But with the evolution of the metaverse and virtual reality, there is a strong argument for saying digital art will, in some form, be part of the future.
But, just as the majority of paintings or sculptures in the world are not priceless investments, most NFTs that exist are not making their owners millionaires. They’re just nice to own.
