Most investors have heard about non-fungible tokens or NFTs at this point, and their raging success has opened new doors. In 2021, Michael Joseph Winkelmann exploded into the headlines when he sold an NFT for $69 million. Later, Canadian software developers Matt Hall and John Watkinson sold the famous ape NFT for $10 million. The ever-growing market bears some rich fruits for those who know where to invest their money.
NFTs Explained: Beginner’s Guide
The artist can sell original NFT digital art for income. Artists now earn cash from a newly emerging art market with the average NFT on sale for $1,000. Many creators of NFTs earn passive income even after they sell a collection. Artists earn a share of the sales price from NFTs indefinitely.
You receive a certificate of authenticity with an indication of individuality. Like other works of art, you stand to gain more from original artwork. NFTs work because of the assurance that you bought an original piece over a copy.
NFTs function like cryptos in that they represent physical and digital ownership. Most NFTs use the Reuther blockchain, another form of digital currency supporting NFTs. The details about the owner, artist and composition are all contained on the blockchain.
Getting Started with NFTs
Before you buy, research your artwork and the artist with care. You don’t want to dive into the NFT market blindly because you can still lose money. Like the stock market, you must research the individual NFT.
You can conduct much of the research online. Check the Twitter and Discord of individual artists to gauge their popularity and learn about the NFTs that interest you. Investors in NFTs tend to celebrate everyone’s wins, and they believe that all ships lift in a rising tide. It’s a welcoming community.
Some of the platforms where you can buy NFTs include:
- OpenSea
- Decentraland
- Axie Infinity
- MakersPlace
- KnownOrigin
- Mintable
We recommend that you start with OpenSea since they hold the title of the largest NFT marketplace on the internet. You must have crypto before you can make an NFT purchase. The most secure crypto platforms include WalletConnect, Coinbase, and MetaMask.
Don’t Buy Till You Ask These Questions
Before you buy, ask if the NFT will offer longstanding value or if it only has popularity because of a short-lived novelty. Does the artist communicate openly and reliably? Are they transparent, and what’s their history in the NFT market?
Have they built a strong community over time? How did the artist’s NFTs from the past perform?
Every investment carries risk and NFTs belong to a newly emerging market, which increases risk. Understand your tolerance for risk before you invest. Since they remain a new investment, we may see new rules emerge for them in the future.
Common Mistakes of NFT Investors
Unfortunately, many in the NFT market invest on speculation. They believe that the NFT will one day rise in value, so they buy and hold. We wouldn’t call this a rewarding or safe strategy. Know what you buy and understand how all investments carry risk.
Pros of NFTs
- Huge growth potential
- Ownership of unique assets
- Clear ownership records
- Groundbreaking technology
- It gives artists a new way to earn money
Cons of NFTs
- Uncertain value
- Environmental cost
- Not the same as a physical artwork
Conclusion
Anyone who buys into the NFT market should understand the risks and how most investment advisors rate NFTs as a highly speculative market. Art only has value in what another investor is willing to pay, which means that the value rises and falls on the market demand.
NFTs serve as digital tokens, but they don’t grant full rights to the investor. Instead, it offers artists a way to keep earning income, and we consider that a positive