A Non fungible token also known as NFTs are unique digital assets such as the NBA top shots which are just GIFs from the NBA. One of these gifs made headlines when it sold for over 200k. These digital pieces of art are normally built on the Ethereum network.
The proof of ownership of the asset is built into the NFT, which means you can see the current owner and the previous history of it. It is easy to add lots of other data to it, for example a video of the artist creating the NFT.
The huge sums of money that some of the NFTs such as the crypto kitties have sold for has seen quite a number of people having an interest in the space and as an investor you would want to know if this is something that if you put your money on it will appreciate in value rather than lose value.
Stick along as I show you the advantages and disadvantages of investing in NFTs, this will then help you make an informed decision when you are thinking of getting into the space.
Easy To Verify Proof Of Ownership
The proof of ownership of the NFT is built on it and if the owner sales it the sale is recorded on the blockchain so it is really easy to verify who owns it.
This also helps you as a buyer of an NFT to verify its authenticity. The art world is full of people that may try to sell you counterfeit art but because here the proof of ownership is built onto the art itself it will be hard for someone to sell you a fake art piece.
Easy To Store
A NFT is a digital asset which makes it very easy to store all you need is a digital wallet to store it and you can store as many NFTs as you like without worrying about the space to put your asset.
There Is No Need To By Fire Or Flood Insurance
The advantage of having something digital is that you will not need to worry about any of the physical hazards such as fires, floods and earthquakes. This means owning an Nft will save you from insurance costs related to these hazards.
Many people love the fact that you can get bragging rights by being able to show everyone online that you own the NFT.
However although there are many advantages that are related to investing in an NFT, there are also some disadvantages. I have listed some of those below:
NFTs Have An Infinite Supply
This means that unlike bitcoin whcih has a total supply of 21 million tokens, NFTs are have a limitless supply because there are so many artists that are coming into the space not because of the love of art but because they want to make a quick buck from creating NFTs.
The only way you can make money from NFTs is if you are able to sell them at a high price than the one you purchased it for and since there are so many being created it will be hard to sell yours when the market floods. The demand will be less than the supply.
When you are investing in NFTs you should keep in mind that you might not find someone to sell it to when you now want to sell.
The high prices of NFTs will increase the supply of them more than their demand. Which means you can not invest in them for the long term.
Like every successful art collector you have to be a very knowledgeable art collector to be successful in this space.
NFTs Can Easily Be Manipulated
An artist can create an NFT on the Ethereum network but there is nothing that can stop the same artist from creating another NFT on other networks such as on the EOS, NEO and TRON blockchain. The same artist can go and create another NFT on these other networks if they saw that their NFT was successful. This will increase the supply and hurt your investment.
The other thing that an artist can do is since there is no regulation they can ask their friends to buy and sell the NFT to pump it up and then sell to a noob.
When you as a noob decide to buy and flip the NFT , there will be zero liquidity. There wont be any bids for your NFT and you have lost your investment.
You may also be interested in: How Do You Create Your Own Non fungible Tokens
