There has been a lot of buzz as of late about NFTs or nonfungible tokens. They have become part of a growing sector with direct connections to cryptocurrency.
Below is a quick overview about NFT’s to understand.
What exactly are NFTs?
So what are nonfungible tokens anyway? Basically, they are a sort of new form of collectible for a new generation. Unlike a baseball card or signed poster, NFTs exist in the digital world. They are most often found in the form of a piece of art or an image, tweet, or video. They also might include a meme or something that seems completely silly.
One of the reasons for the popularity of these NFTs is that they are directly tied to the blockchain and cryptocurrency. This means they can be followed in a very transparent manner. One of the other aspects of this is that the content being offered can be limited to a certain amount of supply.
Because of this, the values of certain NFTs has gone through the roof. Most recently, a piece of digital artwork sold for a whopping $69.3 million.
Every NFT has some kind of marketplace with a product that can be purchased. For many, the concept of owning a piece of art or video of an NBA player slamming a huge dunk down is more exciting than putting that money into one of the various cryptocurrency coins.
In addition, these NFTs can remain fairly independent and not be limited by location specific boundaries and offer some kind of product to customers with just a few clicks.
Why now?
Though NFTs have technically been around since 2015, they are becoming mainstream within the news today for a few reasons.
The first is the recent explosion of cryptocurrency in general. 2020 and early 2021 have been explosive periods of growth in the sector.
The second major reason has been a boom in the largest NFT over the past few months, NBA Top Shot. This NFT has exceeded expectations and grown at an exponentially rapid pace with a lot of popularity because of a partnership with the NBA.
Are NFTs just a fad or are they here to stay?
This is not an easy question to answer because it is simply so early in the explosion of the sector.
The most likely result is that many of the NFTs that have sprung up will make a quick buck but fail to rival anything offered by larger entities.
A number of large brands have already committed to building their own NFTs, including Taco Bell, UFC, Playboy, and a number of television shows, celebrities and musicians have also expressed interest.
The success of NBA Top Shot has also clearly come to the attention of other sports leagues and will likely be replicated there.
Whether or not people are as high on these various NFTs in a year as they have been the past few months remains to be seen, but right now is just the beginning of a worldwide experiment.
Should I Invest?
This is another tough question that really depends on the person. Many of these NFTs are very volatile and can fluctuate immensely. At the same time, it is still early enough to consider putting aside a set amount of money that you are comfortable with and delve into this intriguing new space.
Because we are living in a more digitally focused world than ever before, needing to own a physical product for some is not as necessary as it once was. If you are already comfortable investing in cryptocurrency, it might not be a bad idea to try to diversify in something that could see similar type growth in the coming years.
The key is to do your research and figure out what makes sense for you. As more brands and companies enter the space this year, consider which of them you are most interested in and can trust with your money.
If the high volatility, newness, risk and concept are not your cup of tea, it might make more sense to stay out of NFTs in favor of more traditional investments.
