2018 was the
year of the security token, with companies and private investors alike flocking
to the asset class to take advantage of the benefits provided by blockchain technology.
However, as
we enter 2019, it seems as though NFTs will be taking center stage in the
crypto space as they continue to disrupt traditional markets and create new
opportunities for developers and investors alike.
So what are
NFTs exactly? How do they work? And why are they so crucial to crypto? This
article will provide you with everything you need to know about these unique
assets, including how you can invest in them yourself!
What
Are Non-Fungible Tokens (NFTs)?
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| NFT (Non-Fungible Token) |
NFTs are
cryptographic tokens based on blockchain technology and have unique
identification codes and metadata that set them apart from each other.
NFTs are
great placeholders for assets in the real world like artwork and real estate.
These tokens, unlike fungible ones, cannot be divided into smaller units.
They are also
not interchangeable with one another like a cryptocurrency is. An NFT’s value
depends on its history or story rather than its market price.
For example,
a tokenizing asset platform may issue 100 tokens called Mona Lisa to represent
ownership of Leonardo da Vinci’s masterpiece painting. This token will be
valued differently depending on its history or provenance.
Why
Should You Invest In Them?
Recently,
there’s been a lot of buzz about NFTs, and for a good reason. Investors are looking
at these tokens to diversify their portfolios by investing in assets that
aren’t just restricted to one industry.
Since there
are few (if any) regulations on NFTs, they have a high rate of return and offer
added liquidity.
However, if
you want to invest in NFTs, you should do your research first and prepare for
potential risk factors.
For example,
it could take time before NFTs become widely accepted as legitimate
investments.
And since
blockchain technology is still relatively new, there may be some technical
issues with using them. For now,
though, it seems like an excellent time to start thinking about investing in
NFTs.
What
Are Some Ways to Buy NFTs?
NFTs can be
purchased in three ways: directly from an issuer, through a third-party
exchange, or via a decentralized application (DApp).
Note that
some tokens may not be available for direct purchase. In addition, while all
ERC20 tokens are NFTs, not all NFTs are ERC20 tokens. Some of these
non-ERC20 assets will trade only on specific exchanges or DApps.
If you want
to invest in a particular asset that doesn’t seem to be listed anywhere, check
its website and ask where it trades.
Also,
remember that most NFTs aren’t actively traded yet; they haven’t reached
widespread adoption and thus aren’t highly liquid. It means they
might take longer than usual to sell when you want out.
Things
to Consider Before Buying
Before
committing to a purchase, you’ll want to make sure you have considered all
available options and have done your research.
You may find
that one NFT outperforms another or that one NFT isn’t worth buying based on
many factors. It would be
best to consider liquidity and market cap when determining whether an asset is
right for you.
In other
words, don’t put all your eggs in one basket! There are numerous crypto assets
on the market. Some are more suitable for long-term storage, while others tend
to be more liquid and suitable to trade.
What
Are Other Uses for Non-Fungible Tokens?
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| NFT stands for Non-Fungible Token |
Adopting
non-fungible tokens (NFTs) has expanded beyond their initial use case as
ERC-721 assets.
Blockchain
companies are already finding creative ways to incorporate NFT technology into
their product lines, including using them for more traditional applications
such as loyalty rewards and even securely tracking company shares.
And with new
projects like Ethereum’s Enjin Coin moving forward with cross-game integration,
we’ll likely see more companies follow suit soon.
Conclusion
NFT tokens
will be an exciting new development as they enter mainstream adoption. In some ways,
these tokens already offer significant benefits over ERC-20 and ERC-721 tokens:
they’re designed to be easy to track and value, which is helpful for insurance
purposes.
Yet, whether
or not their price volatility issues can be resolved remains to be seen. For
now, though, NFT tokens look set to stick around for quite a while.
