Non-fungible tokens, or NFTs, are one of the most popular categories of cryptocurrency tokens, generating significant hype when they were released and remaining relevant over the years. The assets represent the ownership of digital items, including collectibles and artwork. Although they inhabit the same space as cryptocurrencies, non-fungible tokens are not interchangeable. The holdings are secured on the blockchain network, making them tamper-proof and wholly verifiable.
If you’re an investor, you already know how complex crypto price prediction figures and metrics are. With the NFTs, you can typically expect elevated prices from the very beginning due to the assets’ utility, rarity, and perceived value. It is their unique characteristics and the community demand that have made them such a profitable venture. Although the marketplace has cooled from the 2021 peak, when the entire blockchain ecosystem began to accelerate, it remains relevant and has experienced a resurgence in areas such as digital identity and gaming.
An overview
NFTs are bought and sold online, typically using cryptocurrencies, as the underlying software is largely the same as that of digital coins. The moment non-fungible tokens became popular was when they became a popular method of trading and acquiring tokenized artwork. Some of the works were sold for tens of millions of dollars, which can seem extreme for the outsiders who don’t understand what the hype is, especially given the fact that these pieces can be viewed through other means.
However, the collectors point out that buying the tokens is an investment since their value is likely to appreciate over the long term. The built-in authentication of NFTs makes the assets even more valuable for collectors. Since they become immutable owners and can derive further value from the assets as well, NFT holders have pointed out that the investment is actually a very sound one, although it can seem irresponsible from an outsider’s perspective.
There’s also the possibility of profiting from additional structures, such as virtual worlds, which often sell digital items collected through gameplay, including costumes, avatars, and in-game currency.
Getting started
Acquiring non-fungible tokens is a little more complex than buying standard cryptocurrencies. You also cannot use crypto exchanges to complete your purchase. However, some things are the same in this ecosystem as well. The first thing is to set up a cryptocurrency wallet and buy crypto tokens if you’re not already an investor. NFTs are an Ethereum creation and are located on the blockchain, meaning that the digital wallet you use must be supported by Ethereum’s blockchain.
The next step is to start researching NFT marketplaces. OpenSea is the most popular alternative owing to the large selection it offers and its user-friendly interface. These features have made it the perfect choice among both casual and committed collectors. Browsing through several options is the only way to find the best option for your portfolio. All trustworthy marketplaces offer browsing options for the NFTs they host, allowing you to determine whether the assets they offer are suitable for you. Purchasing will require you to make a bid since the platforms operate similarly to auction houses.
Make sure to check the gas fees as well. These costs are associated with every single venture occurring on the Ethereum blockchain, regardless of its size. If the gas fees are exceedingly high, you might want to wait for a bit before you start buying, since the amount you’ll have to pay is sometimes higher than the NFT itself.
The art styles
The NFT art styles are very diverse, including futuristic, surrealistic, and abstract designs. On top of that, music and film can be represented in non-fungible tokens as well, not just paintings and drawings. Pixel and avatar-based art are among the most common and easily recognizable styles, but 3D art has become increasingly popular over the last few years, with the NFTs beginning to incorporate more elements from animation and realistic artwork.
Digital paintings and drawings are particularly helpful when it comes to realism and even hyperrealism, but illustrative NFTs can also be designed using this method. In the 3D ecosystem, creators use sculpting and modeling to create three-dimensional characters and objects, as well as ensure that they can be viewed from all angles without any distortion. Animation can then be utilized to bring movement to these models and even to create stories based on the characters.
Advantages and disadvantages
Digital art gives artists the opportunity to experiment and create for as long as they want without worrying that they’ll run out of materials and have no choice but to postpone things until they find the perfect items. If you start creating your own NFTs, you will obviously have a new way to generate income, the same way as the investors do. You will also obtain royalties on any future sale, while the costs to join the marketplace are typically lower than those associated with the traditional art landscape.
However, there are also several potential challenges that you need to take into account. Volatility is the most obvious concern when it comes to non-fungible tokens, the same way it is for all holdings that are based on or associated with the blockchain. Social media trends, user engagement, and macroeconomic factors impact the marketplace and can cause prices to shift unexpectedly. NFTs use a considerable amount of energy as well, something that environmental activists have discussed in the past as one of the main issues that the crypto ecosystem needs to fix.
The legal rights and regulations are often convoluted as well. For example, buying an NFT representing a different asset doesn’t give you ownership of the intellectual property every time. Some artists have also complained about their art being plagiarized or downright stolen in the past. This naturally creates an ethical dilemma as well.
Being an investor is not simple, but when you’re dealing with assets such as NFTs, it can be all the more challenging since you can’t acquire them the classic way. If you want to keep your portfolio as strong as possible, make sure to do your research to figure out exactly which assets are best for you and which don’t have a place in your portfolio.