What is an NFT?

Getting into NFT investing currently would seem like a no-brainer to those familiar with the digital asset but there’s a larger number of people more unaware of the potential NFTs hold and its unlimited number of use cases.

An NFT or non-fungible token is a digital asset that represents a real-world object brought and sold through an NFT marketplace using blockchain technology for transactions.

The attraction of NFTs comes primarily from the usage of scarcity models. An asset only exclusively available will not only raise the curiosity of collectors and investors but the value of the NFT as well.

Is an NFT a good investment?

Many experts can’t truly gauge how effective NFT investments are because there is limited history in which to judge their scalability. However, despite this inconsistent knowledge,  NFTs are expected to remain a valuable asset for the foreseeable future.

The NFT space is a fairly new initiative demonstrating how crypto can benefit more people in the digital economy. Creating digital assets can be an easy option for creators, but buying and selling NFTs is an investment anyone can profit from.

But keep in mind, investing in NFTs is a personal choice. It may be worthwhile to consider it if you have extra money at your disposal, particularly if you have a special connection to the piece.

The value of an NFT is based largely on what someone else is willing to pay for it. Hence, the price will have more to do with demand than fundamental, technical, or economic indicators, which typically affect stock prices and at least generally determine investor demand. Early recognition of NFT trends will place investors in a favorable position to profit later.

How NFTs Gain Value

Opinions and scarcity are the main factors that influence the value of NFTs. So, in other words, if an asset is resold by an NFT holder, the resale value could be higher than its original price, depending on what consumers believe it’s worth.

Resale marketplaces have allowed certain physical goods to have tremendous resale value and NFT marketplaces are similar aside from the fact that NFTs can offer much more than just being a collectible. These digital assets can be used in video games, legal documents, marketing and so much more.

Being an uncommon asset also plays into the appraisal of an NFT as limited supply will be more attractive to a collector.

Utility plays a significant role in determining an NFTs value. An NFTs utility will determine the extent of access a holder may have to the community. Depending on how extensive this access is, the higher the leverage capability of the NFT becomes.

How to Buy NFTs

Like any investment, before you dive in you want to be certain you have the necessary information to make a smart investment.

Research

Investing in NFTs is not the same as collecting so although you liking the NFT may be a consideration, choosing an NFT with high potential is far more important.

You should choose an NFT that has an upside value potential. The NFT can be some art, music, video, or even an item within a video game. You can search Google or Twitter for NFT projects.  Sites like Rarity. tools or NFTcatcher.io have an upcoming list of Ethereum and Solana NFTs that will be released shortly.

When looking at the upcoming NFTs, note when the sale is, what the cryptocurrency requirements are, and how many of the NFTs are being sold. This will give you a better understanding of the scarcity behind the NFT you are choosing.

Set up a Wallet

If you don’t already have a wallet, you will need to set up a compatible crypto wallet. This wallet will hold the cryptocurrency you will need to purchase the NFTs.

Fund Your Wallet

Using fiat money like USD, you will fund your digital wallet to purchase the cryptocurrency you will need for NFT transactions. Although Ethereum is the most commonly used crypto for most NFT marketplaces, the NFT you’re interested in may only be available in another digital currency. So be sure to determine which currency is needed prior to purchase. 

Connect Your Wallet

Now that your digital wallet is funded, you can connect your crypto wallet to the digital marketplace listing the NFT. After connecting, you should be able to view the cryptocurrency balance in your wallet that can be used to purchase your selected NFTs.

Purchase Your NFT

When you are ready, click the buy button.  If you use ETH for the purchase, you will also need to pay a gas fee for the Ethereum network to process the NFT transaction. The amount of this fee varies based on congestion on the blockchain network.

Confirm Transfer

Congratulations! You just completed the first step in investing in NFTs. Be mindful that blockchain transactions are not cancellable or reversible, so the NFT is yours until you decide to trade or sell.

It may take some time for the transaction to finalize before you can view the NFT in your digital wallet. The transfer of the NFT to your wallet is not complete until it is confirmed and verified by the blockchain network that supports the NFT.

Once you see the NFT in your wallet, the transaction can be considered complete.

NFT Marketplaces to Invest

Now that you have your wallet connected and funded, you are ready to start shopping for your future NFT investment. There are several marketplaces to choose from and most of them have a specific focus so it’s important to know what you’re looking for before you buy.

Some of the top NFT marketplaces include OpenSea, Rarible, SuperRare, and Foundation.

NFT marketplaces will be the start of your investing journey but there are a lot of options available. Choose ones that accommodate your buying and storage needs based on the type of NFT you’re after and the crypto you’re interested in using for transactions. 

Ways to Invest in NFTs

Choosing the most effective way to invest will take some time and research.  When choosing an NFT investment you want to consider both risk and cost as well as potential downsides. This approach will help you to determine a reliable NFT market according to your investment budget.

Art

Digital art has become an exciting new venture for artists to not just make money but become known in spaces they otherwise may not have been. For investors, it is peeking to be the next evolution in art collecting.  

It has been argued that since you can find and download the same image or video that someone paid thousands of dollars for, NFT investors are wasting their money.  However, digital scarcity and the idea behind an NFT having only one owner adds to the value of the NFT. When thousands of people can undoubtedly copy and paste, NFTs guarantee ownership of unique physical assets such as digital art.

PFPs

NFT profile picture (PFP) projects are responsible for much of the recent hype behind NFT trends. PFP projects are avatars with a common base and extensive interchangeable traits mixed and matched across the collection.  Value fluctuations in PFPs are largely based on popularity and airdrops for companion NFT projects.

Virtual Worlds

Per Wikipedia, A virtual world is a computer-simulated environment that may be populated by many users who can create a personal avatar, simultaneously and independently explore the virtual world, participate in its activities, and communicate with others. The most popular at the moment is the Metaverse.

You can invest in the Metaverse both directly and indirectly. Directly, you have the option to purchase tokens like SAND or MANA,  in-game NFTs, or virtual land or real estate which are also NFTs. . Indirectly, you can invest in Metaverse associated stocks or an index.

NFT Crypto

NFT cryptocurrencies are usually governance or value tokens for decentralized NFT projects. Their value is dependent upon the success of the project that they correspond to.

Airdropped tokens have been creating a buzz of interest recently. They are usually used as marketing announcements for new projects. Mostly based on a user’s buying activity, the goal is to incentivize engagement in NFT projects.

Keeping NFTs Secure

When you begin investing in NFTs you want to make sure they are kept secure. NFTs should be stored in a secure location such as a crypto-wallet which is generally protected by your 12-word seed phrase, a password, and touch authentication. For the best security, consider storing your NFTs in a cold storage hardware wallet.

Software wallets, such as Metmask, are considered standard security. Everything is encrypted however they do have the potential of being hacked. These wallets are suggested to be used for short-term use only.

InterPlanetary File System (Added Security) or IPFS stores your NFTs off-chain which can decrease the likelihood of being hacked. An IPFS is safer due to its content identifiers (CIDs)—which are hashes of data connected directly to your NFT’s content, rather than an HTTP link which has the vulnerability of being modified and hacked.

Cold Storage Hardware Wallets are the most secure because all of your data is stored completely offline and protected by a device password. These wallets generally can restore device content if it’s lost or stolen as well.

In Conclusion

There is no single best way to invest in NFTs. When planning an NFT investment strategy, consider both the risks and the costs involved. The best NFT and NFT marketplace for your investment goals and budget can be selected by taking an equitable approach.

If you are going to invest in NFTs,  do your research, understand the risks-including the possibility of losing all your investment dollars-and proceed cautiously.

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