The process of minting an NFT can be expensive, and it’s essential to be aware that NFTs are not currencies and may represent risks. Read further about the four key considerations about NFTs that you definitely should know.
Non-fungible tokens (NFT) are digital assets that may represent anything digitally storable, for example, Photos, films, or even audio recordings.
Although NFTs are most commonly linked with digital art, there is no limit to what they may be used for.
There are no limitations to what an NFT may be used for. This includes how the data is utilized. In principle, you could snap a high-resolution screenshot of a costly NFT and have it minted as a distinct NFT; it wouldn’t be as expensive, but it would still be conceivable.
So, you might wonder, what exactly are NFTs? Let’s see below:
Non-fungible tokens (NFTs) are unique digital assets that can be used to represent anything that can be stored digitally. That includes photos, videos, audio recordings, and any other type of digital file. All copies of these data items are available to anyone who wants them, but the NFT is tracked on the blockchain to provide proof of ownership. It separates it from copyright law entirely.
NFTs are currently most associated with digital art, but there is no limit to what they could be used for. Some potential uses include:
- Digital collectibles, like baseball cards or comics
- Unique digital assets, like a house that is only available on the blockchain
- Tickets and vouchers for special events
- Decentralized online marketplaces
The possibilities are endless as NFTs continue to grow in popularity. It’s essential to become familiar with the key considerations for beginners.
If you’re raring to go and want to start buying NFTs, here are the four key things you need to know:
NFTs are not cryptocurrencies.
Fungible tokens are cryptocurrencies such as Bitcoin, Ether, Ripple, etc.
Being fungible means that they are interchangeable. One BTC, for instance, can be exchanged into another form of cryptocurrency with an equal value, say, 12.07 ETH or 54,229.93 XRP.
Of course, the values of different coins change over time. One BTC can be equivalent to 30 ETH next month or 10 ETH the month after that. What’s important to understand is that these coins can be traded for each other, relative only to each coin’s respective value during the time of the trade.
NFTs do not function the same way. Their value is worth as much as you want it to be, as there are no restrictions on price. That means that one NFT token can be worth $100, while another is only worth a penny.
The NFT market is illiquid.
When a market is illiquid, meaning that there are relatively few buyers and sellers, which leads to less frequent transactions. For NFTs, this is seen with the market’s lower trading volume and greater price volatility.
The ultimate value of your NFTs depends not only on the price you want to sell them for but also on the price people are willing to pay for them.
Because of the inherent volatility of the NFT market, it’s important to do your research before buying any tokens. Before investing, make sure you understand the market and what other people are selling them for.
The process of minting an NFT can be expensive, depending on the platform and your chosen cryptocurrency. It means that you should always check how much it costs to create new NFTs before you get started.
NFTs are not regulated by copyright law.
Unlike copyrighted material, such as books, movies, and music, NFTs are not protected under intellectual property law. It means that anyone can own an unlimited number of them, and there is no limit to how they can be used.
That also extends to how the data is used. The creator of an NFT can choose to sell it, give it away, or use it in any other way they please. There are no restrictions on what can be done with them.
You could, in theory, take a high-resolution screenshot of an expensive NFT and have that minted as a separate NFT. It might not fetch the same high price, but it would still be possible. It could be profitable as well, as long as you find someone willing to pay for it.
Few countries currently have a legal framework to pursue those who wish to piggyback on other NFTs’ popularity to create scams or fraudulent schemes.
As blockchain technology continues to develop, these concerns should become less and less of a problem.
Risks of NFTs
While Non-Fungible-Tokens cannot be forged outright, there are still some risks of NFTs that cannot be ignored.
NFTs that are not stored on a decentralized, cloud-based service might become inaccessible if companies or platforms shut down unexpectedly. This problem is only compounded by the fact that some platforms charge high fees for their services and use cryptocurrencies like ETH to do so, which may take several days to process depending on the price of the coin. By the time your transaction pushes through, you may no longer be able to access your NFTs.
It means that you should always be aware of where your NFTs are being stored and who is in control of them. If you’re not comfortable with the platform, it’s best to find another one.
There’s also the chance that an NFT could decrease in value sharply, which is what happens when too many people sell them at once, or market demand drops significantly.
The full spectrum of possibilities NFTs come with creates an exciting new market for both creators and consumers. While there are risks, they’re not insurmountable by any means. As time goes on, blockchain technology should start to solve these problems as well.
It’s essential to be aware of all that NFTs can do before investing in them or using them yourself.
NFTs can help you monetize your work in new and exciting ways if you’re an artist. If you’re a buyer, you’ll be able to purchase rare digital collectibles that are otherwise unobtainable without spending thousands of dollars. Collectors can treat NFTs as they would any other speculative asset and purchase with an eye towards future value appreciation.
Whatever your reason for getting involved in NFTs, it’s essential for you to do your own research and understand the market before diving in. With a bit of caution and common sense, you can avoid most of the risks associated with this new technology.
NFT’s are not currencies; however, they can be sold for cryptocurrency, being the value of NFT’s the value whatever the holder wants it to be worth.