The fascination around NFT’s is on the rise
More and more NFTs are circulating on the net, which are taking over the world in the form of tweets, GIFs or similar means. Currently, they can be traded for up to $69 million each. However, very few people know what exactly lies behind them. NFTs are digital assets, which can be purchased and also resold with cryptocurrencies. They are unique tokens that denote ownership of a digital object. From art to gaming to insurance, NFTs have been spreading across global markets since 2014.
NFT | Image: Tumisu, pixabay.com, Pixabay License
What does NFT stand for?
The abbreviation NFT stands for “non-fungible token”, which means “non-fungible token” in German;. “Fungible” is an economic term which refers to an asset that can be exchanged for another good of equal value. According to this, a banknote with a value in euros is fungible, as it can simply be exchanged for another banknote with the same value.
With the designation “not fungible”, it is made clear that the object can not be exchanged for something entirely equivalent. Art is also an example of a non-exchangeable asset, as the value of art is subjective: this is where NFTs come into play. An NFT marks ownership of a digital asset, like a piece of art or a tweet. One can buy an NFT at a certain price, however, since it is not fungible, its market value can fluctuate.
How NFTs work?
NFTs are often bought and sold through cryptocurrencies, but they are not cryptocurrencies. Like the euro and other currencies, cryptocurrencies are fungible. When a bitcoin is exchanged for another bitcoin, both parties have the same value: one bitcoin. Because NFTs are unique, they have no value other than what the market is willing to pay for them.
What do you get when you make an NFT purchase?
Once an NFT is acquired, one is the sole owner of a digital asset. This does not imply, however, that only the owner decides who may see or share the NFT.
An example would be the most expensive NFT sold to date by Beeple named Everydays: the First 5000 Days. This is a digital collage of 5.000 sharing. The owner of the NFT is the official owner of the NFT, but the collage has been copied, shared and seen by quite a few people around the world. An NFT purchase is thus comparable to the purchase of a signed print. The NFT is signed exclusively for the owner, but anyone can view the work. Basically, any digital asset is suitable for use as an NFT. Currently, the following are included: Artworks, tweets, GIFs, songs, in-game purchases, essays, domain names.
Non-fungible token | Image: GDJ, pixabay.com, Pixabay License
Why buy non-fungible tokens (NFTs)??
Whether stamps or coins, ultimately NFTs are essentially like trading cards. And although these “cards” have no value other than what the market ascribes to them, it can be worth it. As the market fluctuates, so does the collectible value.
NFTs primarily appeal to risk-averse investors and offer a unique opportunity to make exorbitant profits with high stakes. If you are looking for a safe investment, however, you should rather choose stocks than NFTs.