What Are NFTs?
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In the financial world, there are always developments and new products that come along. These can be difficult to keep up with. As you try and figure out your finances, you don’t want to miss out on some of the latest and greatest breakthroughs. As we have mentioned in the past, it will be quite a bit easier to grow your wealth when you are knowledgeable about finances and money. If you are curious about NFT’s, we explain as best we can; as a fair warning, this is still a bit of uncharted territory.
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What Are NFTs?
An NFT stands for a non-fungible token. Non-fungible means that it cannot be traded or exchanged for another thing. Part of the reason the NFT’s are non-fungible is that they are unique. Therefore, an NFT cannot be traded or exchanged for something else because there is no way to compare the value to another thing.
If you think about physical money, it can be exchanged and traded. However, this does not exist with NFT’s. Of course, an NFT can be bought and sold, but this is what makes the market so unique and difficult to wrap your head around.
The NFT’s are built with the same basic idea as other cryptocurrencies. If you have invested in Bitcoin, you have a general idea of how cryptocurrency works. However, because NFT’s can’t be traded or exchanged, they are not the same as Bitcoin.
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This really does open up a new world and what the future of this world looks like is still a bit misunderstood.
What Happens When I Buy an NFT?
Let’s say you want to jump into this world of NFT’s. If you purchase your first NFT, what will you actually get? Since these are digital files, how will you show proof of ownership? When you spend money on an artist’s print, you will have that to display in your home.
However, when you purchase an NFT, there is simply a record of ownership stored on the blockchain. This part becomes difficult for some people because everything is digital. Even the NFT is a piece of digital material.
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It’s important to understand that the ownership process of an NFT is a much more private and covered-up process. Of course, if you spend millions on an NFT, there may be a few news stories about it, but for the most part, this ownership process is a bit different than buying a Monet or Picasso and putting them in your home.
Should I Invest in NFT’s?
The big question for most investors is whether or not the NFT is a smart investment. The smart investment is educated. You have to understand what you are getting involved in fully. If your friends have said they have made some money on NFT’s, then it is certainly worth looking into when you fully understand the investment.
The easiest way to help understand precisely how NFT works is to compare it to art. The world of digital art is where we are seeing NFT’s make the most significant impact. So let’s think about purchasing an art print or purchasing an NFT.
To compare these two things equally, you will have to think of a limited edition original one-of-a-kind art piece. Reproductions or copies are not the same as NFT’s. Remember that each NFT is a unique piece.
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When you buy a digital piece of art or an NFT, you must understand that other people will sometimes use the file. Yes, you will own the original, and this information is stored on the blockchain, but the file can still be distributed without your permission.
As NFT’s are getting more involved and people are trying to navigate the world of making money on NFT’s, we are seeing more changes in how NFT owners make money. In the future, there is certainly a chance that owners of NFT’s are going to make a percentage each time their digital file is used or viewed. This will again complicate this world of NFT’s.
Overall your decision to invest in an NFT has to come down to your financial position and whether or not it makes sense for you. People that are purchasing these NFT’s are certainly hoping that the values will continue to increase and they will make money on them in the long run.
Are NFT’s Going to Last?
When cryptocurrency first became a thing, many people wondered if it would last. Today the world of cryptocurrency continues to grow and expand. It’s hard to say if there is an end in sight. We can say for sure that it is too soon to tell whether or not NFT’s are going to last.
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When you look at the types of people investing in these NFT’s are starting companies involving purchasing NFT’s the future looks quite strong. With certain NFT’s selling for more than 60 million dollars, the NFT has undoubtedly already impacted the financial world.
Can I Create an NFT?
Another interesting thing about NFT is that technically anyone can create one. All you need to do is put together a piece of artwork or any other type of NFT, and then you can turn it into an NFT. The process of turning it into an NFT is called minting, and it is done on the Blockchain.
Once you have created an NFT, you can put it up for sale. There are already several marketplaces out there specifically designed for selling and buying NFT’s. More and more of these will open up. As with everything else, we will see some of these marketplaces stand out as better options than others.
When you sell an NFT, you can attach a commission to it. When you attach a commission to the file you are selling, you are essentially making sure that you will make a commission on the NFT each time that it is sold. This is an excellent option for an owner or talented artist. If, for some reason, the piece takes off and is all of a sudden worth millions of dollars, the original artist will make a commission.
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Navigating the world of creating, buying, flipping, and selling NFT’s takes quite a bit of work and research, but it is something that could end up being worth it in the end.
The Bottom Line
Hopefully, the concept of NFT is now a bit more clear in your mind. But, if it is not, do not feel like you are alone. These NFT’s are confusing even to financial experts. Anytime new technology comes to the market, the concept takes a bit of time to wrap your head around.
The thing that makes this even more confusing is that NFT’s are not tangible. Since you won’t hold this item, you will simply be listed as an owner on the Blockchain. This makes the NFT a difficult option to invest in, but if you are looking into the future and the way the financial world will likely continue to evolve, keep your eye on the NFT’s. Although there is a significant risk in getting involved early in an investment, it is also the chance for the greatest reward.