Blockchain-powered technologies, online platforms, and cryptocurrencies are all the rage right now.
In their wake, conversations around NFTs have increased. NFTs are now being discussed as applied to a variety of industries, niches, and applications.
But what are NFTs? Is it something worth putting your money into? Should you create your own NFTs?
Here’s what you need to know.
What is an NFT?
NFT stands for non-fungible token.
Now, that’s not the best name in the world, and besides, it still doesn’t tell you exactly what it is.
It is accurate, though, at least in the sense that it’s a token that’s not fungible – meaning it can’t be replaced and isn’t interchangeable. Which basically plays into the blockchain, a decentralized network where transactions are permanent, immediate, and non-refundable.
In addition, NFTs are unique. They’re basically like a one-of-a-kind digital trading card. You can trade the card, but you can’t trade it for the same one – you would get a completely different card in exchange for the one you own.
That, in essence, is what makes an NFT an NFT.
What’s the Connection Between NFTs and Ethereum?
If you know anything about cryptocurrency, then you’ve probably heard the term “Ethereum.” In addition to being a cryptocurrency (it has one of the greatest growth potentials of any cryptocurrency), Ethereum is also a blockchain that supports NFTs.
If other blockchains wanted to, they could implement their own NFT style digital trading cards, and that day is probably coming.
What Kind of NFTs are There?
Most of the hype is around digital art right now. Meaning – drawings, paintings, music, videos, virtual land, video game content, and so on. It probably won’t be long before other digital assets and content types like articles and podcasts are also supported as NFTs, if it hasn’t already been done.
Case in point – Twitter billionaire, founder, and CEO Jack Dorsey sold his first tweet for $2.9 million as an NFT.
The trading card analogy is apt, given that as a buyer you won’t necessarily own the original work – you’ll just own the trading card version of it. After all, the artist can retain the copyright and reproduction rights (and why wouldn’t they?).
The current mass hysteria, though, is much like the excitement surrounding cryptocurrency. We hear plenty of stories about four-, five-, six-, seven-, and even eight-figure deals right now, but once the excitement dies down, and the dust is clear, I think it unlikely that this panic buying will continue.
What this situation reminds me of is the early days of eBay, when it was in vogue to buy other people’s junk online, simply because of how novel that act was.
Are NFTs Worth Investing in?
So, given that you can find NBA Top Shot clips on YouTube, the digital equivalent of famous art pieces on Google Images, music on Spotify, and you can literally screenshot or screen record anything you find on the internet, are NFTs worth investing in? Can you expect to make your money back?
First, it's important to understand that there are multiple benefits to investing in NFTs.
As a buyer, you can support your favorite artists. You also get some basic usage rights, such as the ability to use their work as your profile picture.
Of course, you can also collect NFTs in hopes that they will one day be worth more than they are today. Much like crypto, though, NFTs are a speculative asset. Basically, there are no guarantees.
I think it would be best to exercise some skepticism when it comes to investing in NFTs, especially given that practically anyone can download the asset that underlies the NFT.
In an article on The Balance, writer Eric Rosenberg said:
After all, people once thought Beanie Babies and tulips should fetch astronomical price tags. Those fads fell away. Only time will tell if NFTs will hold the value of a Picasso or a pet rock.
Which brings me back to the same piece of advice I offer regarding any high-risk, high-reward investments: Only play with money you don't mind losing!
I feel that NFTs are a fad, and if you’re going to dive into these waters, you’d better penetrate them now. What might be worth seven-figures today might not be once the fog of hype blows over.
What if I Want to Create My Own NFTs?
Thanks to an increasing number of conversations around NFTs, especially on new social media platforms like Clubhouse, artists are flocking to creating and selling their works as NFTs.
I have even had some questions about this from my clients and prospects, given that I’m a musician and creative coach.
And NFTs are hard to ignore, given what’s happening in the artistic industries:
NFTs are already proving to be a valuable side income for artists, and early adopters have been reaping the spoils. If you’re thinking about creating your own, now would be the right time to get started.
CoinDesk even says the NFT craze is far from over, with major brands and celebrities signing their own deals. Not to mention, NFTs aren’t that hard to create.
But if I were you, I would approach this experimentally, and I wouldn’t put all my eggs in one basket.
If you’re an unknown artist without a marketing engine behind you, you’ve still got to ask yourself how you’re going to get your digital assets in front of a buying audience.
Yes, there’s always the chance that some hyped up buyer will come across your NFTs and offer you six-figures, and you should be prepared for such an event, but you can’t count on it.
Given that NFTs are supported by the Ethereum blockchain, I’ve made it my priority to invest in Ethereum rather than NFTs. I like the idea of supporting the network as well as NFTs in general.
I’m not saying that’s how you should treat this information, but it is another way of thinking about it.
Remember – if you’re thinking about getting into NFTs, don’t put it off. Now’s the time!
- The Verge, NFTs, explained: what they are, and why they’re suddenly worth millions, https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq
- BBC News, Jack Dorsey’s first ever tweet sells for $2.9m, https://www.bbc.com/news/business-56492358
- The Balance, Investing in NFTs: Is It Worth It?, https://www.thebalance.com/investing-in-nfts-worth-it-5184442
- The Verge, Grimes sold $6 million wroth of digital art as NFTs, https://www.theverge.com/2021/3/1/22308075/grimes-nft-6-million-sales-nifty-gateway-warnymph
- CNBC, Gary Vee launching art NFTs linked to Ethereum cryptocurrency, https://www.cnbc.com/2021/05/05/gary-vee-launching-art-nfts-linked-to-ethereum-cryptocurrency.html
- CoinDesk, NFTs: How to Create, Buy and Sell Them, https://www.coindesk.com/how-to-create-buy-sell-nfts