The Basics of NFT Investments

Non-fungible tokens (NFTs) have become somewhat of a buzzword in recent years. These cryptographic tokens have opened up the possibility for individuals to own digital assets in diverse creative fields including art, gaming, music, and more.

While they may be well-known in certain circles, there is still much mystery surrounding NFTs for those unfamiliar with blockchain technology. In this article, we will shed light on some NFT essentials, enabling you to make an informed choice regarding this investment choice.

What are NFTs?

NFTs are a type of digital asset that can be bought, sold, and traded online using cryptocurrencies. The same blockchain technology that is used to buy Bitcoin or any other cryptocurrency underpins NFT transactions and provides a secure platform for recording and verifying the authenticity and ownership of these assets.

Each NFT represents ownership of a digital item such as a piece of art, real estate, or a collectible. NFTs cannot be replicated, copied or divided, making them scarce and potentially valuable assets to invest in.

Why Invest in NFTs?

Before investing in this relatively new asset class it is helpful to know the potential benefits of doing so. Below are some of the primary reasons to consider investing in NFTs:

• Potential for profits: These digital assets can present the opportunity for potential profits, drawing investors in with the expectation that their value will increase over time. For instance, a digital artwork called The Merge fetched $91.8 million in December 2021 for its 28,000 collectors making it the most expensive NFT and artwork sold by a living artist.

• Diversification: NFTs represent an alternative asset class compared to traditional financial instruments like real estate, stocks, and bonds. Given their low correlation with these asset classes, NFTs can serve as a potential hedge against shocks such as inflation which standard asset classes are subject to. This makes them attractive to investors seeking to diversify their investment portfolio.
• Empower creators: Aside from their investment potential, many individuals purchase NFTs to show support for musicians, artists and other content creators. In contrast to traditional content creation models where intermediaries often take a huge slice of the profits, NFTs provide creators with a direct way to engage with their audiences and monetize their content. This allows investors to express their support and empower artists in various fields by purchasing digital assets directly from their creators.

Purchasing NFTs

The following items are needed to begin investing in NFTs:

• A digital wallet: This software app allows investors to safely store their NFTs and manage their crypto funds. Popular digital wallets include Metamask, MathWallet, Coinbase and Enjin and some blockchains also have designated digital wallets for NFT transactions. For instance, Ethereum is the biggest NFT blockchain and it supports NFT transactions through its Ethereum wallets.

• Cryptocurrency: In order to begin buying or selling NFTs, cryptocurrency rather than fiat money will be needed. Certain NFT marketplaces such as Solana, may require you to purchase their native cryptocurrency to start trading NFTs.

• Open an account: NFTs are traded on an NFT marketplace. To purchase these assets you will need to open an account and link your digital wallet to the marketplace.

Learning the fundamentals will allow you to proceed with confidence when it comes to NFT investing.