This new technology of non-fungible tokens (NFTs) is received very differently. Many cite many advantages, but just as many criticize the technology for financial and ethical reasons. Today let’s talk about NFTs and whether or not it’s worth your investment
What are NFTs?
A non-fungible token (NFT) is digital data that is stored in a ledger. These data are representative of a particular form of media, be it a book, a work of art, a song or a video. An NFT does not mean ownership of the product itself. It just means that you own that particular work of art as if it were something that you physically own. Only now is everything in digital space. It doesn’t mean the work’s copyright is yours. The copyright remains with the creator. An NFT just dictates that you have the right to own that medium.
market
Although it is a relatively new technology, there is a lot of hype about NFTs and some NFTs have managed to sell for millions of dollars. However, they are a high risk investment. As mentioned earlier, the NFT marketplace is new and therefore lacks authority, security and stability. There is no guarantee that NFTs will exist in decades, or even that they will exist next week.
NFT marketplaces like SuperRare and OpenSea have provided some platforms for NFTs. Art collectors may be able to use this as a new way to find art and claim ownership of the particular work. However, the instability of the market makes it a risky investment no matter where you buy it.
Risks
The greatest risk of NFTs as an investor is that you can lose an NFT entirely and there is no way to get it back. Unlike stocks, which you can keep regardless of market conditions, NFTs are digital and therefore prone to attack, poor storage, or just being accessed for a random reason. Millions of dollars can potentially be lost to something that is completely out of your control and much easier than any other investment. This can result in NFTs being part of your pension contributions.
NFTs rely on blockchains that permanently record the digital image and assign it to the buyer. It’s essentially a certificate of ownership. The image itself cannot be changed or edited. You essentially only have a link to the original image, wherever it may be. If that URL breaks or the server that stores the image is compromised, you can say goodbye to your investment. Technologies like IPFS (InterPlanetary File System), a peer-to-peer networking software, are slowly improving to improve this security.
Ethical concerns
On a platform like the internet, there have been many arguments that there are better ways to support artists online. Platforms like Patreon or Ko-fi come to mind. These platforms do not require the potentially large environmental impact that NFTs bring to the world. The criticism of the value of NFTs is directly related to their cost, so as the altitude increases, more energy is consumed and thus a greater ecological problem arises.
In addition, the lack of management in the NFT market means that multiple people can easily claim ownership of works of art that the “creators” never actually created. Instead, some people can simply trick potential buyers of an NFT that it is a “one-of-a-kind” piece. At the time of this writing, there are also very few official laws regarding NFTs. These ethical concerns can influence people’s decisions about investing in NFT. This, in turn, can reduce its value.
What can you do?
Simply put, make sure you download and backup your NFT yourself. Many investors do not download NFTs that they buy and this should be changed as a practice if you decide to take the risk of NFTs. Much like you should properly store your physical paintings, keeping your NFTs safe is also important.
Is NFT a Bubble That Will Pop?
NFTs are viewed as a bubble by many market experts. The relative novelty, the infamous high buys driving the platform up, and the onslaught of newbies looking to make a profit all have telltale signs of a bubble. While the technology is likely to last a while, there is still a lot of work to be done to address the platform’s ethical and practical concerns.
Should You Invest?
There is certainly a market for NFTs, and the potential return may outweigh the risks for many investors. However, when investing, you should consider all of the risks associated with NFTs and do a thorough research into the environmental impact they can have on the environment. In addition, there are many potential scams in the NFT market as authenticity is difficult to assess in the digital world. Keep the risks in mind when you decide to invest in NFT as while the profits are potentially high, there is also a high risk of losing it all.
Is NFT Good For Investing? first appeared on PrimaFelicitas.
