What Is An NFT? 4 Things You Should Know

What Is An NFT? 4 Things You Should Know

By Justus Wakape

Did you know that NFTs are the latest investment vehicle to burst out of the ether? Are they just but a bubble? Or are they the newest form of stock that's about to redefine the markets?

In a world that is full of changes especially in the market frontier, it's prudent to have an insight of investment tools before plunging in.

1.NFTs explained

What exactly is NFT? Non- Fungible Tokens ( NFTs) are digital assets in a Blockchain with unique codes which represent real-world objects in real estate and artwork. This implies that they are cryptographic and cannot be replicated.

Whilst stocks represent a part of ownership in a particular company or groups of company, NFTs represent absolute ownership of an asset such as: music, videos and art.

Although there are plans to make stocks non-fungible in the future, their current state distinguishes them greatly to NFTs with respect to transferability.

Another important thing to note is that Stocks values are subject to market movements- which are affected by a myriad of factors. However, NFTs' values are set and only subject to appreciation based on their intrinsic value.

2.NFTs and DAO

It's the custom that a business has a centralized figure or figures to govern it to achieve its vision, mission and goals. The centralized figure may be the: founder, CEO, directors etc. It's therefore clear that as the business grows, the further away one is from the centralized figure (s),  the less significant he/she becomes.

Decentralized Autonomous Organization (DAO) gives an opportunity for everyone with NFT to be part of the ownership. This gives everyone an equal voting right.

Risks involved in investing in NFTs

For better understanding, anyone aspiring to invest in NFTs should be aware of the risks involved and be able to measure his/her ability to withstand or maneuver through such risks.

(a)NFTs can aid in the increase of fraud

Since this is a new venture in an old world field of individual properties which have not had a privilege of getting such unique recognition in the Fintech industries, especially with regards to intellectual property protection, the real owner(s) of artwork may be susceptible to loss of their work to fraudsters.

(b)NFTs are not environment friendly

It takes a significant amount of computing energy to create Blockchain records. Thus the amount of carbon emitted into the atmosphere is unhealthy to the environment. It's unclear whether the global economies would welcome such invention in the long run, considering the legal policies that are continuously being enacted against carbon emission.

(c)NFTs are not liquid

Unlike stocks, the NFTs market is still new and has very few traders. This makes it difficult for one to get a buyer easily especially in the time of need.

3.How to invest in NFTs

Investing in NFTs is not as easy as investing in stocks. However, it's not impossible. By following these simple steps,one will be able to venture into this new cryptorealm:

One will need to set up a crypto wallet that's compatible with Ethereum Blockchain; this is because NFTs are mostly on Ethereum. Buy some ether once your account is fully set up.

There are so many marketplaces for NFTs, which include: Foundation, Mintable, Axie etc. However, the most popular one for a newbie is Opensea. By visiting its link opensea.io, one will easily place a bid on the NFT he/ she desires.

Anyone ready to buy NFTs in ether should be aware of 'gas fees'. Gas fees are the transaction cost incurred for carrying out a transaction. There are incidents where the gas fees cost more than the transaction, thus putting the buyer at a risk of potential loss. It's therefore prudent for a starter to wait until the gas fees subside before engaging in a transaction.

There are other methods to venture into NFTs. However, some of the methods have bureaucratic procedures. Still there is an avenue that one can follow inorder to invest in NFTs. One can buy an NFT-focused exchange-traded fund that invests in Blockchain and NFTs stocks.

If one opts to buy NFTs stocks from the markets, there are several which stand out as the best for newbies: Funko inc, eBay inc and PLBY inc. These firms might produce the best entrance to NFT via stocks.

An alternative method is for one to seek venture capital firms that are key players in the industry. Venture capital firms are preferably a better way for one to delve into the world of NFTs.

4.Companies that invest in NFTs

Over a short period of time since its inception, NFT has seen tremendous growth. This has attracted players from across the investment and Fintech industries partaking in its growth. There are notable and reputable firms that have pulled their resources to get a piece of the pie from the NFTs. Amongst the many companies are:

(a)Coinbase Ventures

This is a venture capital company that invests in startup building the open financial system.

It has raised funds for the augmented NFT platform known as Anima. It has also helped to raise funds for an NFT- based digital arts platform known as Markersplace.

(b)Benchmark

This is a venture capital firm that provides seed money for startups.

It has helped to raise funds for an NF football-based marketplace known as Sorare. 

(c)Animoca Brands

This is a venture capital company that has helped to raise funds for: an NFT move-to-earn platform known as Genopets, a community governed NFT protocol called Unicly, and a 3D NFT marketplace for building metaverse known as Metamundo.

(d)Andresseen Horowitz (A16Z)

This is a venture capital company which has helped to raise funds for reputable firms such as: Opensea,  a play- to-earn gaming platform known as Mythical Games, and a play-to-earn video game company called Axie Infinity.

(e)Coatue

This is a venture capital firm which helped to raise funds for Opensea and other reputable firms such as Dapper Lab.

NFTs being new, especially in an industry which is gaining traction might produce the best investment vehicle for newbies who would want to be part of the cryptoworld. However, it's prudent for one to delve into with caution, having a clear understanding of Fintech industries and their future as well as knowing how NFTs are related to stocks. This will help in making a better decision in the long run.