Back in 2021, NFTs boomed in popularity, and volume trading reached $41 billion. However, the market has collapsed since then, but this may be a blessing in disguise because more people will consider exploring NFTs.
With this in mind, we’re going to offer a brief overview of NFTs and decide whether they’re worth investing in.
Why NFTs are Appealing
The majority of people associate NFTs with digital art like the popular Bored Ape Yacht Club (BAYC), but the smart contract technology used to prove ownership has unlimited potential applications.
For example, the medical industry is beginning to leverage smart contracts to secure patient medical records on the Ethereum blockchain. When you take the original minting of digital art and blend it with business applications of NFTs, you have an environment where all tiers of society can find interest.
The NFT Purchase Process
NFTs are sold on purpose-built marketplaces like OpenSea, which are built over blockchains like Ethereum. If you see a piece of media you wish to purchase and add to your NFT wallet, you will need to hold native coins for the blockchain.
Unfortunately, the majority of NFTs can’t be bought with traditional payment methods yet. The total cost of the NFT will be displayed in crypto, alongside the fiat cost. You can choose to buy now or make a sensible offer, which may allow you to secure a cheaper price.
When the NFT is moved into your wallet, you receive a few lines of code which prove ownership of the digital media. Essentially, this means that owning an NFT gives you bragging rights. However, more projects are emerging that attach real-world assets to NFTs, which makes the more desirable.
Reasons for Adding NFTs to Portfolio
If NFTs are only pieces of digital code sitting in a wallet, you’d be right in questioning the value of adding an NFT. To make the decision, you need to consider the main reasons people invest including:
- For basic community bragging rights
- Supporting artists
- The thrill of collecting
- For additional perks
- As a way of investing
If your motivations lie in the first four reasons, then why not go ahead and add an NFT to your portfolio? However, if you’re looking to invest and turn a profit, you should note that cost predictions for NFTs are only ever estimated – nothing is guaranteed. That being said, you can lock NFTs and gain passive income (yield).
Risks Involved
The NFT and crypto landscape is marred with risks, ranging from high volatility to scams. If you’re looking to invest in NFTs, you need to be okay with potentially losing the initial investment. All you need to do is take a look at the BAYC Justin Bieber saga to realize how much you can stand to lose.
Blockchain tech, including NFTs, has only recently attracted mainstream traction. Whether an NFT is worth buying will come down to personal motivation and affordability. If your NFT purchase is purely an investment, there’s much more risk to consider, so be sure to conduct extensive research.