What do Mark Cuban, Serena Williams, Jay-Z, Shaquille O’Neal, Reese Witherspoon, and Heidi Klum have in common? They are all NFT owners. NFTs or non-fungible tokens are digital assets on the blockchain that represent ownership of items. These could range from art, music, in-game items, videos, to collectibles. Each NFT has a unique identification code and metadata that will differentiate them from others.
NFTs are non-fungible, which means they are not interchangeable. A classic example of fungibility is money. Each $50-dollar bill is worth $50. It does not matter where the Treasury Department printed the bill or where you got the money from; it is always worth $50. Diamonds are non-fungible. Each diamond is unique because of the differences in cut, color, size, and grade; thus, they are not interchangeable. A non-fungible item is usually valuable because it is one-of-a-kind and may be in scarce supply.
Ethereum is the principal blockchain that holds NFTs, but there are other networks that support them. Solana, Avalanche, Flow, and Tezos are some of the up-and-coming blockchains for NFT development. If you are planning to make an NFT, choosing the right blockchain is a crucial decision. Criteria to consider are transaction speed, transaction cost, smart contract functionality, and consensus mechanism.
You may have first heard of NFT because of the Bored Ape Yacht Club (BAYC) NFTs. These are avatars of apes with different fur, facial expressions, clothing, jewelry, and more. NFTs, though, have more use cases apart from art collections like BAYC. They can store medical and academic records, verify identification, and ensure an item’s authenticity. The real estate industry can use NFTs to transfer deeds, provide proof of ownership, and simplify transactions and documentation. NFTs will also work well with protecting intellectual property, such as digital content.
Investopedia states that market efficiency is the greatest benefit of NFTs. “The conversion of a physical asset into a digital one streamlines processes and removes intermediaries. NFTs representing digital or physical artwork on a blockchain remove the need for agents and allow artists to connect directly with their audiences. They can also improve business processes. For example, an NFT for a wine bottle will make it easier for different actors in a supply chain to interact with it and help track its provenance, production, and sale through the entire process.”
Should I Invest in NFTs?
NFTs gained popularity when stories of celebrities like Snoop Dogg, Eminem, Steph Curry, and Elijah Wood collecting them came out. News items of a single NFT sold at $91.8 million have also piqued public interest, and most are wondering if they are worth investing in. Investment experts have differing opinions. Some say that an investor could profit from an NFT. However, only 10 to 20% of NFT projects may yield returns, according to Jonny Caplan in an Entrepreneur article. Some experts consider NFTs to be a riskier investment than cryptocurrencies. Daniel Strachman, Managing Partner of A&C Advisors says to treat NFTs as an investment akin to investing in silver, gold, or art-an illiquid part of an investment portfolio. Humphrey Yang, a personal finance expert, says that NFTs are “only as valuable as someone else is willing to pay for it.”
Just like any other investment, the best thing to do before jumping in the NFT bandwagon is to do your research. Get to know the team, track history, execution, utility originality, and rarities. Determine your level of exposure. This means to invest only what you can afford to lose. If you decide not to invest in NFTs, don’t take them out of your radar. If the other use-cases for NFTs go mainstream, that may be a better time to include them in your digital portfolio.
The Monero blockchain does not support NFTs, but you can buy NFTs using XMR. You will need to exchange XMR to a crypto token that’s supported by an NFT network. Make sure your Monero tokens are in a secure web-based crypto wallet. Web-based wallets make online crypto transactions more convenient. If you don’t have an online wallet yet, XMRWallet is an open-source Monero wallet that complements the privacy that Monero guarantees. Registration is free when you create an XMRWallet account. You can immediately transfer your XMR once you’ve created your XMRWallet.
Choose the NFT you want. The most popular NFT marketplaces are OpenSea, Rarible, NBA Top Shot, and Nifty Gateway. Create a compatible crypto wallet. Fund this wallet by exchanging your XMR to the required crypto coin. Connect this wallet to the NFT marketplace of your choice and buy the NFT.