I first heard about non-fungible tokens (NFTs) through social media. One of the people that I follow religiously had been going on about them in several of his posts which piqued my interest. However, like anything I see on social media, I took it with a grain of salt. It seemed like a goof that someone would spend millions of dollars on a video game character.
NFTs have been blowing up for the past few months and there has been a lot of speculation surrounding them. Many are supportive of the latest digital development as is evident with the amount they’re willing to pay for such assets. In fact, the first NFT ever minted, a digital artwork by an artist named Beeple recently went on auction again and sold for a whopping Ksh. 7,389,900,000. Another NFT that caused quite a stir was Twitter CEO Jack Dorsey’s first-ever tweet that sold for Ksh. 406,900,000. Back home, Eliud Kipchoge became the first Kenyan celebrity to launch an NFT collection that sold for Ksh. 3,900,000.
If it’s hard to believe that something so simple could be worth millions, you’re not alone. When we think of worthy investments, we mainly think of more grand assets like real estate, stocks, and shares not tweets and pixelated video game characters. However, the world has shifted to a digital era which means the economic world is also adapting to this change. Hence, people are starting to see the value of digital assets such as NFTs.
What are non-fungible tokens?
An NFT is a utility token designed as a decentralized protocol that intends to establish liquidity for a specific type of digital assets. It uses blockchain technology to link the token with a unique asset. Basically, you can convert any object that holds value to you into an NFT whether it’s artwork, music, your favourite childhood cartoon character, sporting moments, and even social media posts. This could be one of the main reasons behind their skyrocketing popularity.
People, especially the younger generation, are investing in NFTs for their monetary and sentimental value. They also get the bragging rights of owning an item that may be valuable in their social circles.
Since NFTs use blockchain technology, it means that no one can claim ownership of an NFT that already has an owner. Additionally, NFTs act as a collector’s item and can’t be duplicated. They also come with a license that shows proof of ownership and gives the owner proprietary rights to the item. The user can then use it at will for instance display it at a digital museum, resell it at an NFT marketplace or simply add it to their collection.
Why are they so pricey?
NFTs are much like any other tangible collector’s items like artwork, sports cards, and designer items. The rarer they are the more expensive they sell for. This explains why something like the first tweet or historic sports moments would fetch millions of dollars.
Additionally, NFTs have solved a problem that was rampant especially in the creative space – fake artwork. People could easily duplicate original art thanks to Photoshop at the expense of the original artist. There have been reports of art, even the classic artwork such as Leonardo Da Vinci’s paintings, being duplicated so much that it’s difficult to trace the original. With NFTs, the proof of authenticity is stricter since each NFT is unique. Therefore, regardless, of how many copies are made, it’s still easy to track the original owner. This has made it attractive to wealthy people who want to collect such items.
Are they worth the investment?
The question on everyone’s mind is whether NFTs are worth the money or are they simply overhyped. We’ve seen this trend with previous digital assets like cryptocurrency where people were skeptical about investing in them. However, the crypto market has grown so much in such a short period of time and we can simply assume that the same will happen for NFTs.
At the moment, many investors are buying NFTs as a speculative investment and hope that they will have a huge turnover. Judging from the recent activities in this space, the NFT market seems to be growing in the right direction.
How can you buy NFTs?
You can use any form of currency to buy an NFT including, a debit card, credit card, PayPal, or cryptocurrency. However, it will take several stages. Here’s a guide.
It’s necessary to diversify your investment and invest in more digital assets as the world is becoming more tech-oriented by the day. However, like with any other investment, you need to be prepared for the risks involved. One of the biggest problems with investing in NFTs is that they can be overpriced making it hard for you to sell them at a profit. Nonetheless, they have the potential of being very profitable.