NFTs: What they truly are, what they’re worth, and their pros and cons
NFTs have been a hot topic on the internet for the past few months, with them increasing in popularity day by day. Every day some rich guy buys an NFT for a million dollars, and some guy who bought it for just a few hundred dollars becomes a millionaire. And some people like to call it 'Bitcoins of the future’ (‘some’, here, might be an overstatement, as nobody has probably ever said that lol).
YEAH, THAT’S COOL, BUT WHAT EXACTLY ARE NFTs?
NFTs, by definition, are unique non-fungible tokens that essentially cannot be replaced by the exact same token. This does not mean that they cannot be traded but means that these tokens are one of a kind. Two exactly same NFTs cannot exist. This is the difference between a cryptocurrency coin and an NFT. With crypto coins, you can trade one coin for another, and you’ll have the exact same thing. But with NFTs, you 'own' the token, and this means that more of the same token cannot exist (NOTE: NFTs similar to the one you own MAY exist, however, nobody can own the same NFT that you own. This can be a big drawback, however, read on to know more about this).
Are NFTs worth buying?
This is a question nobody can answer. Everyone has their own opinions, and for some of them, NFTs are a waste of money, whereas for some they’re the future of art and design. And for others, they are similar to Pokémon cards; some are worth a lot, while some aren’t worth anything. However, after reading this article, you should have a certain viewpoint on what NFTs are worth to you, and which ones should you go for (That is for you to decide, however, I have put some basic requirements from NFT projects and communities for you to look up to).
ADVANTAGES OF OWNING AN NFT
- IMMUTABILITY
NFTs cannot be changed or replaced in any way if their authenticity is verified in the blockchain. This means that once you have been declared the owner of the NFT, nobody else can make changes or own the NFT (unless you sell it to them). - BUILT ON A BLOCKCHAIN
Blockchains are usually super safe. This implies that you can sleep well at night, knowing that it’s almost impossible (not IMPOSSIBLE) to lose your NFT by it getting hacked. This is because in a blockchain, once a transaction is complete, it cannot be undone. This makes the NFT marketplace safer and trustworthy. However, do not forget that nothing can be 100% safe, yet. - PERPETUITY AND RECOGNITION
Once you purchase and own an NFT, the transactional data is added to the blockchain. This information cannot be removed and will exist forever, even if you sell the NFT to somebody else, after which more info would be added regarding the current owner of the NFT. However, you will always stay a part of the history of the NFT. This means that the ownership of an NFT can be proven on-chain, and cannot be mutated. However, new info can also be added to the chain. - RISING VALUE
Then, of course, comes the value of the NFTs. Unless you’re not paying attention to hot crypto topics, you probably know how some NFTs get sold for hundreds of thousands of dollars every day and how someone makes a whole fortune out of it. Recently, CryptoPunk #1422 (an NFT from the CryptoPunk collection), which was bought for $74 four years ago, got sold for $2 million.
DISADVANTAGES OF OWNING AN NFT
- UNPREDICTABILITY
Just how pretty much the whole stock and cryptocurrency market is, NFTs are largely unpredictable. About 97% of NFTs are 'bad investments’. This is because most of these NFT projects work on a garbage gameplan. Empty hype, fake promises, and an untrustworthy, deceitful team lead to the fall of the value of the NFTs created by the NFT brand. Don’t fall for such communities, guys, do your homework and research. - THEFT AND IMITATION
Hold up, you just said NFTs are super safe and you should not worry about losing these NFTs to hackers? Well, NFTs are safer in a blockchain than they would have been in a conventional database, however, cryptocurrencies have been stolen before. And it’s not just about theft, the fact of owning an NFT can not stop others from using it. Owning an NFT simply means that you have the 'ownership' rights of it. This cannot stop others from downloading the contents of an NFT (This can be a pro in itself, but it depends on how you look at it). Moreover, NFTs similar (maybe even better) to your NFT can exist, and may even decrease the value of the NFT.
However, an NFT belonging to a great team, with valuable perks and assets determines a lot about the value of the NFT. This is why NFTs like those belonging to The BAYC have a way higher value than certain similar NFTs belonging to other minority groups. Thus, it’s not always about the artwork.
- ENVIRONMENTAL ISSUES
Most NFTs belong to the Ethereum Blockchain technology, which has a significant environmental impact. ‘The combined energy consumption of computers and servers, as well as cooling systems, used to mine and run systems for cryptocurrencies is equal to a million transatlantic flights.' (Source).
So should you consider investing in NFTs? And if yes, which one should you buy? Well, that depends. Mostly on your budget, but also on the project you’re considering buying from. First, make sure you can afford to lose how much you’re willing to spend on NFTs as you may not make a profit, in most cases (Do not feel underwhelmed. If you have put enough thought and work, and have some luck on your side, you will make a good profit.) Then, choose a project to purchase an NFT from. Check the background of the company. Authenticate the information provided by them and confirm that they aren’t blindly emulating the big companies, and preferably have something unique. Look for the perks. Check the stats. Check if they have a roadmap. Don’t trust blindly. Even if some projects lack some aspects, if they actually provide what they promise, go for it. And of course, without a bit of luck, any investment can become a bad investment.
For a better and more entertaining explanation, check this out (trust me, it’s one of the best articles out there).
Now that we’ve had a brief look at some of the Pros and Cons of buying NFTs, let’s take a look at some unbelievable NFT purchases:
- Cryptopunk #9998 was sold for a breathtaking $530 million on October 28th, 2021! However, there’s a catch. It is believed that the owner of the NFT sold the artwork to himself, as a publicity stunt to gain popularity and (what I believe) to increase the value of the particular NFT.
- One of the most respected and famous artworks by Beeple, the world-famous artist, 'Everydays: The First 5000 days' was sold for a massive $69,346,250, to Vignesh Sundaresan (Nice!)
- As astonishing as it could be, Cryptopunk #7523 made it’s way to being the most expensive CryptoPunk ever been sold yet (let’s not consider CryptoPunk #9998 as it technically wasn’t sold), for as much as $11.75 million.
- Edward Snowden has his own NFT. No, really, the guy who leaked the classified information regarding secret US surveillance (spy) programs, has his own NFT, and for a liberal, democratic cause. Edward Snowden’s 'Stay Free' NFT bagged $5.4 million not for himself, but for the Freedom of the Press Foundation, where Snowden is the president.
That’s all for today, cryptolks (see what I did there? Crypto + folks = cryptolks). Hope you enjoyed reading, and good luck on your journey with NFTs if you consider buying some. Until next time, peace out!