NFTs, or non-fungible tokens, have been making waves in the art world as of late. Christie’s recently sold a CryptoPunk for $7.5 million, and Beeple’s digital collage “Everyday: The First 5,000 Days” sold for over $69 million.
But what is an NFT? They’re pieces of data that are non-fungible and are present on a blockchain, a digital ledger that uses cryptography to verify transactions. (Blockchain is best known as the technology behind cryptocurrencies like Bitcoin and Ethereum.) An NFT is unique, unlike traditional cryptocurrencies like Bitcoin and Ethereum, which are interchangeable. Because they’re unique, they can be used to represent ownership of digital items such as artworks or collectables. That is not to say that you will physically own the artwork if you purchase it—NFTs cannot be held or touched—but you will own the token that represents it.
If you buy an NFT, you are buying proof that you are the only owner of that particular piece of digital property. In this case, “proof” means “a record kept in a decentralized blockchain database
But is it a good idea to invest in NFTs or should you just stick to looking up gold price Gujarat and Mumbai and making investments in gold and other such traditional assets?. Let’s find out
Advantages of investing in NFT
1. Good diversification
Today, investors can invest in stocks, bonds, real estate, commodities and more. As the adoption of NFTs continues to grow, we could see them become a part of this diverse mix of asset classes.
The NFT market is in its infancy and for many it could mean achieving a better balance of risk and return. Therefore, it has yet to be studied and analyzed in great detail. However, we do know that these digital assets are different from traditional investments and have the potential to provide a benefit to an investment portfolio. For instance, if you’ve already invested heavily in other asset classes, such as stocks and cash, adding an NFT to your portfolio can diversify your holdings. Diversification is a way of spreading out your risk. This means you avoid putting all your eggs in one basket that could decline in value and negatively affect your investment returns.
2. Built on safe blockchain technology
The blockchain technology behind NFTs is very safe. Similar to cryptocurrency transactions, which are stored on the blockchain, all transactions involving NFTs are also recorded on the blockchain. Because it’s impossible to hack or alter the information stored on the blockchain, we can rest assured that all records for NFTs are accurate and secure.
3. What you own is unique
A single NFT is a one-of-a-kind item that cannot be replicated, meaning it can’t be counterfeited or copied in any way. This makes every single NFT valuable, as you can never find another exactly like it anywhere else. On top of that, no two NFTs are alike—even if they stem from the same digital file. This is because each NFT has a unique cryptographic address or token associated with it. And just like cryptocurrency wallets have public and private keys, each NFT also has its public and private keys that prevent hackers from stealing digital artworks or altering them without authorization. This is very much unlike other investment assets like gold where you make investments based on todays gold rate in Kolkata or Bangalore but you don’t actually own something unique you may just own it at a unique price point. Check out for more.
Disadvantages of investing in NFT
1. NFTs Are Just One Part of a Larger Ecosystem
When investing in an NFT, you must also consider the broader ecosystem in which it exists. For example, an NFT may require some other platform or token to be used, such as the Ethereum blockchain or ETH tokens. It is important to understand any additional risks associated with these platforms or tokens and how they may affect your investment.
2. NFTs Are Not Backed by Anything
NFTs are completely disconnected from any real-world asset or value driver. In other words, they are backed only by confidence in their future price appreciation (a speculative bubble). For example, an NFT representing a share in a company may be worth less than the stock itself should it ever become available through traditional exchanges.