What’s all the fuss with NFTs and Why Now is the Time to Invest in Them
Unless you’ve been cast away on a desert island where talking to a volleyball is your best chance of an engaging conversation, you’ve probably heard of NFTs.
It’s unavoidable. Anyone remotely interested in investing has been talking about it, and if you’re still not quite sure what it is, now’s the time to do your homework.
NFT is an abbreviation for Non-Fungible Token, a new form of digital asset that can represent virtually anything from a piece of digital art to a real-life car or apartment. Every token on the online marketplace represents something of value through a unique identifying code that can not be forged, copied, or counterfeited.
By introducing scarcity to the equation, NFTs completely revolutionized the world’s understanding of digital ownership. Unlike previous digital items that can be easily duplicated and copied, NFT users can now buy a digital item and be able to claim sole ownership of it.
Table of contents
- How do NFTs even work?
- Who’s using NFTs?
- Where do You Buy and Sell NFTs?
- How do I create an NFT?
- Benefits of Investing in NFTs
- The Drawbacks of NFTs
- Talk to Our Experts
How do NFTs even work?
If NFTs represent a digital item, then they are just like a file on my computer, right? Not exactly. The biggest difference between NFTs and traditional digital assets is that they exist on something called a blockchain – a public ledger that stores information and data through a worldwide network of servers and computers.
This is the same kind of public ledger famously used to record Bitcoin and other cryptocurrency transactions. Any data or information that enters the ledger is recorded by a gigantic network of users who work together to maintain and verify the record and protect it from being altered or reversed.
The significance of this innovation is that buyers and sellers can now confirm with absolute certainty that the digital asset in the transaction is indeed the original item. Blockchain technology allows NFT users to instantly identify ownership and certify the authenticity of an item without any third parties involved.
Who’s using NFTs?
Like we’ve mentioned before, NFTs can represent anything from a piece of digital art to a car in real life. While NFT’s usage continues to expand into every type of commodity, certain industries have felt the impact of its infiltration far more significantly than the others.
Artists and musicians are often the first to capitalize on new trends, and they have done so perfectly with this one. NFT artwork is already being sold at Christie’s auction house and at astronomical prices.
In March 2021, American digital artist Beeple’s NFT artwork named Everydays: ‘The First 5000 Days’ sold for USD $69 million and instantly placed him as one of the world’s top-earning artists.
Since then, celebrated musicians and filmmakers have all begun minting exclusive material as NFT merchandises to attract the interest of loyal fans and collectors, such as when unseen footage from Wong Kar Wai’s In The Mood for Love was sold as an NFT for USD $550,000 in the Sotheby’s auction. Without NFTs, these memorabilia might have never reached the market, let alone the fans.
Real Estate and Property
As we’ve previously mentioned, NFT’s use of blockchain as a public ledger gives it a powerful advantage in verifying transactions. During the purchase of a property, buyers and sellers can both verify the chain of ownership with absolute certainty and relative ease.
This kind of transaction also removes the need for a middle person or a third party organization such as banks and lawyers and the tremendous amount of processing time, fees, and paperwork associated with them.
While property transfers through NFTs are still relatively infrequent, some enthusiasts have already begun buying and selling their apartments with it due to the benefits mentioned above. As NFTs become more and more popular, don’t be surprised to see a lot more NFT transfers in the housing market in the near future.
It should be no surprise to anyone that the fashion industry has found NFTs to be extremely advantageous. For decades, luxury brands and their customers have always struggled to deal with counterfeits, and the invention of NFTs could provide a much-needed solution.
The use of NFT technology can help verify ownership of an item and certify the authenticity of a product. The implementation of NFTs means consumers can buy an item with absolute certainty of its authenticity and save a ton of time and money from not having to navigate into counterfeit products constantly.
Like in the art industry, the popularity of NFTs has driven brands to release new lines of products that would generate millions of dollars in sales and revenue. Virtual sneaker brand RTFKT released a series of limited-edition sneakers that you can try on and purchase on Snapchat before redeeming the physical version. The result? Over 600 pairs of sneakers sold, amounting to USD $3.1 million in sales.
Where do You Buy and Sell NFTs?
If you’re looking to take your first step, check out our list of popular and reliable marketplaces that are ideal for your first purchase. They are all simple to use and can be accessed even without in-depth knowledge of cryptocurrency and blockchain technology.
Transacting on the Ethereum blockchain, OpenSea allows users to buy and sell all sorts of NFTs without any blockchain fees. It is one of the most popular NFT marketplaces on the planet and offers a wide range of digital assets for users to trade, such as digital art, music, domain names, and virtual world souvenirs.
Creators can also use OpenSea to mint their own NFT and start selling without having to code anything. They currently charge a 2.5% commission on every sale, but it is still a great place to start with for anyone who wants to sell their digital creations.
Similar to OpenSea, Rarible is Ethereum-based and works as both an NFT marketplace and a minting platform. One special feature that Rarible offers is the ability for creators to configure smart contracts. This is very useful for the collection of royalties on their creative work in the future.
Rarible also has a unique function where you can encrypt additional content, such as high-resolution files and hidden messages into your token. Together, these fun and innovative functions have made Rarible a very popular platform amongst creators and collectors.
While the platforms mentioned above are both very accessible platforms for new creators, SuperRare operates in a more exclusive fashion. You can only become a seller on this platform through invitation, and the commission on each sale is a whopping 15%. This exclusionary approach has helped the platform maintain very high standards for its artwork and, in turn, establish a reputation of being more luxurious and premium than its competitors.
If you have a large amount of capital to invest, SuperRare will be a very reliable auction house. Since launching in 2018, the platform has reportedly generated over USD $110 million for its creators, USD $65 million worth of secondary sales, and an average resale value of over 5000% for their artwork.
How do I create an NFT?
If you are a digital artist or creator who wants to mint your own NFT, platforms such as Rarible and OpenSea will allow you to jump straight in without having to code anything or have extensive knowledge of blockchain technology.
All you need to get started is a crypto wallet to complete your transactions, which is also very easy to set up nowadays as Coinbase, Gemini, and other popular web and mobile wallets are now available for Hong Kong citizens.
Once you enter the create page of your platform, you can simply upload your artwork in one of the available file formats (JPG, GIF, PNG, MP4, WAV are the most common), pen your own title and description, and add them into a collection. Some platforms, such as Rarible will also have additional options such as adding hidden and unlockable content to your artwork.
While most NFTs are currently minted on Ethereum, you can also choose to mint on other blockchains such as Tezos and Flow. These blockchains are less popular but provide benefits such as being more eco-friendly and having lower transaction costs.
Benefits of Investing in NFTs
Despite being relatively new, NFTs have already become a significant holding in many investors’ portfolios. Here are the reasons:
Great Place to Diversify
With the market constantly making new highs, it’s always a good idea to diversify your investments. If high growth potential sounds appealing to you, cryptocurrency and NFTs might just be your best bets.
Like the crypto market, prices for NFTs could be quite volatile compared to traditional large-cap stocks, but provide a much bigger return when they do go up.
Many investors now believe that cryptocurrency is staying for the long term and that blockchain technology is shaping our future. If you share similar views regarding the potential of blockchain, NFTs are an unmissable investment.
Digital Assets are The Future
Whether you are a collector of watches, designer clothing, vinyl records, or classic art, your collection is bound to increase in value over time.
This is the same for digital assets, as scarcity and rarity are important factors in helping some NFTs rise to their current prices.
More and more artists are jumping on the bandwagon, and their fans are also driving up demand for exclusive artwork. This trend is quickly spreading to other industries, as sports stars are beginning to mint their own souvenirs and sell them at great prices.
Basketball fans can now own an iconic moment of history through collecting NFTs of NBA highlights. An NFT containing a Lebron James highlight was sold for a mind-staggering USD $200,000, and that number could still go up over time.
Get a Head Start on Technological Innovation
If the history of crypto prices has taught us any lessons, it’s that new technology can change our entire economy within just a few years. As blockchain technology and cryptocurrency continue to mature and have more impact on our future, getting into the game early will give you a significant advantage.
The use of cryptocurrency continues to expand, and many experts believe that we could be using it for daily transactions in the near future. By getting into NFTs early, you will learn the ins and outs of the new technology and the community that it created and discover new business opportunities and smarter ways to make investments.
Connect with The Creators
Apart from surging a new wave of artwork and memorabilia through creating a huge and highly lucrative market, NFTs also open the door for artists and fans to connect in ways that were not possible in the past.
With blockchain technology as its backbone, NFT digital artwork can be sold to and owned by one single proprietor, and transactions can take place without any mediator or middle person involved (other than a small fee charged by the NFT platform).
This means you can now buy a unique piece of art from your favorite artist and musician, and the funds will be transferred directly to them. Their revenue will no longer be hampered by things such as piracy and commissions.
The Drawbacks of NFTs
Like any other newly popularised technology, NFTs also comes with a few drawbacks. As a potential investor, you might want to know some of the things that might hinder its progression and be prepared for the risks involved.
Highly Speculative Nature
While it’s true that any investment will come with its own set of risks, NFTs are significantly riskier than most of your other options as there are still many unknowns regarding their long-term viability and value.
NFTs that are extremely rare and possess sentimental value (such as exclusive, unseen cuts from a very popular movie) will undoubtedly preserve or even gain value over time, as we have seen with physical antiques such as trading cards and signed CDs and records.
However, other NFTs that are less likely to generate worth from emotion and history might not age so well. Like any tangible art collection, factors such as supply and demand will determine an item’s price, and it’s hard to predict what a less desirable NFT item will be worth after the market cools down and demand decreases.
Like cryptocurrencies, NFT uses blockchain to record transactions, and this requires high processing power from many servers and computers across the world.
The upsurge of crypto mining has already created a GPU and semiconductor shortage. With climate change on the horizon, people are becoming more concerned about the environmental problems NFTs could cause.
Fortunately, many blockchains are looking to improve their efficiency.
Ethereum is aiming to cut its energy use by 99% by the end of 2022. Similar measures will have a significant impact on NFT’s longevity.
Decentralization and Control Issues
NFT operates on blockchain and relies on a highly decentralized and anonymous network for verification. The technology is constantly improving, but there is still room for security breaches and foul play.
As such, there had already been complaints from artists that their work had been minted for profit without their knowledge or consent.
While platforms such as OpenSea and Rarible continue to invent new solutions in preventing copyright infringement and plagiarism, buyers still need to be cautious of the risks involved as they could be losing a large amount of money on their investment.
Talk to Our Experts
If you’re ready to start investing in NFTs and want to kick start it with something special, check out the Superist NFT collection and add a piece of digital marketing history to your collection.
Have questions about NFTs or how the changing digital landscape will impact your business? Don’t hesitate to reach out and speak to one of our digital specialists.
With years of experience planning thousands of successful campaigns for clients across the globe, our talented team of experts at First Page will help you develop an impactful digital marketing campaign that will captivate your customers.
Get in touch to learn how we’ll help your brand and business stay on top of an increasingly digital economy.