NFTs are definitely in the spotlight at the moment. They are arousing a lot of attention and curiosity. Our team are getting lots of questions and queries about NFTs. So, we thought we would talk about them in this blog post. One of our three core values is education. This is exactly what we are using this blog post for, to educate our audience.
In this blog post we look at the pros and cons of NFTs. We cover the good, the bad and the ugly to give you a full understanding of NFTs and if they are right for you. By sharing the potential benefits and potential drawbacks, you can make an informed decision for yourself and your crypto investment. However, if you have any questions, you can always contact our crypto experts in the office.
What ARE NFTs?
NFT stands for Non-Fungible Token. They are a unique and digital asset. NFTs can be sold to investors on the blockchain. An NFT can include any kind of art that can be rendered in the digital form. This includes music, imagery, video, memes or a combination of media, for example.
The blockchain verifies that the item is an original. It is a unique item that cannot be duplicated. This is where the ‘non-fungible’ part of NFT comes from.
The creator of the NFT places the item up for sale on a blockchain platform. When the NFT is purchased the new owner gains possession of the NFT. This is done via a smart contract. Best case scenario, the item will grow in value. This means that the owner may choose to re-sell the NFT for a profit in the future.
It is possible for the original artists and creator of the NFT to attach a royalty agreement to their creation. This means that each time their NFT is sold on or changes hand, the original artist and creator will receive added compensation. Just like when a radio plays a song and has to pay the artist, for example.
What Are The Advantages Of NFTs?
There are advantages and benefits of NFTs for both the artists and the owners. We have listed some of these benefits and advantages below.
• New Revenue Stream
NFTs create a new revenue stream for artists. In fact, NFTs were partially created as a way of helping artists make more money in the digital landscape. This was an area that hadn’t been particular kind to them, however NFTs were a way of changing this. As the artwork from a creator grows in and accrues more value, it gains when it becomes popular on the internet. In turn, the artist gains income from this growth in value and popularity too.
If the authenticity of an NFT is verified on a blockchain, it means that it can’t be changed or replaced in any way. One of the great things about NFTs is that the intrinsic value becomes an actual, extrinsic value as well.
• Smart Contracts
Smart Contracts are the heart and soul of blockchain technology. They are what makes the automatic executions after certain events possible. A great example of this is if the owned or the NFT wanted to resell the NFT for a profit at a later date. In this case, the artist attaches a royalty ‘rider’ to the contract. This means that the artist will be compensated as soon as the sale is made and completed.
• Support For The Arts
NFTs offer support for the arts and pride of ownership. An NFT gives benevolent patrons a direct way to support the growing community of artists. It also enables patrons to add a unique asset their art collections or investment portfolio.
What Are The Disadvantages Of NFTs?
While NFTs are hugely popular in the world of digital currency and much talked about among crypto investors, this is a field that is still a work in progress, so to speak. Below we have listed some of the potential pitfalls of NFTs that you need to be aware of as a cryptocurrency investor considering growing your crypto investment portfolio into NFTs.
• All-Speculative Market
Currently, the worth of NFTs is tied entirely to aesthetic and sentimental value. This means that it is impossible to gauge the worth of NFTs as a long-term investment. In turn, this means that the NFT market right now, is nothing but speculation.
• Potential NFT Theft
There have been many cases where NFTs have been the target of a few security breaches. This is especially the case from hackers that do not believe NFTs are real investments. Many crypto exchanges have outdated or inefficient security protocols in place to protect NFTs. This is likely to change, develop and improve as the interest in NFTs continues to grow.
• Questionable Sustainability
There is a question among many regarding the sustainability of NFTs. The creation and selling of NFTs accounts for a low of power usage. This is the same for blockchain chain technology and subsequent transactions. Some scientists worry that if the NFT market was to grow rapidly this could cause and result in further harm to the environment that is already depleting.
• Ownership Isn’t Control
It’s important to note that just because you own an original NFT, it doesn’t mean that you have control over its distribution or duplication across different platforms. By becoming an owner of an NFT it just means that you hold the authentic ‘original. As an owner, you can not stop prints being made of your NFT.
How the NFT market will fare in years to come is yet to be seen. Only time will tell, but it’s certainly a digital currency market that we recommend you keep your eyes on.