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Currently, blockchain technology is making quite a stir because of a newly enabled trend. As a result, a lot of collectors and investors are shelling out hundreds of thousands, and even millions of dollars.
Why? It’s to acquire digital collectibles called non-fungible tokens or more commonly known as NFTs.
NFT’s are tokens that are blockchain-based, and these can represent almost anything in digital form you can think of. These also include physical assets.
With its sudden popularity, the NFT boom has caught a lot of people by surprise. But despite all the news, stories, hype, and media attention, NFTs aren’t that new. These also exhibit another application of the same DLT (distributed ledger technology) that establishes the groundwork of the blockchain.
Similar to other quickly evolving technologies, NFTs offer innovative opportunities for everyone wanting to expand their brand to greater heights. These provide alternative routes for companies to mint a more classic portfolio of assets. However, there are also linked challenges with NFTs that these companies need to know about.
And while the media has been filled with various opinions about NFTs and their rise, let’s go take a look at the pros and cons of NFT.
After reading a couple of success stories related to NFTs, it’s not surprising if you get easily attracted to these. Making about $70 million overnight will surely spark anyone’s interest in a snap. And that’s because the current narrative for NFTs can be highly profitable.
This is one of the pros of getting involved in NFTs. But like everything else, there are cons bound to it as well.
For newbies, we don’t necessarily recommend purchasing NFTs that are available on the marketplace. Once the narrative for these begins to slide down, you might end up having a collection of NFTs that no one would likely buy.
There is a solution to this, and it’s to get into sales like UFC’s, NBFA Topshot, Capcom’s, and more. These are NFT markets that allow your investments to exponentially grow without risks. Why? It’s because the NFT packs available are extremely affordable, though prices vary as well.
For creators around, these NFTs are a smart way to get adequate exposure to the narrative. Of course, this equates to more money for their talents.
Do note that as long as you have something one-of-a-kind to offer, you can turn these into an NFT. Sell these on the marketplaces like OCEANS, SOUL, WAX, and more.
Non-fungible tokens are continuously trending today, and there are tons of pros as well as benefits of utilizing these. Currently, NFTs are used for selling exclusively limited goods on online platforms. However, these can certify something that can be beneficial in verifying its ownership.
A couple of these benefits that collectors focus on when purchasing non-fungible digitized works include the following:
Like other types of investments, there’s always a good potential for growth in your investment’s value when purchasing these tokens.
A good example would be CryptoPunk # 3100. On the 6th of July in 2017, it first sold for around $2,127. The collector who owned it refused to sell this NFT and waited until March 2021. Despite this, he or she received a lot of offers for it.
Nonetheless, this person was probably extremely ecstatic, considering the return on investments they earned went over $7.5M.
Since these digital collectibles are non-fungible, it means they’re essentially irreplaceable. There’s a somewhat good vibe knowing that you own something unique and one-of-a-kind. This applies to anything, whether it’s furniture, painting, audio clip, digital image, or any other digital asset.
A lot of artists continuously face financial pressure. So, it isn’t a surprise that the idea of selling creative works online is enticing. Pair this with the hyped environment of cryptocurrencies, it’s clear why artists opt to sell their works as NFTs.
Of course, you’ll need to make sure that you’re in the right place if you want to sell your works. To avoid having your work ripped off, it’s best to adequately research the platforms that actively promote original works.
NFTs let creators earn money directly from their creations. Let’s use art as an example: generally, an artist will need agents to sell then market their work. But for NFTs, these eliminate the need for middlemen and let artists and creators directly transact and interact with customers.
This structure benefits creators by letting them earn commissions every time the NFT exchanges hands.
Compared to other cryptocurrencies, you can’t send portions of NFTs to anyone. This is because they’re non-fungible and do not have a specified value.
An example would be one bitcoin: after transferring, it will have the same value. With NFTs, these will not.
Technically, a lot of people will involve themselves with NFTs to make money. There are lots of individuals earning from reselling these since the resale value can lead to great profits.
A couple of these collectibles were resold for over $20,000. This is in contrast to only a couple of thousands of dollars invested by the original purchaser. Through reselling, they were able to acquire more than $15,000 by just trading.
Metadata on tokens can’t be changed by anyone. Also, it can never get erased, removed, or misplaced since it’s on the blockchain.
NFTs are considered non-interoperable because all of them follow the ERC-721 standards. These imply that the data in them can’t be used or transferred in any way. Non-fungible tokens are meant to last for eternity since the data will always stay as is.
This gives the NFTs high value and is great for collections.
NFTs offer generous patrons a direct way to support the arts community while adding distinct assets to their collections.
In a way, NFTs were created to aid artists earn more in a digital landscape. If their work acquires more value, the artist will realize the gains income.
One of the best advantages of NFTs technology is that it lets content creators and artists retain their full copyright. This is something that isn’t usually seen when it comes to most licensing agreements. And with that, they’ll still be able to generate revenue without giving up their copyrights over their works.
Protecting one’s work is one of the most important things for artists and creators. And by utilizing blockchain technology, it’s entirely impossible to corrupt the ownership, provenance, and original creator.
Simply put, it’s a smart way to fight piracy, letting creators and collectors enhance the value of their NFTs.
The biggest pros of NFTs is that the blockchain is extremely safe. Since it’s a network instead of a central or basic authority, you can easily trust the system. And this is without having to bother with trusting any specific contributor.
With NFTs, you can guarantee the security it gives. Technically, blockchains are naturally decentralized. This means, data held is hosted in a variety of nodes around the globe.
There’s always a corresponding record of the database on each node. So even when it’s down, the record will always be present somewhere.
The technology of NFT assures you in knowing that whatever may happen to the blockchain, nodes will always be running. With that, nothing can happen to the data. It isn’t only because of how much money they make, but also the amount being secured.
NFTs are great, but just like we said earlier, these also come with a couple of cons. Following the perspective of an investor, these can be quite risky. This is mostly true when you purchase non-fungible tokens from marketplaces that want to resell them.
Although these can be successful, in most cases, it won’t happen when the narrative starts winding down.
With that, here are the cons of NFTs.
The risk is one of the first cons of NFTs. It’s especially true if you aren’t diligent enough to do your research before putting money into them.
Most of the time, newbies in the space of cryptocurrencies are at risk. Although it’s true that NFTs have a real-use case and it’s booming, it’s generally fed with a lot of hype. And we know that things never end well for investors who don’t take the necessary preventative measures.
This is the same effect that occurs when new investors see a boost in cryptocurrency prices. They instantly feel the need to jump in before missing anything, only to see it drop after.
Interestingly, NFT transactions have significant complications to the environment. The latter has always been a hot topic among many, which makes this another con for NFTs.
Any record that’s filed into the Ethereum blockchain takes serious computing, thus, requiring the use of huge amounts of energy. With that, trading NFTs on a large scale, as well as other blockchain-based assets, isn’t an environment-friendly process.
Based on numerous studies, a typical transaction burns 340kWh of electricity, which is equal to driving for 676,000m.
A good example would be someone driving. They’d need to go from NYC to LA on a round-trip about 121 times to get the necessary mileage.
Like blockchain transactions, creating and selling NFTs use a lot of power. The flourishing NFT market concerns some scientists since this could further harm our rapidly depleting environment.
NFTs are created and minted based on anything that can be digitally represented. With that, it’s easy for anyone who knows how blockchain works to create NFTs out of anything. As a result, the art community is at risk of theft with the booming NFT industry.
Recently, stories of artists discovering their work in online marketplaces have emerged. These artworks were sold as NFTs without their consent.
The value proposition of NFTs is that proof-of-work guarantees that the artist’s piece has a distinct token on it. Meaning, the owner who owns it knows they have the original piece.
However, the problem is anyone can take a JPG file of an artwork, then attach a token to it. Since it’s already an NFT with a different token, the person can sell this to another marketplace.
So if a small creator posts their artwork online, an NFT miner can turn the image into an NFT. Unfortunately, the miner can earn a large profit out of it without anything going back to the artist. That’s why it’s important to confirm that the seller of the non-fungible token is also the owner of the artwork.
An owner of an original NFT doesn’t have control over its distribution and duplication across platforms. Ownership simply means that a person holds the authentic version of the NFT. The owner cannot stop the production of prints and copies.
It’s undeniable that the NFT blockchain technology comes with a lot of advantages especially when it comes to profit-making. It has tons of amazing benefits for both creators and resellers. With that, it’s evident that non-fungible tokens have a lot of potential in becoming an essential part of the future.
NFTs are fun since they offer a way to exclusively own something on the blockchain. But if you’re planning to invest in NFTs, you should still look at these speculatively since they’re risky assets.
Additionally, non-fungible tokens have important pros and cons. Before getting involved in the business, it’s vital to evaluate them whether you’re a creator or investor. Be diligent and do your research before doing anything to protect your capital and investment.
If you see opportunities in these tokens and want to get involved in the blockchain, go for it. But do it responsibly and keep the pros and cons of NFT in mind. Always remember that NFTs are volatile, and investing a lot can be risky.
Purchase low-cost NFTs and enjoy being part of the business, not with the mindset that it will make you rich. Don’t rely on NFT investments to change your financial status since the value of NFTs fluctuates every time.