Confused about what is NFT? Here is All You Need to Know About the Non-Fungible Tokens

Before you decide to invest in NFTs, first know all about the pros and cons. You cannot invest in NFT as they do not exactly fall in the asset class category. 

Anyone who’s a little tech-savvy and knows how digital currency works has started investing in Non-fungible Tokens, popularly known as NFT. With the internet evolving at the speed of light, every digital asset can now be turned into an NFT. 

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Suppose that you purchase an art piece, a picture, meme, or any music over the internet and receive a token with it. This token provides you with the right to prove that the purchased artwork is yours. This helps both collectors and artists. 

But if you’re also wondering whether investing in NFTs is a wise decision or not, you will find all the information here. Let’s explore what is NFT and is it even worth the hype and how can you actually invest in this digital currency. 

What is NFT? 

The Non-fungible tokens are irreplaceable and cannot be interchanged. The NFTs represent the collection of digital assets such as art, music, meme, games, etc. One of the key highlights is that these NFTs can’t be forged or manipulated. These NFTs are a part of Ethereum which is a type of cryptocurrency.

NFTs are sold and brought with cryptocurrencies but are not exactly a type of cryptocurrency and are encrypted with the same software as cryptos. However, unlike crypto, the NFTs are very limited, and the unique identification codes create digital insufficiency. Now cut off the supply, and it will always increase the product’s demand in the market. 

These NFTs can be anything. From a wedding picture to NBA footage, anything can be turned into an NFT. NFT can come in different shapes and sizes but only digital, from an individual image to a collage of images. 

Even though you can screenshot the same asset or record it, the buyer will have the original item with unique authentication under their possession. In India, the provisions for NFT are still under discussion and the government will define the digital assets. 

Functions of NFT

A non-fungible token or NFT exists on the blockchain. These NFTs are created from different digital objects, including art, music, GIF sports highlight, video clip, collectables, video game equipment, digital avatars, designer sneakers, and music. 

Here are some of the NFT’s key functions- 

1. NFTs cannot be divided into smaller pieces, unlike Ether or Bitcoin. An NFT is an exclusive piece, and this is how it will always be. 
2. These NFTs cannot be destroyed as the frameworks are stored in blockchain via smart contracts. 
3. The organizations that made NFTs are not real owners but those who purchased them. 
4. The current owners can track the NFT’s journey. No third-party permission is required. 

Different Types of NFTs 

We have already established what is NFT but did you know that there are various types of NFTs being sold in the market? Here is a real-world example of NFTs being sold in the market. 

Virtual Real Estate 

These days there’s one more question popular among people is that what is NFT? It is whether they can buy NFT in Metaverse. You might be aware of the metaverse, the digital representation of our actual world, and now people buy NFTs in Metaverse. One such example of buying land in the metaverse is the game Decentraland. You can buy the land in this 3D gaming world and create your real estate there. 

All the plots in that real estate will have the unique token and can be sold as an NFT.

Source: Shutterstock

Real Estate 

All properties are different, meaning it can be sold as an NFT, which recently happened in Florida. The buyer paid for the house with Ethereum currency, and if they ever wish to resell the property, all they will have to do is initiate a wallet-to-wallet transaction. 

Sports videos 

Sports Brands such as NBA or ATP are now selling some popular video clips as an NFT. In a nutshell, the value of sports video clips will continue to rise in upcoming days as various sports stars have started backing up the NFTs too. Even in India, the sports NFT is picking up pace now as per news reports.

CryptoPunks 

CryptoPunk includes a vast collection of 10,000 animated characters. Each character is an NFT and is one of the most sought after NFTs in the current scenario. 

Advantages and Disadvantages of Investing in NFTs

Before you decide to invest in NFTs, first know all about the pros and cons. You cannot invest in NFT as they do not exactly fall in the asset class category. 

Just don’t buy an NFT because you want to have an NFT. Understand the complications that come with it, both positive and negative. If there’s an NFT that appeals to you and you have the fund, invest in it, but remember to check all the benefits of the NFT. 

Understanding what is NFT and the fact that it is not a type of cryptocurrency is not exactly a complex thing but since there are different types of cryptocurrencies in the market, you are bound to get confused. Before buying an NFT, know what is NFT and then make a wise decision. You can visit Investment Simplified for more information about NFTs and get answers for your investment-related concerns.