Non-Fungible Tokens, also known as NFT, are trending in many social networks and investment websites due to the sale of a work of art by Christie’s for more than $60 million. However, most people do not know what they are. Let’s solve it.
What Are NFT?
When we talk about NFT, we are referring to digital assets. These assets can be pictures, videos, works of art, or virtually anything as long as you cannot touch them.
Let’s simplify things, so you can understand. The NBA, yeah the USA basketball league, is generating NFT that consist of interesting plays performed by players during games. The concept is call NBA Top Shot, and it is a great idea because it targets one of the most interesting markets related to any topic: collectors. So now, for example, you can collect the first play of a player. In most cases, this will be worth almost nothing in the future, but can you imagine having the first scores made by Michael Jordan or Kobe Bryant? That could have some value for collectors, right?
Now, you may be thinking that yeah that could be worth something, but anyone can get it from YouTube and have a copy. And there it comes, the brilliant mind that created value from nothing. Yes, it is true that anyone can have a video of Michael Jordan’s first score, but what if you make it unique and original in a way that the one you have is the good one and the others are just copies?
Bingo!
That is what you can do thanks to Blockchain Technology. If you associate the file with a unique token, in the future you can prove that the file is the original one.
Is it worth investing in NFT?
As long as people are buying and selling NFT, it is possible to earn money with it.
Now, there are serious risks in this kind of investment.
First of all, the market is too new, and people have too little information, making it similar to a lottery. What factors or reasons can you have to buy one token and not the other? For now, we would not put any trust in the advisors of funds doing these investments because even for them there is not enough historical data to show that their investment methods will work in the long-term.
Second, what happens when technology evolves? These files are linked to many technological aspects. For example, if you buy a graphic work of art, it will be in a file extension, and the extension can get outdated by technology improvements. When this happens, the market can decide that the file has more value due to historical reasons or less value because it is just outdated. The same happens with the token technology. These tokens are related to Ethereum, but what if nobody uses Ethereum in 5 or 10 years? Even now its use is quite marginal.
We would not invest in NFT; but if you want to do it, do it as if you are playing the lottery — think about the money as lost; and if in some time it gives you good news, welcome it!