When the first bitcoin was bought and sold in 2009, no one could have foreseen the influence cryptocurrency would have on the world. Today, the popularity of investment in digital assets has even created a digital counterpart to the art world. But why do people invest in NFTs?
NFT stands for ‘non-fungible token’, which means it cannot be traded or exchanged in the way that cryptocurrencies can. More and more people are buying NFTs, sometimes for millions of dollars.
How do NFTs and cryptocurrencies differ?
Cryptocurrencies and NFTs are somewhat similar. For instance, both are using the same blockchain technology. Blockchain is a database in which every participant has full access to information. The participants can all contribute to the database through transactions. However, they cannot alter the data already stored on the blockchain. This technology is used for buying and selling cryptocurrency, and it is the same technology used for NFTs. You can read more about blockchain technology here.
Although the technology and idea behind cryptocurrency and NFT are similar, there is one major difference between the two. An NFT is, as already mentioned, non-fungible. Unlike cryptocurrencies, each NFT has its worth. Much like physical works of art, NFTs are unique digital images and each NFT is therefore valued by its own merits. When you buy an NFT, you have ownership of the digital image on a blockchain. Still, people are allowed to copy your digital image and save it on their computer or even use the image for publication. Most people, however, invest in NFT for the mere purpose of selling. It is a digital asset, a token in which to store value.
Why do people invest in NFT?
It is easy to explain why people are interested in selling NFTs. The million-dollar sales of digital art make the market very interesting to artists looking to make a profit. But why do people buy NFTs? One explanation might be that the popularity of cryptocurrency and a growing distrust in the US dollar has moved people to invest in an alternative, new, and exciting form of asset. It is simply a different and modern way of storing value. Additionally, the NFT market is for everyone. If you want to learn how to buy NFTs you can read all about it by following the link and get started very easily. You don’t need an art degree to know how to invest in NFT successfully.
Are NFTs works of art?
It is tempting to compare NFT investments to the trading of art, but this comparison won’t do. The value of a painting can rise and fall. Still, the value of physical art is usually determined by the identity of the artist, the history of the piece, and many other factors all of which are constant and unchangeable. NFTs, however, rise and fall in popularity due to internet trends, making the NFT market as volatile as the crypto market. For instance, the suggestion that Elon Musk would sell his digital assets prompted people to bid up to 1 million dollars. As it turned out, Elon Musk wasn’t interested in selling after all.
The market of NFT is fast paced. There is no guarantee that the NFT you have bought will rise in value. As the market of cryptocurrency, the NFT market is volatile. Still, people are investing millions of dollars in NFTs.