Over the past few years, investors have been increasingly interested in the NFTs, including family offices and individuals. The Collins Dictionary has announced “NFT” as its Word of the Year for 2021. NFT looks like a new trending fad, but it has been around since 2014. Recent media interest has focused more and more on how his NFTs can be used to market digital artwork. For example, Jack Dorsey, the CEO of Twitter, auctioned off his NFT in his first tweet and sold it for $2.9 million, making his NFT sales in the first half of 2021 close to his $2.5 billion.
The potential opportunities his NFTs offer beyond the art world is enormous, so it is no wonder the number of high-profile people involved in this latest technological development is growing. Whether you are a family office, company, or individual considering investing in NFTs, you should be aware of certain risks from a privacy and cyber security perspective before jumping on the bandwagon.
What are NFTs?
This acronym stands for Non-Fungible Token and is something unique, irreplaceable, and another cryptocurrency block. Denotes a crypto asset that runs on-chain. Applying this definition to NFTs, a unique digital certificate registered on the blockchain is obtained and used to record the ownership of an asset (physical or digital). Transform into individual items, including art, GIFs, videos, merch, designer shoes, music, and more. However, the purchaser receives a digital file instead of a physical item. Acquiring an NFT also gives the purchaser exclusive ownership of the item. Thanks to NFT’s data on blockchain technology, NFT can ensure accountability and traceability.
Specifically, blockchain technology is built on a distributed public ledger that records transactions. Anyone can verify the blockchain and track NFT ownership and transaction history, making NFTs challenging to tamper with or counterfeit.
The NFTs are unique in that every token modifies a cryptographic standard that is unique and irreproducible, making it impossible for any token to be equivalent to each other. According to Investopedia, they are also scalable, meaning that one NFT can be combined with another NFT of his to ‘breed’ a third of its own.
Similar to Bitcoin, NFTs also retain ownership particulars, permitting straightforward identification and transfer between token holders. Owners can also count metadata or details associated with the NFT’s assets. For example, a token representing coffee beans can be considered fair trade. Alternatively, artists can sign digital art with their signature within the metadata.
The evolution of NFTs will enable the reinvention of physical asset infrastructure. This technology will genuinely disrupt traditional personal finance. When the concepts behind NFTs are combined with the tamper-proof blockchain benefits of smart contracts, it opens the door to incredible new opportunities. The most apparent benefit is market efficiency. It may feel strange to invest in digital, but with these right trends, NFTs are something to consider. For example, CNBC reported that an investor paid him $1.3 million for a digital photograph of the rock in August. Big brands like Pizza Hut, Taco Bell, Adidas, and Visa have also released their versions of his NFTs.
The NFTs are bits and bytes stored on the blockchain. However, the concept of value is driving this surge in popularity. The value that a prospective purchaser associate with his NFT also ultimately determines the price. The CEO is changing the way business is done with the help of his NFTs, which are trendy, exciting, and different.
NFT art by NFT creators
There are many ways to create NFTs, and each situation requires a unique approach. This part introduces some of the most common techniques in NFT design. One of the critical factors to consider is how the NFT will be used. For trading purposes, ease of use and comprehension is essential. NFT artists can be given more freedom when used only by their owners. Another thing to consider is security and ensuring that their NFTs have not been stolen or cloned. This severe problem must be addressed when developing any digital asset.
Cryptography is a popular approach for creating the NFTs. It may generate unique tokens that cannot be copied or stolen. Encryption also has the advantage of ensuring system security. The most common approach is to use blockchain-based tokens. This has the edge of being safe and tamper-proof. It also decentralizes the system, eliminating the need for a central authority to manage it.
Finally, another vital aspect to consider is its usability. There are numerous additional elements to regard when developing NFTs. These are just a few of the considerations when designing an NFT. Understanding these issues allows you to easily create tokens for various convenient and easy-to-use NFT marketplaces.
What are the risks and opportunities of NFTs?
However, as with any emerging technology, the risks of cyber-attacks, online fraud, and intellectual property theft remain high. Scammers trick users by advertising the NFTs when in fact, they are not or claiming ownership of digital items when in fact, they do not. Earlier this year, the US Department of Justice found him guilty of carrying out his $1 million NFT fraud scheme against two individuals. The rise and popularity of various cryptocurrencies have changed the landscape for buying and selling investments, providing ample opportunities for changing and new fraud schemes.
Legal implications also remain a challenge, given the need for globally accepted legislation defining and regulating the use and trading of the NFTs. With international regulatory bodies promoting and supporting NFT rules and regulations, NFT trading will remain safe.
However, it is not all bad news. With the constant evolution of blockchain concepts and technology, NFTs may offer countless opportunities and have potential applications beyond the art world. For example, a school or university can issue her NFT to a student who has completed her degree. This will facilitate the education verification process for prospective employers. Another example is concert venues using NFTs to sell and track tickets for their events, thus reducing resale fraud.
What steps should be taken before investing in NFTs?
You can take steps to minimize the risk of getting caught in an NFT. Investing in NFTs is similar to investing in other types of assets. Research content creators. Look at other works to see if the style matches. Check the authenticity of the NFT. Browse some of the different NFT marketplaces to see if your NFT is sold in multiple locations. You could “buy” these NFTs that are identical to the NFTs sold on another blockchain, making these NFTs not authentic and certainly not unique.
Sense check the price. If something sounds too good, it probably is. Find out what the artist’s other work sold for. A significantly lower price may indicate that something needs to be corrected.
It is all about finding the right opportunities, doing research, and making sure you are investing in potential projects. There are some things to remember when looking for the NFTs to invest in. Remember that research is essential; you should take your time and not rush.
Platforms NFTs are built on
There are many different blockchain platforms, each with its strengths and weaknesses. Before investing, research the platform the NFT you are interested in is built on before investing.
The team behind the project
A good team is essential to a successful investment, especially in blockchain and crypto. So spend some time researching the team before committing to investing.
Use cases for NFTs
What are NFTs used for? Are they just digital collectibles, or are they used to power decentralized applications? The more useful NFTs are, the more potential for growth is higher.
Whether the NFTs are on-chain or off-chain
Despite what many believe, not all NFTs are stored on the blockchain. Off-chain NFTs are hosted on centralized servers, which can make them vulnerable to hacking and manipulation. If you are considering investing in an NFT, check whether it is stored on-chain or off-chain.
Get a compatible crypto wallet.
To purchase and store NFTs, you need a cryptocurrency wallet compatible with the blockchain on which the NFTs live. For instance, if you desire to invest in Ethereum-based NFTs, you will need an Ethereum wallet such as Trust Wallet, MetaMask, or Ledger. MetaMask is a free browser extension allowing you to easily store Ethereum-based tokens and use decentralized applications.
Buy the cryptocurrency you need
Now that you have a compatible wallet, you will need to purchase the cryptocurrency you need to purchase the NFTs you are interested in. For example, if you want an Ethereum-based NFT, you must buy Ether. (Ethereum). Once you complete a transaction on the blockchain, the transaction is registered on the blockchain ledger. To add a transaction to your ledger, you must pay for gas. Its fees are paid in cryptocurrencies.
Choose a Marketplace
Now that you have your wallet and the cryptocurrency you need, it is time to choose the NFT Marketplace. There are many different marketplaces, so take your time exploring and finding the one you feel comfortable with. OpenSea, with a 97% market share, is currently his largest NFT market. With over 1 million users and over $200 million in revenue, OpenSea is the go-to place for NFT investors. Create an account, verify your email address, connect your MetaMask wallet and join the platform. You can start purchasing the NFTs in just a few minutes.
After researching and choosing the right NFT marketplace, it is time to make your purchase. Once you find an NFT that interests you, click Buy or offer 5% more than the current asking price. Please ensure you are 100% happy with your decision before making a purchase, as the NFT purchases cannot be reversed. Only make promises once you are sure the NFT is legit and you are getting a fair price.
Receive your NFT
Wait for the transaction to be processed and the NFT to be delivered to your wallet. This can take minutes or hours. Everything depends on the blockchain being used. Once the transaction is completed and the NFT is in your wallet, you are the owner of the NFT.
Are NFTs worth the hype?
Given that they are such a recent phenomenon, it is hard to see how the future of the NFTs will play out. The possibilities offered by this new technology are numerous, but it remains to be seen what will come true. From a cyber perspective, the potential risks are clear. NFTs open the door to countless cyberattacks and fraud opportunities. Anyone considering investing in NFTs should keep this in mind. Despite their growing popularity, it is essential to understand that the NFTs are still highly speculative and unregulated digital assets.
How did it all start?
Contrary to popular belief, NFT did not pop up a year ago. They have been around for several years. They got much attention recently. People consider the Bitcoin blockchain color coin to be the first NFT. They were less practical and functional than the NFTs we see today, but they did contribute to the creation of decent NFTs. All colored coins represent different assets, such as subscriptions and properties.
The technology was still fresh and unpopular, but it permitted people to consider how familiarizing purchases with the blockchain could be worthwhile. So in 2014, when Counterparty came out, he started developing the NFTs. Counterparty is a platform built on the Bitcoin blockchain. This includes games and digital assets, some of the most popular being Pepe Memes.
When Ethereum became famous in 2017, the Cryptopunks collection was released and hit the blockchain. The character was part of his first NFT made on the blockchain. This collection contains 10,000 characters of him, each unique. Then in October 2017, he also released CryptoKitties. This is when owning digital assets began to gain more attention, with prominent investors investing in NFTs. Over the next two years, this immense NFT marketplace expanded in fame. Rarible and OpenSea were among the leading marketplaces. They made them special because they allowed people to cast NFT art. There are many famous NFTs, but a few are the most prevalent.
Bored Ape Yacht Club
There are 10,000 of his NFTs in the Bored Ape Yacht Club collection. Investing in one of these Bored Ape Non-Fungible Tokens gives you access to various features, including a yacht club membership card. With 6.5k owners, there are still a few left if you are interested.
CryptoPunks is a collection of NFTs released in 2017. The collection contains 10,000 characters with unique features. The characters are all pixelated, have their characteristics, and are not similar. It is easy to find punks that interest or suit him, so he might want to make room for one in his portfolio.
Mutant Ape Yacht Club
There is also the Mutant Ape Yacht Club, an improved version of the Bored Ape Yacht Club NFT. This collection is much more extensive, with about 20,000 unique NFTs. As the name suggests, these NFTs come in different and original designs, so if you are drawn to the mutant theme, these Non-Fungible Tokens may be for you.
How do NFTs operate?
Non-Fungible Tokens are digital components that can be discovered on the blockchain. Individuals can bear intangible or tangible articles and preserve them on the blockchain by transforming them into digital assets or crypto collections. Such articles include avatars, digital art, music, GIFs, and videos. The process of converting an item into a crypto collection or digital asset before adding it to the blockchain is known as “minting.” Minting brings investment into the network and makes it visible to potential buyers. Purchasing an NFT gives you ownership of a specific digital file.
Differences between Fungible and Non-Fungible
Fungible and non-fungible are terms used to describe the interchangeability and uniqueness of assets. Fungible assets, such as currency or commodities, are interchangeable and have identical value. On the other hand, non-fungible assets, such as real estate or works of art, are unique and possess distinct value. The main difference between fungible and non-fungible assets lies in their ability to be replaced. Fungible assets can be replaced with an identical item, while non-fungible assets cannot be replaced with an exact duplicate. This distinction is crucial when it comes to ownership, trading, and valuation of assets.
If you are new to the NFTs, you may need help telling the difference between fungible and non-fungible assets. Fungible tokens are indistinguishable and interchangeable items while offering the possibility of dismantling them into multiple parts. For example, currency and cryptocurrency are convertible. Someone can give a $10 bill, and that person can give the same bill back with nothing changed.
However, you can give someone the bill while he returns two $5 bills or he returns 10 $1 bills. You will receive the same amount in return. Bitcoin and other cryptocurrencies work similarly. If you give someone a bitcoin unit, you can get another bitcoin unit back. But non-fungible tokens are not the same. One of the rarest cards of its kind, the Blue-Eyes White Dragon Yu-Gi-Oh card can hold much value. But even if you sell it for $50 at auction, someone else might sell the same card for a higher price.
So when it comes to Non-Fungible Tokens, you invest in digital works that cannot be replicated. Whether it is collectible cards, artwork, or any other thing online, it is yours. Many types of NFTs can be found on blockchains. The most common item in circulation is art, but you can get more than that. The kinds of NFTs you can invest in such as music, videos, movies, collectibles, games, art, tickets for various events, sports, and photos.