As a crypto enthusiast, you might wonder if NFTs are worthwhile. These tokens only recently shot to prominence, so you may also have other questions. We’ll answer some of these here to give you a head start.
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What Are Non-Fungible Tokens?
A non-fungible token (NFT) is a unique coin. Instead of acting as a typical fiat cryptocurrency, it’s linked to a digital object you own. These coins give digital images and objects a value they didn’t have before. They also protect the original owner’s intellectual property rights.
How Does This Work?
The easiest description is that it’s a certificate of ownership. Say, for example, an artist sells 15 limited edition digital copies of one work. In the past, they’d upload them to a platform or give the buyer the original file.
The issue with this is that they sacrificed their creative rights. With NFTs, each digital work becomes traceable, and it’s easy to verify ownership. This makes it easy to keep track of royalties and may also curb copyright infringement.
The artist creates a unique digital file for each work. They then issue an NFT with detailed information about the following:
- The work
- The file’s fingerprint
- A symbol to represent the artwork
They can do the same with any digital file like music, video, photos, and GIFs.
What Are the Benefits of Using NFTs?
Prevents Copyright Infringement
You cannot alter blockchain records. As soon as the artist creates an NFT on the system, they have proof of concept. If someone tries to pass off a duplicate file as their work, they can refer to the NFT.
The ownership of an NFT is traceable. Artists can therefore track it for royalty sales or sell these on. They might also assign additional benefits to the buyer.
It’s also possible for buyers to buy shares in a file using NFTs. This is good because investors have a cyber record of the agreement.
Is This Secure?
The art is never on the blockchain. Instead, the artist stores it elsewhere in a secure location. You receive a certificate of ownership of the file instead.
The ownership contract dictates the rights you buy when you pay. You may, for example, purchase full rights. The artist may also retain the copyright and issue reproductions if they wish.
Are There Risks?
As with any investment, there are risks. NFTs are highly speculative, and so prices are market-driven. There is no real underlying value with this type of investment.
At the moment, they’re a hot item, but experts suggest caution. Some even liken it to a Ponzi scheme because the value depends on bringing in more investors. Market demand dictates the value.
Should the market lose interest, the token is worthless.
Should you invest? It’s a bit of a gamble. You might have more fun with the money on a gaming site, like 918kiss.
Other than that, it’s similar to investing in the traditional art market. The primary difference is that there’s no physical product.
In the art world, buying work from upcoming artists is speculative. You may discover the next Rembrandt, or you could purchase something worthless.