In the traditional setting of acquiring art assets, only wealthy and influential people seem to be involved in the picture. Nevertheless, with the emerging trend of crypto art or Non-fungible Tokens, there are more and more celebrities, companies, collectors, auction houses, artists, and investors getting to try their hands on these crypto-collectibles and other forms of digital assets. This is because they see reasonable returns on investments.
Still, these tokens can amount from a few dollars to a million and are considered a risky investment. With this in mind, let’s go ahead and look at the things you should think through if NFTs are worth your money.
People regard blockchain as one of the most hyped technology to ever exist. Although it may not be a hundred percent failsafe for cybersecurity, most investors prefer to deal with assets involving the blockchain network over other networks because of its transparency. Also, another benefit of using the blockchain for the storage of this digital asset is that investors and companies can utilize the blockchain network from anywhere and anytime in the world to do reliable verification for the ownership of these digital assets, which was not formerly possible.
Diversification of Assets
With the introduction of NFT in the market, one’s own investment portfolio can become broader. Their uses deviate from conventional assets like bonds, stocks, and traditional art pieces. It is because of their unique advantages and features that are a factor in their success in the crypto industry.
It has always been challenging to divide the tangible ownership of assets like property, jewels, or other works of art. However, it has less hassle to distribute their digitalized structure among multiple holders. Whether that asset may be a prized bottle of wine or a one-of-a-kind jewelry piece, the digitalization of some assets has increased their liquidity, raised NFT prices, and expanded their market. Additionally, fractional NFT investments can improve your investment portfolios. Since it enables accurate positioning and greater diversification, everyone wins. It also allows this art form to be accessible to everyone, not just to the elite.
Economic Opportunity and Source of Income for Artists
If there is one significant advantage for NFT, it would be that it has become the source of income for artists, especially among the struggling ones. It also allows them to improve the worth of their art online as their artworks gain more recognition and increase their value.
Much like cryptocurrencies, Non-fungible tokens are subject to environmental scrutiny. Although the creation of NFTs does not consume that much energy, the process of trading them is what exhausts high energy. Many blockchain platforms verify transactions using proof of work (PoW) consensus as their algorithm, which is the main reason behind the high energy consumption. This verification process involves multiple computers that emit carbon-causing greenhouse gas emissions. Some estimations say that a single NFT transaction can produce a carbon footprint of around 48 kg CO2.
This disadvantage is in connection to the environmental issues that arise from minting NFTs. Since it is causing considerable harm to the environment, scientists believe that this kind of digital asset that relies on blockchain technology will only serve to fast-track the depletion of our environment.
Ownership does not equate to control
Even if you own the original NFT does not mean that you have the means to stop it from being duplicated or distributed to other platforms. Ownership in NFT jargon means that you are the one who holds the original copy and has the right to reproduce it and nothing else.
NFTs are Illiquid
For any conventional commodities and cryptocurrencies, it is easy to liquidate them when you are in a financial bind or when the economy is in a spiral. But that is not the case for these Non-fungible tokens. You have to find potential buyers for your NFT, and if, by some luck, there are some people who are interested, it still has to go through some verification and valuation to see how much it is worth. One of the reasons these tokens are illiquid is the speculation attached to this technology since it is still new. You will find that there are still many people, even investors and some corporations, who are skeptical about NFTs and their concepts.
Forasmuch as Non-fungible tokens are a promising field in investments, since they are in their early stages, it is vital to know the advantages and disadvantages of this technology. The points we have laid out may help you play evenly on the field, whether it will be the right move for you to go along with the hype or watch on the sidelines as this technology unfolds. It may also be crucial to bear in mind the future potential of NFTs since no one is really an expert in this field.