Total NFT sales have grown from $250M in 2020 to over $2.5B in 2022 - it's obvious why investors are scrambling to find the best NFT collections to invest in now. Today we will consider NFT from the perspective of an investment asset!

What is an NFT token

NFTs (non-fungible tokens) are digital assets in the form of digital arts, videos, gifs, music and other things, confirmed by a smart contract. Copy as much as you want, but there is only one owner, the ownership of the asset is already fixed in the blockchain, which proves the authenticity and uniqueness of the NFT.

For example, the famous Van Gogh painting “Starry Night” has many copies and iterations, but this does not make them as valuable as the original. The picture was painted in June 1889; since 1941 it has been kept at the Museum of Modern Art in New York.

Despite the copies created and their number in the future. Van Gogh's work will remain as great and valuable as ever. In the same way, NFTs increase the value of assets, proving their originality and uniqueness among a million copies in the digital world.

Investing in NFTs: all risks and benefits in 2022

How to sell NFTs

NFTs are constantly bought and sold on the Internet like regular fungible cryptocurrencies and they work on the same principle, the process of buying and selling is not much different, including their basic software. NFTs are currently in high demand as they become a popular way to acquire and sell art.

Consider this on the example of the work of Sofia and the Italian artist Andrea Bonacheto created by artificial intelligence. It was sold on the Nifty Gateway platform for $688,000, but it can also be viewed online for free.

In addition, NFT is often an example and indicator of status, for example, the owners of a well-known collection of boring monkeys have a special status in the crypto world and are in a closed offline/online community. Simply put, such digital "bragging rights" granted by NFT's own authentication are of great value, especially among collectors.

By the way, gamers are now also in this party, unexpectedly, right? They can now also become permanent owners of in-game tokens and other unique assets and earn decent amounts from this. There is also an opportunity to earn money in virtual worlds and metauniverses such as SandBox and Decentraland, acting on the same principle of reselling digital assets, only in the game (for example, skins, avatars, characters, etc.

Investing in NFTs: all risks and benefits in 2022

How to buy NFTs

Here is a step by step guide to acquiring these digital tokens:

Create and set up a crypto wallet (there is also a video on which one to choose), and buy Ethereum cryptocurrency, since NFTs are mainly supported on its blockchain.

After creating a wallet and transferring Ethereum cryptocurrency to it, which you can purchase on any of the cryptocurrency exchanges, choose one of the platforms and marketplaces where you can buy NFT: FTX, OpneSea, or any of the above that have proven themselves well. Then everything is simple: choose the one you like and click buy! Now you are the owner of NFT!

Another thing to be careful about when buying NFTs is gas fees, so called commissions. If you have never transacted with Ethereum before, you should know that it has an additional cost: commissions. In simple terms, this is money paid for completing a transaction. If the transaction fees are high, it may be necessary to wait a while before purchasing the NFT, as some buyers ended up paying more for it than for the NFT itself.

Investing in NFTs: all risks and benefits in 2022

Just take seriously the choice and assessment of the value of the asset. Cryptocurrencies are highly volatile. It is almost impossible to objectively evaluate an asset. But there is a main criterion that can attract NFT buyers - the name of the author. Therefore, many budding artists work with large companies.

This is how collectible cards from gaming organizations (NBA), unique editions of drawings (The Boys) and other digital objects that can be worth millions of dollars. A good example of this is that the world's largest Binance recently entered into an exclusive multi-year partnership with Portuguese football legend Cristiano Ronaldo and will release several exclusive NFT collections on the Binance NFT platform.

It is obvious that the price of these NFTs will obviously not be modest. In this area, originality and an aesthetic component are valuable. To attract the attention of the audience is one of the main tasks of the developers of the product that needs to be sold. An exception is the situation if an object from the real world is transferred to the non-fungible token format. As a rule, it already has a certain value.

Investing in NFTs: all risks and benefits in 2022

Benefits of NFTs over other investment assets

Authenticity

The core value of NFT tokens directly correlates with their uniqueness. As we said above, it is impossible to fake NFT, screen or copy it either, since each token is associated with a unique record in the blockchain. This is the so-called certificate confirming the originality of the NFT asset, protecting users from scam. Creators also often deliberately release very limited amounts of NFTs to boost demand and value, tricks like this

Ownership

Just like you own property, an apartment, a car, you can own an NFT asset. Since NFT is on the blockchain, it is very easy to identify it as well as its owner through a single account. They are also indivisible, making it impossible to separate them between different owners. Critics like to claim that you can simply take a picture of an NFT and sell it or give it as a gift. While you can of course own the Nft image, this is not equivalent to owning the original asset. For example, by downloading a photograph of Van Gogh's Starry Sky from the Internet, you will not become its owner.

Content Ownership

To everything else, the ownership of the content is added, which implies any ways to monetize their creations. When using traditional publishing models, content creators often face challenges with platforms that steal all the profits and potential revenue. For example, digital artists who publish their content on these platforms make money from ads shown to fans of the artists. However, not all of this money goes directly to the artist.Often most, if not all, of the profit goes to the platform.

Transferability

NFTs are also easily transferred. This allows sellers and buyers to easily move NFT without worrying about theft or loss of the asset. NFT tokens are stored in digital wallets, as a result, the owners can dispose of the assets at their discretion. For example, use them in games, exchange, sell and so on. Thanks to smart contracts, this process is greatly simplified. The transfer of ownership can be completed between the buyer and the seller subject to certain conditions specified in smart contracts.

Investing in NFTs: all risks and benefits in 2022

Risks of investing in NFTs

There are two main types of risk associated with NFTs, namely smart contracts. The first is the likelihood of a DeFi network being hacked, resulting in the theft of an unreasonably large number of cryptocurrencies. The main reason is the weak security of the smart contract, which created an entry point for scammers. The second problem is the valuation of NFT assets. Since there are still no specific standards, this topic is covered in dark darkness and shrouded in sheer subjectivism. While the price of an NFT is largely determined by criteria such as uniqueness, creativity, and rarity, prices tend to fluctuate a lot.

Price fluctuations are a permanent phenomenon, as it is still difficult to determine the factors influencing the market. Thus, NFT valuation remains a challenging task. In terms of legal regulation, there is currently no legal definition of NFT in any country.This is due to the fact that there is still no international organization responsible for implementing the rules and laws regarding the NFT. Due to the increased interest in it, the need to create a regulatory body is becoming more and more obvious every day. The scope of NFT has also expanded significantly. In such circumstances, a regulatory framework with well-defined rules and regulations is needed.

Along with the growth in popularity, the frequency of cyberattacks has also increased. In some cases, entire fake marketplaces are created to lure unsuspecting buyers.

Investing in NFTs: all risks and benefits in 2022

Conclusion

Now that we have looked at the potential of NFTs as an investment asset, the question of whether this is a good option for your investment is still debatable, since the value of the NFT token depends on the use case. A good option to invest in NFTs is in-game items and digital art ownership.

Regulatory uncertainty around NFTs is a significant barrier to their mass adoption in the market. The lack of regulation means that buyers and sellers have no rules to follow when transacting, making it difficult to fully assess risk when buying or selling a non-fungible token. Whether to invest in it or not, the choice is yours anyway.

Whether the art of NFT has a future or not, only time will tell. Some believe that the trend will change quickly, while others believe in the long term. For example, major players such as Visa, Adidas, McDonalds, Gucci, Louis Vuitton are already investing in the art of NFT, which indicates that the potential is quite large.