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Monday, March 27, 2023

Everything You Need to Know About NFT: Benefits & Risks

NFTs have stirred a lot of commotion in the online marketplace. Despite its ups and downs, its market continues to expand and grow, with celebrities and influencers also being part of the action. As such, you might find many celebrities’ NFT projects floating around online, which are pretty high value. That said, when purchasing NFT, one should consider both the potential benefits and risks involved. It will help you make a sound decision – one you won’t grow to regret. And this post will walk you through the good and bad sides of NFT to help you make an informed decision.

What Do You Understand by NFT?

Let’s get the basics right first! They refer to something distinct and one-of-its-kind that is made of individual units. It is made using the same type of programming used for cryptocurrencies. However, they can’t be traded or exchanged like other crypto assets.

What’s more:

  • NFT is a digital asset representing internet collectibles like music, games, and art that comes with an authentic certificate created through Blockchain technology.
  • It is a unique digital piece that can’t be forged or manipulated.
  • Its exchange takes place with help from cryptocurrencies like Bitcoin or specialist websites.

Benefits of NFTs

Let’s discuss the potential benefits you can enjoy from purchasing NFTs.

1.    Accessible to All

One of the major benefits of NFTs is that anyone can invest with access to blockchain technology. Digital asset ownership that is tokenized into an NFT is more efficiently and quickly transferred among people worldwide.

2.    Immutable

Another added benefit it has is that metadata on the token is untouchable by anyone. Blockchain is a kind of decentralized ledger that records transactions and stores NFTs. The data can neither get removed, erased, or misplaced from the blockchain, and it will last for years, giving them high value and collectability.

3.    Security

When it comes to NFT, you can be certain of high security. The blockchains are of decentral nature, which indicates that the data they hold will be hosted in different nodes worldwide. In that sense, a record of the database at each of the nodes will always be present. So, blockchain technology ensures the investor’s ownership of the asset is secure.

Drawbacks

Besides benefits, celebrities’ NFT, or other digital assets, all come with risks that are important to be aware of.

1. High Price Volatility

NFTs are not properly developed or accepted in the marketplace, which means they are at risk of high price volatility. For instance, the prices of Ethereum and Bitcoin, two of the known cryptocurrencies, are known to fluctuate constantly. As such, this volatility makes it challenging to shed light on the future of an NFT.

You can lose your money if you invest in an NFT that loses value in the coming time.

2. They Do Not Replace Physical Art

Let’s be honest; NFT can’t replace physical art, as the latter can’t be digitized. The experience of owning art drawn by an artist using their skill and expertise on paper and canvas is something NFT can’t replicate.

3. No Generation of Income

Unlike other assets such as bonds and stocks, NFT doesn’t generate income. This means when you purchase them, you are heavily relying on the appreciation of digital art to make a difference in your finances in the future. That said, it could be possible for you to hold an NFT for years without seeing any increase in its value.

Invest in NFT: Good or Bad?

Investing in an NFT is definitely not a bad choice if you enter carefully understanding all potential red flags. Like any other investment asset, you must research and make an informed decision about investing. On top of that, investing in NFT is surely fun and exciting. Plus, it is a great chance to learn more about Blockchain technology!

Sylvia James
Sylvia James
Sylvia James is a copywriter and content strategist. She helps businesses stop playing around with content marketing and start seeing the tangible ROI. She loves writing as much as she loves the cake.

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