Many experts anticipate their breakthrough in the mainstream this year: NFTs. What a new hidden area for most people has been used by others as an investment for years. Notable names are also following this trend. Last year, for example, it became known that Deutsche Börse and Commerzbank were investing a double amount in Fintech 360X to go into virtual art and trade real estate. But what are NFTs? And how can potential customers buy NFTs? Overview.
What is NFT?
NFTs are non-fungible tokens. Translated, this means: tokens that are not replaceable or replaceable. The owner of the NFT is authorized by a so-called smart contract. Like cryptocurrencies, the latter is based on the blockchain, that is, the digital data protocol. This makes it straightforward to see who currently owns the unique item and when it was changed. Therefore, NFTs act as a kind of digital proof of ownership or authenticity.
In principle, NFTs are not limited to a particular field of application. All kinds of valuables are now traded on the blockchain. For example, non-fungible tokens can be proof of authenticity:
- Gadgets in games or in digital worlds, for example Metaverse
- business cards
- a musician
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At the end of last year, for example, the lyrics of the song “King of Rap” by musician Kool Savas were auctioned as NFT. Purchase price: 30 thousand euros.
Unlike cryptocurrencies such as bitcoin or ether, which act as a means of payment with a similar equivalent value, digital currencies cannot simply be exchanged with each other. Its price depends on the request. Trading cards, for example, increase in value the more limited and exotic they are.
NFT Art: Why are NFTs so popular in art?
The technology behind NFTs can solve many problems that the art market has struggled with for decades. For example, the forgeries of countless works of art continue to change. NFT acts as a kind of guarantee of authenticity. Icons can represent both digital and analog artwork.
Additionally, artists can program automatic sales quotas into smart contracts. If the NFT is resold, the artist receives a set percentage of the resale price. The most expensive NFT in the world to date illustrates the exorbitant amounts that sometimes flow into NFT. Digital artwork by American artist Mike Winkelman, Every Day: The First 5,000 Days, grossed $69.3 million.
Buying an NFT: How safe and sustainable are NFTs?
From an investor’s point of view, NFTs enable a whole new class of assets. Experts at the US bank Goldman Sachs estimated the market size in October 2021 at about $ 17 billion. According to market research site Nonfungible.com, in 2020, it was still around $340 million.
According to forecasts, NFTs should finally reach the mainstream in 2022. Despite the rosy future prospects, buyers should consider purchasing risks. If the demand and noise of an object decrease, the NFT can quickly lose its value.
And: The fact that NFT is available for purchase does not guarantee actual ownership of something of value. Since, in principle, anyone can create and sell NFTs, buyers must know the property and its potential value in advance. Michael Jake, CEO of Advanced Blockchain AG, explains in the Handelsblatt Today podcast that this market is completely unregulated.
The truth is: if you want to sell your NFT again, you have to find a buyer. However, since there is currently still a lack of liquidity in the market, it can be difficult when in doubt. The investment risk is correspondingly high.
Match tracking On February 22, 2022, a Handelsblatt expert spoke on the topic: NFT as an investment?
Where can I buy NFTs?
If you want to invest in non-fungible tokens, you need to have access to a suitable platform. Places where you can purchase NFTs include:
Read about this: Gamestop plans its own NFT platform and cooperates with crypto projects
Opensea is currently the largest market for digital art. In a new round of funding, the startup has raised $300 million and is currently valued at $13.3 billion.
The business areas of the NFT trading venues are already expanding. American cryptocurrency exchange Kraken is currently developing an NFT market where tokens can be used as collateral for loans. Kraken founder Jesse Powell announced to Bloomberg News at the end of December.
Evidence: How to Buy NFT in 2022?
Since the majority of NFTs currently rely on the Ethereum blockchain, on which the cryptocurrency Ether is also based, the latter is the preferred method of payment. Accordingly, an Ethereum wallet is often a prerequisite for buying and trading NFT.
In contrast, users must purchase the cryptocurrency Ether via an online broker or crypto platform, such as Coinbase.
Example: This is how buying NFT via Coinbase Wallet works
At Coinbase, one of the largest crypto platforms in the world, the NFT purchase works via the in-house wallet app. The latter is only available as a mobile app for Android and iOS devices. After installing the Coinbase wallet app, it must be linked to a Coinbase account that can hold cryptocurrencies.
Once linked, go to the tab in the wallet app “trade”To exchange ETH for any NFT compliant Ethereum “ERC-20 token” standard. tap on “Choose coins”, Select the NFT and the appropriate trading venue, eg Opensea. Enter the amount of ETH you wish to invest in NFT. You should take transaction fees into account.
more: Non-fungible token: A new asset class on the cusp of a breakthrough in 2022