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As your hometown bank, we want to help you make educated financial decisions. That is why we did the research on the newest investment buzz-phrase, NFTs. Below is what we found as an introduction to the topic. We believe it is important to always weigh the risk and reward when you make any financial decision. 

When it comes to financial sense, little sense can be made from NFTs. We’ve seen this acronym all over the internet for the last year or so when they went mainstream, but NFTs themselves actually started in 2014. To put it simply, NFTs are sort of like owning an original Matisse painting. People can copy it or try to mimic it, but there is only the true original owned by you. 

That’s NFTs in a nutshell. They are one-of-a-kind digital assets (like art, gifs, or even Twitter founder Jack Dorsey’s first tweet) that can be traded on the Ethereum blockchain. 

NFT stands for non-fungible tokens which means they are not “fungible.” To be fungible means to be able to trade something one-to-one like a bitcoin for a bitcoin. NFTs are not like that because each token holds a different value than another due to its uniqueness–we know it’s very convoluted. When it comes down to it, NFTs are currently just like trading cards for the ultra wealthy. 

Should I invest in NFTs?

NFTs are far from affordable investments like the stock market can be. For example, the first NFT was Kevin McCoy’s “Quantum.” That piece sold for over $1.4 million at auction in November 2021. So it’s not like using an app to invest your spare change, to say the least. And now that NFTs are mainstream, those kinds of prices aren’t going anywhere. 

And, because NFTs are not regulated yet, people are finding ways to play the system. There are artists out there boosting their own NFT prices by buying work from themselves. This practice is known as “wash trading” and it’s become a bit of a scourge in the NFT market. Interesting Engineering said part of the problem with wash trading is that it’s incredibly hard to track. Because of that, it might currently not be a good idea to invest. 

“Those considering investing in the NFT space may want to think about how early it is to do so,” Loukia Papadopoulos wrote for IE. “The space has very little regulation and transparency making it a hotbed for scammers and fraudsters. Is that really an area you want to put your hard-earned money in?”

How do I buy NFTs?

If buying an NFT is something you are interested in, there are plenty of ways to go about it. What you need first, however, is which marketplace to go to, what kind of cryptocurrency you want to use and what kind of wallet you want to store the NFT in. Easy, right?

Right now, the biggest NFT marketplaces are OpenSea, Axie Marketplace, NBA Top Shot Marketplace, Larva Labs, Nifty Gateway, Foundation, and SuperRare. Each marketplace operates differently which includes potential user fees, so be sure to look into those before signing up.

When it comes to cryptocurrency, Ether is still the most widely used in purchasing NFTs. It is possible to buy them in other currencies, but Ethereum-based tokens are still your best bet (remember, this is really a gamble when compared to money in the bank). Although there is a brand new system called MoonPay that will allow NFT investors to make their purchases with traditional means. 

Digital wallets are probably the simplest part of the whole NFT acquisition process because many people have them already. Apps like Apple Pay, Google Pay, and even PayPal or Venmo are technically considered digital wallets. So if you plan on investing in NFTs you might already have a wallet you trust.

Bottom line?

Even though they’ve been around since 2014, there is still a lot to do within the asset’s infrastructure. As they continue through the mainstream, it is our hope that NFTs will eventually be regulated, and maybe become a safer investment.However, it seems the risk of the unknown may still outweigh the reward at this time.