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Non-fungible tokens: Why they are all the rage nowadays

The world of crypto has been influential over the past few years, even going as far as branching out to other industries like digital art. One of the most popular creations that have come out of this branch is called NFTs, non-fungible tokens that come in the form of digital artworks, titles, collectables and other rarities. 

Learn more about the non-fungible token meaning, what they are and whether or not you should have an interest in investing in them! Read on to see what makes this special digital token so unique in the crypto market.  

What are NFTs and how do they work? 

When it comes to the world of cryptocurrencies, digital assets like Bitcoin and Ethereum among many others are known to be fungible, much like fiat money. Being fungible means that it can be exchanged with itself or other currencies for the same,  equal value. For example, the value of one Bitcoin and another Bitcoin will always be the same. Bitcoin can also be changed to another cryptocurrency as well as fiat money. 

What makes non-fungible tokens or NFTs unique is that they function similarly to cryptocurrencies but they are non-fungible, which means they cannot be copied or replicated. You can think of NFTs as digitalised or tokenised pieces of art, property, rarities and many more. Since they are non-fungible, they cannot be exchanged for something of equal value. 

Another thing that makes NFTs special is that every single token is unique, varies in type, value and cannot be replaced. You can somehow think of it as a fingerprint, which is unique from other types. NFTs can also be extended, which means that they can be combined or bred with other NFTs to make a completely new and unique one.   

Non-fungible tokens also work thanks to blockchain technology, and most of them function on the Ethereum network. However, they do not function the same as cryptocurrencies and cannot be used as a medium of exchange.

When people think about non-fungible tokens nowadays, they often associate them with digital art. However, NFTs can come in various forms such as real estate titles, collectable cards and so much more. The idea behind selling NFTs lies in the ownership of the original copy, which can cost hundreds, thousands and even millions of dollars. 

So, if you are into the world of digital currencies, then it is likely that you’re intrigued by NFTs as well. They are unique, controversial and all the rage nowadays. Who knows, you might even be driven to purchase one in the future and see what the fuss is all about. 

Things to consider before getting your hands on NFTs

Now that you have an idea of what NFTs are and how they work, you can try and see if it’s a good idea for you to invest in! There are a lot of different factors you need to consider first to ensure that you are making the right step in terms of investing in something like a non-fungible token. See the list of factors below to learn more:

NFTs can change over time

Since non-fungible tokens are completely digital, it makes sense for people to think that digital art and collectables can stay that way for a long time. However, these digital pieces can still deteriorate in value and quality in the next few years or more since gadgets and software nowadays continue to upgrade. 

With all of these possible changes, the quality of pixels, distortion, colour vibrancy and so much more can be affected. Even accessing NFTs can prove to be difficult in the future with the pace of technological developments today. Be sure to consider these before you go ahead and buy your own NFT. 

The digital trend is volatile

Much like cryptocurrencies, NFTs also have a possibility of being volatile, but in terms of their worth in the long run and not simply with value. Trends in the digital industry come and go, depending on what online users like to see. This also dictates the popularity and price of certain NFTs, so be sure to look out for these as well. 

So, NFT collectors have to ensure that the pieces of art or collectables that they are buying are timely and will not go out of fashion anytime soon. This is so you will have a valuable NFT on your hands and potentially sell it in the future for a higher price. 

Theft is still a possibility

One of the best things about non-fungible tokens is that they are unique and irreplaceable. There is nothing else like it, which makes replication or hacking very difficult. However, the possibility of digital art theft should not be ruled out completely. It is difficult to accomplish, but still possible to some extent. 

It is important to remember that all investments pose risks. If you end up choosing to invest in NFTs, remember that the risk of theft or any form of fraud is still there. But as long as you take the necessary precautions to keep your digital assets safe, you can decrease the risks as well. 

Certain rarities and collectables are difficult to get 

NFTs have a reputation for being expensive because of their rarity. This is true because non-fungible tokens are made by digital artists or owners, who then transfer the ownership to the highest bidder. 

So, if you have your eye on a particularly rare or sought-after NFT, then chances are, you’ll have to compete with and win against other bidders. The price can then become extremely expensive.

The creation of NFTs are known to be energy-consuming 

One of the things that come with NFT investments includes a proof-of-work mechanism where miners consume huge amounts of energy to validate and store data to make NFTs. As a result, some people are concerned about the environmental impact their investments make since creating and storing them uses up non-renewable energy sources.

So, before buying NFTs, decide whether or not you are comfortable with this effect. If not, research for more environmentally friendly ways to invest in them.

Learn about NFTs and more at Cryptoshimbun! 

Some people believe in the potential of non-fungible tokens, meaning they look forward to the possibility of it blowing up and being incredibly valuable or popular in the future. It is certainly a good idea to start a collection of your own today, as long as you are armed with the right knowledge and are ready for any potential outcome. 

Do you think investing in NFTs is the right move for you? Learn more about it along with other crypto-related news here at Cryptoshimbun. Further your investments and get all the latest information about the digital asset market. 

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