Why is NFT an Ideal Investing Option Now? – Finextra

why-is-nft-an-ideal-investing-option-now?-–-finextra

Welcome to Finextra. We use cookies to help us to deliver our services. We’ll assume you’re ok with this, but you may change your preferences at our Cookie Centre.

Please read our Privacy Policy.

News in your inbox

For Finextra’s free daily newsletter, breaking news and flashes and weekly job board.

Sign Up

Channels

Group

External | what does this mean?

This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.

Non-fungible tokens (NFTs) have been trending as a lucrative investment option for some time. Many artistic and creative items are now selling at exotic prices, fetching millions of dollars for small creators, artisans, and artists. But are all these hypes and buzzes justified for this trending investment option?

From fantasy games to digital artworks to self-created music videos and too many others, they are selling like hot cakes against NFTs. While the buzz around NFT is growing to generate serious interest among investors and content creators, it is time to decide the opportunities behind this investment option.

What Is a Non-fungible token (NFT)?

Non-fungible tokens (NFTs) refer to a digital asset representing the transaction value of various items such as game characters and in-game attributes, artworks, music, and videos. These items represented by the tokens can be sold and purchased by using cryptocurrencies. Both cryptocurrency and NFT are run by the same decentralized database technology called Blockchain.

NFTs come with unique identification codes, and this tokenization of the digital creations and assets results in scarcity of availability. This is a reason why NFTs, unlike the other non-tokenized digital assets, do not ensure plenty of supply. While other digital contents and assets continue to crowd the market with inexhaustible supply, NFTs are scarce and hard to access.

The question is, while all these digital items are available for absolutely free, why will people spend millions on them? Well, this is because, for the first time, these digital assets can be owned by paying the price. Every NFT representing an item comes loaded with inbuilt authentication referring to its ownership by a particular individual. The hyper-popularity and the soaring value of NFTs result from the fact that the ownership fetches more value than the items themselves.  

How do the NFTs Create Revenue Opportunities for Creators?

NFTs, just like cryptocurrencies, rely on decentralized blockchain database technology for recording the ownership status and transaction data. NFTs can represent both tangible as well as intangible items ranging from game characters, game skins, game assets, music, digital artworks, videos, collectibles, virtual characters, GIFs to designer fashion items, designer sneakers, rare accessories to almost anything that is not sold as a mass-market product.

Even digital content such as Tweets that gained a unique value started to be sold as NFTs. NFTs are just like cherished possessions on the collector’s shelf, and the only difference is that they are stored and protected for ownership with digital tokens powered by Blockchain distributed ledger. For example, if you are looking for an app development consultant in the USA for your next game project, you can find that your preferred consultant owns several NFTs for unique game skins and characters. Since every NFT can have unique ownership at a given time, the company can show interest in buying some of your game characters, creating a separate revenue stream for you.

NFTs create an awesome opportunity for content creators and digital asset makers to monetize their creations and establish their branding through non-fungible ownership status. Thanks to NFTs, instead of relying on middlemen or agencies such as auction companies, art galleries, or merchants, content creators and artists can sell their items straight to the consumers, fetching higher prices and recurrent payouts from every future sale of the NFTs.

A lot of strengths and a few weaknesses make NFT a great Investment Option

We have already seen even the tweets of Twitter founder Mike Dorsey fetching millions for his first-ever tweet tokenized by NFT. Every day, there is news of content creators fetching millions for their artworks through NFT. The NFT trend is growing from loud to louder.

But NFTs have their darker sides as well. While it unveiled great investment opportunities in digital content, art, and collectibles creating a win-win situation for the creators, artists, investors, and collectors, one must have a clear understanding of the drawbacks of NFTs as well.

Strengths

  • Compared to physical artworks and collectibles, digital artworks, content, and collectibles have always been considered cheap and easily available. NFT changed this perception and opened opportunities for digital creators to earn better revenues.
  • Through NFTs, digital asset creators can easily reach a far wider audience.
  • Because of the scarcity created through tokenization through NFT, digital artworks and contents become more coveted and sought after, resulting in higher demand.
  • NFTs powered by the distributed database with strong encryption ensure optimum security for all transactions and are completely safe from data tampering and fraud.
  • NFTs fetch good prices for the content creators, and for every subsequent transfer of hands or transactions, the original creator is paid a certain percentage of the transaction value.
  • NFTs unlock the opportunities of direct marketing to collectors instead of relying on galleries and auction houses, resulting in better value sharing between creators and buyers.

Weaknesses

  • NFTs need huge amounts of computing, resulting in great energy consumption, which is derogatory for the environment.
  • NFTs as static assets remain idle without transaction and do not produce revenues on their own. This, in the long run, can diminish the market value of NFTs significantly.
  • It takes significant resources to create and sell NFTs, which can sometimes eat up their revenue prospect.

So, despite a few weaknesses bordering on environmental concerns and market uncertainty, NFTs offer a lucrative investment option for all parties. Most importantly, for the first time, under-appreciated and undervalued digital content creators and digital artists have found an opportunity to turn their creations into revenue-generating items. The emergence of NFT opened up a new ecosystem of selling and buying digital content.  

On A Final Note

After going through the reasoning clarified above, you no longer can consider NFT a big bubble. For many years from now, NFT will thrive as a new way of digital content marketing, encouraging digital artists and content creators to opt for revenue-generating tokenization. The ecosystem is still new and will likely go through many twists and turns with the evolving market demands and challenges.

In the meantime, content creators have to focus on generating more value to fetch bigger revenues, and marketers need to get versed with this new decentralized ecosystem where creators and buyers remain in command.

Channels

Group

External | what does this mean?

This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.

News in your inbox

For Finextra’s free daily newsletter, breaking news and flashes and weekly job board.

Sign Up

Leave a Reply

Your email address will not be published.