Non-Fungible Tokens, or NFTs, are a tokens or digital representation of real-world assets on a blockchain. They are unique and valuable, and now extremely popular.
If you felt like you finally just got a handle on cryptocurrency only to be immediately left in the dust understanding non-fungible tokens, you’re not alone. NFTs are the latest in blockchain asset storage, and investors are flocking to invest.
NFTs are unique and have value because of their uniqueness. They typically represent a physical asset, like a piece of art or land, but can also be a unique digital asset – like the very first tweet which is worth $2.5 million.
Non-fungible essentially means “non-equivalent”. Though they use blockchain technology, NFTs can’t be traded or exchanged like cryptocurrency. Every Bitcoin is equal to one Bitcoin because cryptocurrency is fungible, but every NFT is unique and irreplaceable.
NFTs can be used to represent real-world items, including things like art and real estate. Because these cannot be faked, there is no question about who the rightful owner is. This also allows NFTs to remove the traditional intermediaries when buying and selling these assets.
NFTs contain all the details of ownership and history of transactions in the blockchain. The metadata can contain anything you want it to: artists can digitally sign their work, goods can be marked as fair trade, and so on. Furthermore, the technology allows for multiple owners, so more than one person can own a plot of land or a piece of art.
Non-Fungible Tokens Art
Most of the NFT market is currently in collectibles, namely art.
The NFT of this digital work of Trump lying facedown in the grass by Beeple recently sold for a cool $6.6 million, and it’s no wonder: it’s mesmerizing.
NFTs are particularly revolutionary in the art world, and there is talk that they might do away with traditional art markets entirely.
How to Buy Non-Fungible Tokens
There are a few different ways to buy NFTs, depending on exactly what you’re looking for.
In order to buy NFTs, you’ll need a cryptocurrency wallet, which means you should already be invested in some Bitcoin and other digital currencies.
If you don’t currently own any crypto, now is the time to open an account with Coinsquare and get started. Coinsquare will let you send CAD or USD directly to the platform via eTransfer from your bank account. You can then purchase Bitcoin, Ethereum, and many other cryptocurrencies depending on what you want to invest in.
Here are some NFT marketplaces where you can buy and sell NFTs:
You’ll see the prices of NFTs typically listed in BTC or ETH. If it doesn’t display the value in your home currency, make sure you do the conversion to CAD or USD so you know exactly how much you’re paying!
Are NFTs bad for the environment?
We tend to get caught up in the excitement of blockchain technology and forget about the carbon footprint. But if you hated the carbon footprint of cryptocurrency, you’ll be even more upset to learn NFTs are much much worse.
NFTs are extremely bad for the environment. Creating a token requires a lot of computing power, and this computing power comes from energy that we extract from petroleum and oil. But it doesn’t stop there: energy is also used in bidding, sale, and transfer of ownership.
When one researcher did the math, it turns out the power used to create an average NFT was enough to power a single-person home for an entire month or fly for two hours.
The negative environmental impact is starting to turn many people off of non-fungible tokens.
Should I be investing in NFTs?
Whether or not you want to add NFTs to your portfolio is up to you! It’s certainly fun to get into a new speculative asset, but it’s really hard to know what your return will be. You could make money, but you could also lose all of it too.
NFT art is particularly beautiful and interesting, so you may want to invest because you appreciate the art and want to own it simply for that reason. And why not? Art has always been important and this is simply its latest form.
If you’re looking to make a quick buck, realize that you could get burned. If you’re not familiar with the digital art world, artists, NFTs or cryptocurrency, it’s easy to make a mistake with what you’re buying. As always, your money is best left investing in the stock market, but you’re definitely welcome to make speculative investments if you have the cash to spare.