Should you invest in NFTs?

I have been wanting to write about NFTs for a while now and I am going to try and explain it in the simplest terms possible so as to not confuse myself as well while writing this article as the blockchain, crypto, and NFTs in general could get a bit tricky to wrap your head around at times

What are NFTs?

So what are NFTs and how do they work?

Well an NFT is a Non Fungible Token meaning it is something that can’t be replaced with something else, it is unique in its own form. Here is an example to make this as easy to understand as possible.

The Mona Lisa is a very famous painting that was created by Leonardo da Vinci. Since the year 1804, it has been part of the Louvre Museum in Paris. As of 2020 the painting Mona Lisa was valued at around $860 million. This painting is worth a lot of money as it is unique along with the fact that Leonardo da Vinci was the artist who painted it.

But how is this related to NFTs?

I bet you have seen many Mona Lisa paintings being sold online or even in art shops but does it mean it is the real Mona Lisa painting? Well of course its not

The people who purchase these Mona Lisa paintings do know that they are purchasing a similar but not exact painting. As a matter of fact, my aunt has one in her living room. It is so huge and seems so real but of course, it isn't and whoever will see that image in the living room will know that it isn't the real painting without a doubt, but because of her love for art, she decided to have a copy of that image in her living room.

Take this concept I just explained and digitalize it. What you get is what is exactly is going on with NFTs. Let's say the Mona Lisa was created in the year 2022 on a very famous artist's iPad and they decided to upload that image for sale on Opensea or Rarible(NFT marketplaces) then that is exactly what an NFT is. Though in this sense an NFT could be a video, image, audio, or literally anything that can be sold online and will have the realization of ownership.

NFTs exist on the blockchain.

Well well, here we are another weird complex word.

Well, it really isn't.

The blockchain is a system that records the full history of transactions or information from the very first one ever made or recorded and provides all this information with full transparency to the public while being difficult to change or hack.

So all those images and short clips that exist in the NFT marketplaces exist on the blockchain. This is to be able to verify and prove who is the owner of a particular token digitally. If you want you can head to Opensea and click on an NFT and scroll all the way down to a section that says “Item Activity” and click on the date of any activity you want to see and it will redirect you to the Etherscan which will show you the transaction details of that particular item on that particular date. But the good thing is that the buyer/owner/party involved can’t be identified as the only thing that is visible is their Ethereum wallet address and not their name.

How do you buy NFT’s

Well, to buy an NFT you will need a digital wallet. This wallet will hold the acceptable exchange to buy NFTs which most of the time will be Ethereum, but at the moment I see a lot more digital currencies having their own ecosystem of NFTs that could be only purchased by their digital currency such as Tezos.

Once you have a wallet let's take the most famous one(MetaMask) you then have to fund it by buying Ethereum on crypto platforms such as Coinbase and sending that crypto to your MetaMask. After this, you can then log in to the NFT marketplaces using your MetaMask. Once this is done all you have to do is make a choice out of millions of NFTs out there. Once you have purchased something on the marketplace the ownership will transfer from the seller to your wallet address.

Remember in the NFT world your digital wallet is everything, so keep it safe.

Now here comes the big question

Should you invest in NFTs?

Well, this part is not going to be any sort of professional investment advice, all I am doing here is giving my opinions based on what I have seen, experienced as well as researched deeply about.

I am going to start right off by saying I don't invest in NFTs and if you don't too it is fine don't feel pressured about it as many people do right now. I have my reasons why I don't really invest in NFTs and I will explain them below. But before we get into it, there is something to note. In this article, everything I will explain will be based on NFT collectible art such as The Bored Ape Yacht Club and many more as this is the most dominant form of NFTs at the moment.

1. High prices

Unless you have been following specific NFT creators for a while on social media and have been super active on their discord to the point you get added to their whitelist (A list of people who have shown active participation in the community and they get offers by either buying the NFT collections at a discounted price or pre-release) you won't easily or affordably get your hands on the NFT collection.

I am an average man living in the United Kingdom and I can't justify spending more than £200 on art. And hey I mean proper art that I can physically hold not digital. I totally do understand if someone is into art then of course their views towards this are different but I am just saying this from my perspective.

Most of the time you will see NFT collections being released and getting sold out in just a couple of hours. And the people who profit the most are the ones who will buy these NFTs when they are initially released and resell them at insane prices to more speculators who will buy them in the hopes that they will make even more money. I have seen people buy. NFTs for $2000 and sell them for $35,000 and you will just be sitting there thinking how can someone spend an insane amount of money on a digital image (a jpeg).

Well that's where we come into the second reason why I am personally not investing in NFT’s

2. A massive speculative market

Here is how the market goes; I buy an NFT collectible or art at a cheaper price with hopes that I will sell the same NFT to someone else but at probably twice or even quadruple the amount I paid for it. So when you look at such a market carefully you realize one thing. It is filled with people who want to make a quick buck and cash out. I could say maybe only 10% percent of the people in this market really care about the art.

What does this tell us? This shows that this could be a wave that might come and go. But don't get me wrong NFTs may become the next biggest thing just as how the internet was back in the days but the thing is if you really compare the internet and NFTs, the internet had way more use cases. The internet opened doors for people to conduct online businesses, more ways to connect with people around the world, access information freely and so forth but what does an NFT offer? An image that you could probably sell for a higher price(just talking about the art side of the NFT here).

The point here is that you might buy an NFT for a large sum of money and you might end up with it not even being able to resell at the end of the day cause one thing you need to know is that NFTs are carried by the massive power of hype and marketing. Once all this dies off depending on the time you bought the NFT you are most likely to fall with it by being stuck with a high-priced digital image that might not really benefit you based on the reasons why you even bought it in the first place.

3. Use Case

Most people might argue at this point that NFTs have many use cases such as acting as a social gathering pass whereby you can connect with different people who own a piece of the same NFT collection, some people also claim that it will represent ownership for digital real estate as well as physical real estate by connecting an NFT directly with ownership documents of a house or virtual land. But the truth is among all the people who are involved in the buying and selling of NFTs how many of them do you really think care about the use case of NFTs? Of course very few people. Most people will buy the NFTs for the sole purpose of reselling at a profit.

So I personally decided to not invest in it because I don't see why I would need an NFT at the moment and I wouldn't be ready to hop on a money-making opportunity by taking a risk that I have completely no control off.

4. Scam Cases

In the past few months, there have been a lot of reports of people losing their NFTs from their wallets all over Twitter. How does this happen? I have no idea. But one thing I can tell you for sure is that the people behind all this fraud definitely get smarter by the day, and as well all know the digital world is a very unsafe place.

Just think about it. The probability of a person breaking into your house and stealing your valuables is very low depending on the neighborhood you live in, but that's not the case online. Hackers find ways every single day to beat security systems and guess what they don't even need to come close to your door they can erase your bank account without even knowing what your sitting room or your safe looks like.

Finally, I would like to say that before you invest your money into NFTs please be very careful. Do your research and make sure you follow every safety measure while depositing huge amounts of money into these wallets.

Dont invest in NFTs just because you see someone doing it and making money from it, make sure you properly assess your decisions first.

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