What is NFT stock

14.10.2021 16 2834
What is NFT stock

What actually is NFT?

What for are NFTs created?

NFTs and art

Is investing in NFTs worth it?

NFT and taxes

Where and how to buy NFTs

Frequently Asked Questions

 

Even if your interests are far away from the modern digital market, still the chances are that recently you have heard something about NFT (or non-fungible tokens NFTs) stocks because they had really skyrocketed last year.  Some people say that it is a new scam, and soon all the people who have made investments into NFT stocks will lose their money, while others argue that this market has a bright future ahead, so everyone has to buy some NFT stocks.

 

In this article, we will try to navigate you in this newly discovered stock market, and probably we will also have a conclusion on whether NFTs are worth investing in.

 

What actually is NFT?

Let us start from some theory because it is always better to know exactly what we are talking about and avoid possible misunderstandings.

So, NFT is a digital asset based on digital art, and that can exist in various forms such as:

 

  • GIF file
  • Funny tweet
  • Video clip from YouTube
  • Digital artwork (a meme)
  • in-game items

 

In other words, it can be any object of modern art in the digital form. These digital objects (NFTs) are usually bought and sold online, most of the time using cryptocurrencies.  Moreover, very often, NFTs are created with the same software that is used for the creation and encryption of cryptocurrencies.

 

What is more interesting about NFTs is the fact that each NFT is an exclusive digital asset, one of a kind. This is unusual to the modern digital economy, where everything can be found in unlimited supply, and that is one of the reasons for their great price.

 

Here, for a better understanding of the NFT, it would be better to have some examples, and we probably can not find a better example than one of the most expensive pieces of NFT, which were sold at Christie's for an astonishing 69 million USD. This object of digital art is called "EVERYDAYS: The First 5000 Days" and consists of 5.000 drawings created by Mike Winklemann, who is also known as a digital artist Beeple.

 

Factual information

The interesting fact about this digital art is that unlike a usual piece of art, which can be stored somewhere in the basement and no one will see it, this work can be viewed by anyone on the internet. Moreover, anyone can download it or take a screenshot. So, why would someone pay 69 million American dollars for something that can be obtained absolutely for free?

The answer is pretty simple and can be found in the core of NFT technologies. So, when you buy some digital asset, you acquire not only an image but "an original image", with all necessary authentication that can be used as proof of ownership. So, that is not the quality of the image or digital art that made the NFT market skyrocket, but the fact that it has only one owner and the NFT's unique data makes up most of the value. In other words, we can say that you are buying the digital signature that proves the authenticity of the data. Also, it means that the NFT market is almost endless because we can create NFTs from every picture on the internet.  

 

This authentication is built on proof of work blockchain; by the way, the same software is used in Bitcoin, Etherum, and other cryptocurrencies. And the main aim of this blockchain technology is to create a record of all transactions which were done with this digital asset. Furthermore, most NFTs use the ethereum platform. Also, we can see the growing number of NFTs that use polcadot or Cardano.

 

Usually, this ethereum-based blockchain network contains unique identifying codes, which records transactions, and in which we can find personal data of the owner of the digital art, and moreover the list of all owners through all the period of existence of this NFT and also all NFT's metadata.

 

Interim highlights

To sum it up, we can say that an NFT is a unique digital asset in the form of digital art (it can be a photo, tweet, or even sports highlights) that can not be replaced with another asset (it explains why these tokens are non-fungible). And this is the main difference between NFT and cryptocurrencies because each crypto, whether it is ethereum or bitcoin, is identical, and for example, one bitcoin can be easily replaced with another bitcoin without any loss of value.

 

The same logic does not work with NFTs, because each NFT can not be identical to another not only because it has different digital code but because this is how artworks, one jack Dorsey's tweet would not cost the same as another jack Dorsey's tweet because it would not be the first tweet in history and as a result, the public perceives them differently. Therefore they have a different value on the market.

 

Is it possible to copy an NFT?

So, as we know the most of the value of an NFT comes from its authenticity, and to avoid the loss of authenticity and, as a consequence, a loss of value, non-fungible tokens use blockchain technology. However, the NFTs platform permits the creator of original NFTs to create multiple copies of an art object, and moreover, each of them would be considered as original.

 

Nevertheless, as it happens with reproductions of usual artworks, every copy of NFT indeed would be considered original, but the price of each copy would be lower than it could be if only one copy of digital art existed.

Also, it is an interesting fact that some NFTs marketplaces allow digital artists to charge royalty each time when a non-fungible token is solid or copied. However, this is not a widely accepted practice.

 

What for are NFTs created?

Now we know what these digital assets called NFT are all about and how they work. However, another question remains unclear, and this question is, for what purpose NFTs exist?

 

In simple words, the main purpose of the NFTs is to give an instrument to the creators of digital art to monetize their work. Moreover, NFTs afford artists to sell their works directly without auction houses and galleries. Therefore they can receive more profit. Additionally, they can use the royalty mechanism which we have discussed above.

 

Furthermore, not only NFT creators can raise money; in fact, anyone can do it if he or she has successfully obtained ownership over some NFT. Because the market for NFTs works is like the market for conventional art, and there is a very high chance that in the future, objects of digital art will gain price. So, most of the people who buy and sell NFTs are not doing it for aesthetic satisfaction or to store them like physical collector's items, but for selling it to the highest bidder in the future, and by this make some good money. So, this technology allows investors to acquire ownership and transfer tokens.

 

Moreover, unlike with usual art, blockchain technology brings zero risks of fraud or theft.

 

NFTs and art

From the point of view of some art critics, digital art is not art in the classic understanding of this word. However, most people, especially those people who, on the wave of the NFT craze, pay big money for non-fungible tokens, do consider NFTs to be art, obviously very modern art, but still.  But even if we recognize NFTs as art, we still have to address a few issues that are strongly connected to the nature of the NFT stocks. Firstly, it is the fact that an NFT collection posted online can be easily shared, viewed, or copied by anyone, which does not add a lot to the sense of ownership that people have when they pose, for example, an actual oil painting.

 

Nevertheless, despite this issue, the willingness of people to capitalize on their digital arts and on the speculations on the stock market allows the NFTs stock market to flourish and digital artists to create new art. 

 

Is investing in NFTs worth it?

So, now let's discuss probably the most interesting issue: whether you have to spend your money on digital assets or it is better to avoid NFT stocks at all costs.

 

The answer to this question is not easy and can depend on many different issues. If you asked someone a year ago about buying NFT stocks for your investment portfolio, they would say that you are either nuts or they just did not hear about such things as NFTs stocks. But now, things have changed, and even old-fashioned bosses and analysts from Wall street are considering investing in NFT. Moreover, the vast invasion of investment funds and celebrities on the NFTs market was the main reason for stock prices and total value to skyrocket.

 

However, even despite the fact that now prices for NFTs are above the roof and it seems like it is a no-brainer, and everyone should invest, there is a concern that like it happened with some crypto NFT craze will be over and NFTs in not far future will lose most of their value and people who invested in it will be really disappointed. 

 

In conclusion to this section, we can only say that, indeed nowadays, non-fungible tokens may seem to be a good short-term investment. However, their long-term future remains to be uncovered, and considering the fact that NFTs are prone to all issues that typically influence stock prices and make them unstable, we can not advise you to invest huge money into NFT stocks.

 

Moreover, in the current situation, when people like Elon Musk are buying these stocks, NFTs can be regarded as luxury products, and they have a lot of their own weaknesses.  Furthermore, we have to remember that the price for these digital assets, especially if they are luxurious, is mainly driven by demand, so if people stop believing in the future of the NFT, the price will certainly collapse.

 

Think about it

However, not all economic indicators are bad, so it can be a good idea to invest a moderate amount of money and to buy some unique NFT. Furthermore, NFTs can be a great instrument of diversification of financial portfolios for big investors who have money to spare and risk.

 

Also, we should add that, like with every investment, the NFTs market is unpredictable, and everything can happen, so you have to carefully assess all the risks before investing. And anyway, even if you are not planning to become one of the investors in the market of non-fungible tokens, it is still worth keeping your eye on the development of non-fungible tokens (NFTs).

 

NFT and taxes

Another important question that worries people who want to invest in NFT stocks is whether or not non-fungible tokens can be taxed. And sadly, the answer is yes. It happens because the IRS considers NFT to be collectibles like a usual stock, and therefore, like everything on the stock market, it is subject to capital gains tax. Moreover, the tax relief act has lowered the maximum tax level for most assets by 20%. However, NFTs do not receive such treatment.

 

Therefore, you have to pay a higher collectibles tax rate of 28% for NFT work and NFT transactions. So, before any NFT transactions, you have to talk to a tax adviser.

 

Where and how to buy NFTs

So, if you decide to take a risk, invest some money, and become a new owner of some NFTs asset, this section is for you. Firstly, before buying actual NFT, you have to possess a few things. The main of them would be a digital wallet that can store different crypto and NFTs. Secondly, before purchasing NFTs, you must find some cryptocurrencies. Usually, it is Ethereum, but it can be Bitcoin or something else, depending on the provider. Also, it very rarely happens when NFTs are sold for the usual dollars because content creators prefer to make a profit in crypto.   

 

To buy crypto is not a difficult task at all; there are plenty of places on the internet such as eToro, Coinbase, and Paypal where you can buy crypto and afterward relocate it to your digital wallet. Before buying crypto on a platform, do not forget to check their fees because most of them charge at least 1% for any transactions with cryptocurrencies.

 

When you have acquired ownership over some crypto, you can go to an NFTs selling platform and buy as many NFTs as you want. Like with crypto platforms, there are already a plethora of different sites where you can buy a non-fungible token. The easiest of them to get started with is OpenSea.io. To start trading NFTs on this platform, you just need to create an account. The platform describes itself as a place where exclusive and rare NFTs work can be found. So, at this NFT marketplace, you can find inexpensive art of an unknown digital artist for a fair price.

 

The next marketplace that is worth attention is Rarible, and this platform is also good for starters from both sides; whether you want to acquire ownership over some NFTs or you are an unrecognized creator, this platform is for you. Rarible is a very open and very democratic platform with moderate fees and community rules.

 

A few more options

The next platform is called Foundation, and this is far more expensive but at the same time a more respectable marketplace. To enter this platform, a digital artist must get enough upvotes or receive an invitation from creators who are already trading their NFTs on the platform. Moreover, after receiving an invitation, artists should pay for using this platform. As a result of these requirements, this platform is selling the most expensive NFTs on the market; for example, the famous Nyan cat NFT was bought on this platform.

 

Actually, there are many platforms where you can buy and sell NFTs. However, you have to be careful when choosing a platform because many artists and investors have fallen victim to numerous frauds on some NFTs platforms.

 

Also, platforms have different attitudes to the verification process, and some of them, like Rarible, do not require any verification from both creators and investors, while more well-established platforms such as Foundation have very complicated and secured verification processes.

 

Frequently Asked Questions

 

What does NFT mean in trading?

 

So, in trading, NFT stands for a non-fungible token, and it means that there is only one of a kind token that has unique digital authenticity and to which exclusive ownership rights are attached. The NFT is exclusive, which means that it can not be replaced, which creates most NFTs value. This is very contrary to the cryptocurrencies that are built on the same blockchain technology with built-in authentication. However, one bitcoin is fungible and can be replaced with another bitcoin without any losses in value. While NFTs, as we have stressed above, are non-fungible and intangible items.

 

Can I invest in NFT?

Basically speaking, anyone can buy an asset and acquire ownership over NFTs; there is no rule deciding who can and who can not buy an NFT. Even a company can do it. The only requirement is to have enough money and a digital wallet with crypto. However, a more important issue is not whether or not someone can become a new owner of NFTs, but whether or not it is worth it, and here we can find different opinions on it. Opinions are different because NFT as an asset has a lot of weak places, and no one knows whether this asset will become useless and lose all of its value in the near future. Some even consider NFTs to be fraud.

 

Yet, not everything around NFTs is bad or suspicious, and some data indicate that at least in the near future, this market, as well as the value of each asset, will continue to grow. So, if you have a lot of free money and a strong sense of financial gains, you can try it out and acquire ownership over some NFT because the chances are that this object will increase its value. 

 

What are NFT coins?

NFT coins are analogous to the cryptocurrencies, which are also built on blockchain technology and which are linked to NFT projects and can act like trading cards in NFT related operations. Also, the price for the coin would be higher if the total value of the NFT project is growing. A good example of an NFT coin would be FEVR which is directly linked to the RealFevr NFT project and can be used on their platform in order to acquire ownership over their art, which is football highlights and moments. Also, some NFT coins can be connected to the NFT games. At this moment, the best NFT coins to buy are Theta, Tezos, AXS, Chiliz, and Flow.   

 

What is a good NFT to buy?

NАЕs are around us for not so long time, yet there are already a lot of them, so if you have decided to buy one, the issue of choosing the right one may seem to be daunting.

 

But still, there are several NFT that can be your first choice.

 

  • The first one is CryptoPunks, which was created in 2017 and was the first NFT project run on the ethereum platform. The art, in this case, if the so-called Punks, the final number of these Punks is limited to 10.000, which means that supply is not limitless, and at some point, we will see digital scarcity. Moreover, usual human Punks are not so expensive while rare, like an alien Punk can be bought for the price as high as 8 million dollars.
  • The second NFT which is definitely worth attention is Axies. This NFT is based on the blockchain game Axie Infinity, and one unit cost not so expensive, around 200 USD.
  • Another interesting NFT is Bored Ape Yacht Club; in its structure, it is very similar to CryptoPunks. The art that is sold here is pictures that are commonly used as avatars. One picture can be bought at the price of 6 ETH; what is more important is that a few months ago, the price was around 1 ETH, so these NFT s are pretty fast-growing, and you should consider adding them to the portfolio.   
  • The fourth NFT that you ought to consider buying is Meebits, and they come from the same creator who made CryptoPunks and basically works on the same model, with one huge difference. Meebits are three-dimensional characters that can be used in blockchain programs. Currently, those objects cost around 2ETH.
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