Famous artists, celebrities and even sports teams are getting into crypto and has everyone asking what are NFTs? A few short years ago no one even considered the possibilities of ownership of digital art but now that it is here, everybody wants an NFT of their own!
In today’s review of the digital market, we take a closer look at NFT custody solutions and provide a guide for those wondering how do I buy NFTs. We want to challenge you to keep an open mind as we venture into the bizarre world of bored apes and crypto punks to see what the world of NFT custody solutions has to offer!
What are NFTs?
The odds of being asked what are NFTs are becoming ever more likely as celebrities including Snoop Dogg, Posta Malone, Jimmy Fallon and Paris Hilton share their newfound hobby in digital collectables with the world. So let us help to clarify what are NFTs so you have a clear answer if you are ever put on the spot. NFT stands for non-fungible tokens, NFTs can represent any unique digital asset. Traditional crypto assets such as Bitcoin are perfectly interchangeable one for the other and therefore can be considered fungible. A user should have no preference for a particular Bitcoin over another as they are the same in virtually every respect. Tokens can be created that represent unique digital property and this is where NFT cold wallet storage comes in.
Ownership of digital art collectables did not make as much sense before the ability of buying NFTs, this is in part because you had no way of proving your ownership. Even today, the notion of owning a digital image is controversial as anyone can have a screenshot of that exact image on their devices as well. However, when buying NFTs those transactions are recorded on the blockchain which is an immutable record so you can always refer to that record to prove you are the owner of the intellectual property that is that specific NFT. The addition of a digital asset smart-card could be the perfect solution as the private key cannot be hacked, however, most services only offer these options with cryptocurrencies.
The first NFTs were created on the Ethereum blockchain using the ERC-721 standard. Some of the first NFT incarnations were Ether Rocks, literally just an NFT collection of a static 2-d rock animation in various colors. Then there was Cryptokitties, an NFT collection game with goofy looking cats that could be bred to create new collectables with unique features. Cryptopunks is perhaps the most iconic NFT collectable with its 8-bit pixel art style. Cryptopunks and Bored Ape Yacht club are the two most popular and valuable NFT collectables. In the next section let us consider the features of a successful NFT project.
Features of successful NFT projects
There are literally thousands of NFT cold wallet projects across multiple blockchain platforms and naturally not all of these projects are successful. In fact, similar to the art industry, it is just a small minority of NFT projects that attain mainstream notoriety and that are ultimately considered valuable. Once NFT project key characteristics are identified as a winner, such as the inclusion of a hardware security module, it can skyrocket in value, and many people have become overnight millionaires simply for buying NFTs early before they became super valuable. So let us look at the factors that enable NFT collections such as CryptoPunks and Bored Apes to rise above the rest.
The First Mover advantage
First, is being first. The Eth Rocks are perhaps one the laziest examples of an NFT collection, literally just images of the same rock in various shades of gray or brown, yet, just because it is one of the original collectables from 2017 and perhaps in part due to its absurdity the floor price for this collection is now approximately $800,000. Many collectables stake their entire reputation on simply being the first on a particular blockchain and if NFTs are able to maintain cultural relevance these collectables will likely continue to accrue value with joint-custody crypto services.
Community
The second important feature of a successful NFT project is the community. What made Bored Apes and CryptoPunks so valuable beyond being one of the first major projects on Ethereum was that they had a community that proudly displayed their NFTs as their profile pictures on social media, which caught the attention of thousands. It soon became like an exclusive club that people wanted to be a part of. The community was strong however and realized that people would pay a lot to be a part of this exclusive community, and so it was that celebrities like Jimmy Fallon and Snoop Dogg bought Bored Apes, which only further increased the allure and desirability and therefore price of the other collectables in the set.
Utility
The third and final factor in the utility. We put this factor last, because many NFT projects do not have any stated utility beyond looking cool and they still become successful. However, when an NFT project does have a roadmap and factors that utility such as perks in an associated video game or community meetups and events or free airdrops in the future -these are features that generate interest in the collection and thereby stimulates demand for the project which should theoretically increase the value of the collectable. What makes NFT investing particularly difficult is that the second and third factors we highlight here are difficult to identify when the project is small. Many new projects over promise with talk of digital asset smart cards and under deliver, so be careful when buying NFTs. It is still the wild West out there.
Are NFTs safe?
The entire crypto space is considered a high risk investment vehicle, and NFTs are no exception, in fact, many would argue that NFTs are even riskier that traditional cryptocurrencies. Investments in NFTs can be very hit or miss. While cryptocurrencies generally promise some utility in their ecosystem for a token, thereby generating a demand for it, many NFTs do not have such utility. NFTs are certainly very hyped right now as it is a completely new thing that has celebrities and young people excited, but it could ultimately be just that – an overhyped fad. Should these cartoon images really be a long term store of value, most of them won’t be and identifying the few that will be is no easy task.
The other aspect to consider is that there are bad actors that are taking advantage of this trend by rugpulling investors. This is when creators of a project simply take off with investors’ money without delivering what they had promised. This is a very real and very sad problem within the space. Now just because there are bad apples does not mean the whole tree is rotten. There are genuinely fun and creative NFTs out there that build organic demand and have great communities and try to create true utility for their token with joint-custody crypto. Major sports teams such as Real Madrid and Manchester City have NFT projects and so do major brands like Nike and Gucci, this may be them finding new streams of revenue but it is also a very real way for fans to engage with brands that they love. So, are NFTs safe? It depends really, the private key cannot be hacked but we recommend you do thorough research and become acquainted with the space before jumping in and buying NFTs.
How to invest in NFTs
If you are wondering where to buy NFTs there are many options available to you. You could decide to directly invest into crypto collectable NFTs by buying NFTs from an NFT marketplace, of which there are many. Every blockchain has their own NFT marketplace, the most well known are OpenSea for Ethereum, Magic Eden for Solana NFTs or CNFT.io for Cardano and Binance NFT for, you guessed it, Binance NFTs. On these online marketplaces you can compare and contrast different projects and different collectables within a set. When buying NFTs people tend to choose collectables that in some way represent aspects of themselves, but a better strategy is to buy a more rare feature or something that others would want. You can check rarity on marketplaces like Opensea. By using these marketplaces you can also check the longevity of a project, which is useful in identifying scams, if something has an absurdly high price but has only been on the market for a week, this is likely to be a scam and you should steer clear.
If you have decided your answer to should I buy NFTs is ‘yes’ then let’s get to actually buying NFTs. At the NFT marketplace of your choice, choose the NFT you wish to purchase. Generally payments for the NFT is made in the native currency of the blockchain the transaction is stored on thus Eth for Ethereum, Ada for Cardano, Sol for Solana, etc. Therefore you the relevant wallet and deposit the appropriate amount into that wallet and then you can place a bid on the NFT. In the marketplace you can see the top and floor price for a collectable as well as the highest bid and the asking price. If you want to instantly purchase the NFT you can match the asking price of the owner, otherwise you can try to bid him down if other bids are not close to their asking price. There is generally some room for negotiation when it comes to buying NFTs.
The other way to invest in NFTs is by simply investing in the underlying infrastructure or blockchain that the NFT project is built on. This simply refers to crypto trading. You could buy Solana, buy Cardano or buy Ethereum, any of these smart contract platforms will be like an indirect investment into NFTs as they host the technology on their platforms. No need for taking on greater risk and buying NFTs, if you want exposure with less hassle you can just invest in one or a few of these protocols.
The Future of NFTs
While NFTs are primarily used for digital collectable art at this point, many believe that in the future real world assets will be tokenized and have their digital twin represented on the blockchain. Imagine a world in which property becomes a completely liquid asset that can have all contractual aspects recorded and traded on the block as though it were a stock. Now this may still be somewhat far fetched but some companies are looking to make it a reality. NFTs in gaming are sure be massive in the future as in game purchases are already a huge money maker for the gaming industry. Digital ownership of epic sports moments can also be sold by networks, imagine if you could purchase an iconic video clip of Michael Jordan dunking a basketball and receive some royalties everytime that footage is aired. All this and more is possible in the future with NFTs, however the longevity of the current digital collectable trend is uncertain but you can always check into the Vaultavo Newsroom for the latest developments. Be careful buying NFTs that may not have long term longevity or value.
Conclusion
In this article we covered the essentials of what are NFTs and buying NFTs. We hope you now have a better understanding of the technology, what it is used for currently and its potential in the future. The Vaultavo smart-card crypto solution could also provide the perfect platform for NFT custody in the near future.
If you are planning on buying NFTs, please do so safely by doing a lot of research on the project and checking that others have successfully completed a purchase. The future of NFTs is very exciting but also uncertain and we are excited to see where it goes from here. For more great smart-card crypto related articles, check out our Vaultavo content goldmine!
NFT FAQs
Where to buy NFTs?
You can buy NFTs at an NFT marketplace. Every blockchain has their own, and sometime even numerous, NFT marketplace(s). Ethereum has Opensea, Solana has Solsea, Cardano has CNFT.io, etc.
Are NFTs a scam?
The cryptocurrency space is risky in general. There are tens of thousands of projects and there are certainly many scams littered in the mix. NFTs are the same, for every sincere legitimate project you can also find a scam. Therefore it is very important that you diligently research any project before buying it. The longer a project has been around the more likely it is to be legitimate, you can also consult online forums to see what people say about a specific project although these too can be manipulated.
What are the Best NFTs?
This depends on what you like. If you like digital collectables, there are many things you can take into consideration. Like what do you subjectively believe is the best art in the space, or what is the best appreciating asset, or perhaps which NFTs have the most utility. That is one of the great things about the NFT space, is different people value different aspects of it and there is something for everyone to enjoy.