Many onlookers believe that investing in non-fungible tokens (NFTs) remains an alien concept. Even so, there are many reasons as to why someone would invest in digital pixels on a blockchain. Therefore, it is plausible to assume the industry will continue to build momentum, despite some obvious risks associated with this new industry.
Investing In NFTs Makes Sense
In the current non-fungible token landscape, most people assume the investment occurs from a speculative mindset. While many people try to buy NFTs and flip them quickly for a profit, there are multiple valid reasons why anyone would buy a digital asset they cannot hold physically. The first generation of NFTs revolved around profile picture collections, which fueled speculation. However, the industry has much more to offer today.
One upside to the profile picture collections is how they can help users establish themselves in the NFT space. More specifically, one’s profile picture becomes their brand. Once they sell the corresponding NFT, they will have to change their profile picture, which doesn’t always make sense to people. Every non-fungible token is unique, allowing users to stand out among other investors and enthusiasts.
Another contributing factor is how wealthy people have spent money over the past decade or so. Spending large amounts of money on something that seems of little value to the mainstream is not an exception. Why buy a rare bottle of wine worth $10,000 or more if you can’t drink it? The same applies to NFTs, as anyone can right-click the image and save it. However, spending vast amounts on rare and unique items has become the norm among the wealthy and will continue to be for some time. As a result, NFTs are a status symbol in 2022.
It is equally worth remembering NFTs represent the underpinning technology and ideology. Providing true ownership of digital goods has not been possible for long, yet it creates many new opportunities and use cases. Even though setting up a compatible wallet as a novice user is a bit tricky, it is not something one needs to do multiple times either.
Unlocking New Utility
An extra dimension found in NFTs is how they provide a bridge to the real world. More specifically, creators do not just create digital art, but they can provide asset holders with real-world experiences. For example, an authenticated celebrity NFT can provide a Zoom call with your favorite celebrity, automatically enter you in concert ticket giveaways, etc.
The unique properties of non-fungible tokens – every NFT is a unique asset – unlock financial potential beyond speculation and trading. In decentralized finance, NFTs can be used as collateral for lending, borrowing, staking – to earn rewards – and more. They can become tools to create a passive revenue stream, although the value of those rewards may fluctuate wildly.
As more renowned artists, videographers, filmmakers, and celebrities get involved in NFTs, the industry gains much more legitimacy. Works by an artist are unique, and only one copy of each can exist. It introduces a level of scarcity that can prove appealing to collectors, but it is also a way for artists to explore a new paradigm. Moreover, artists, celebrities, and other creators can introduce any use case or utility to these NFTs they see fit.
Risks Still Persist
As with any new industry, novice users must avoid crucial pitfalls when dealing with NFTs. The first business order is not to take advice from strangers on the internet, as everyone claims to be an expert on non-fungible tokens these days. There is tremendous information to be found on social media, but conducting research oneself remains paramount in this ever-changing industry.
A second potential pitfall is the many shady NFT marketplaces that exist. Again, using reliable and trustworthy platforms will save users many headaches. NFT marketplaces like OpenSea and Rarible are renowned and provide access to nearly all prominent collections. While new platforms come to market regularly, it is always best to be more hesitant and protect your collection and investment above everything else.
NFT enthusiasts looking to tap into extra utility for their NFTs – particularly in decentralized finance – will need to use the right tools. The Drops.io platform helps everyone get more value from their NFT and DeFi assets to earn passive returns through lending. Additionally, users can borrow against these tokens to reduce the opportunity cost of holding governance tokens or other liquidity. Additionally, using NFTs as collateral for loans is an exciting opportunity to boost global financial inclusion.
Finding these trusted and reliable service providers confirms non-fungible tokens are about much more than just digital artwork or profile pictures for social media. Decentralized technology has created an alternative financial ecosystem and allows artists to mint assets with real-world utility and experiences. There is much to be excited about in this industry, even if it might not make sense to everyone just yet.