Why NFTs Are So Attractive – And How Anyone Can Start Learning For Free
NFTs are all the rage these days. At first glance, they may seem like a fun pandemic distraction, a Twitter trend inspiring collectors to change their profile photos into colorful little avatars, like the $ 280,000 Serena Williams CryptoPunk pin that Alexis Ohanian wore at the Met Gala.
Wait – a pixelated cartoon worth $ 280,000? Perhaps the NFTs are worth digging into.
As more financial advisers learn, DFTs are starting to spread, even among non-celebrities. And a client may soon be asking you how to include NFTs in their portfolio.
This column originally appeared in Crypto for advisors, CoinDesk’s new weekly newsletter defining crypto, digital assets, and the future of finance. register here to receive it every Thursday.
While the jargon used by the NFT community may turn heads, there is something about these digital works of art. The technology itself isn’t too hard to grasp (at least not conceptually), but what’s really exciting is the potential this technology brings – and where it could take us in the future.
So what exactly is an NFT? And how will you advise customers when considering whether to buy digital tokens? In the future, I will help demystify this new form of digital asset.
What are NFTs – and will they live up to the hype?
The acronym “NFT” stands for non-fungible token. It’s an elegant way of saying irreplaceable or not interchangeable. Dollar bills, for example, are fungible. A dollar bill is the same as the next dollar bill. As long as there is no counterfeit, a cashier will accept any dollars you have in your wallet. It doesn’t matter which one you choose to pay with.
Most cryptocurrencies are also fungible. A bitcoin, for example, is equal to a bitcoin, is equal to a bitcoin. The actual file transferred does not affect its value even if there is a finite number of bitcoins.
Non-fungible tokens, however, are not fungible. Struck on the blockchain, these digital files represent a unique and therefore rare asset. These cute CryptoPunk cartoons may look alike, but the digital record stamped on the blockchain can verify who is which and, more importantly, who owns it. When ownership is transferred, the blockchain records this as well.
If you’re passionate about technology, it doesn’t take a lot of the imagination to figure out how this new technology opens up a world of possibilities that could change the way we register and transfer digital property. We already know how to send digital files like PDFs, JPGs, etc., but NFTs add a new layer of data validation.
There are even smart contracts, where a creator can code royalties into their NFT, so that every time the asset is sold in a secondary market again, they (and anyone else they want to write in the code ) continues to be paid. Compared to the ’90s, when any kid in the neighborhood could just burn a CD or upload their favorite songs to Napster, the NFT exchange on the blockchain creates a recording that is stored, as far as we can understand, in perpetuity. .
Finally, NFTs are not just about art, although this is the most popular context in which they are discussed at the moment. Technically, an NFT can be any type of file, says Jordan Lyall, product manager and co-founder of NFT Nifty’s marketplace.
“It’s almost just some kind of new file format,” he says. “Previously, Netflix would mail the movies, but when the technology got good enough, they started streaming. It’s a bit the same thing.
Now, NFT technology is winning over the arts community, but it’s just a jump, a jump, and a jump away from being used for ticketing, deeds of ownership – and maybe even for security ownership. financial, says Lyall.
“I can see that at one point the Nasdaq is running completely on a blockchain,” says Lyall, who started farming site NFT dontbuymeme.com before founding Nifty’s. Having experienced first-hand the kind of innovations that result from experimentation, he expects NFT technology to continue to snowball until it becomes ubiquitous.
But now we’re getting speculative (see how easily the excitement creeps in?). Let’s refocus and discuss where and how your clients can trade NFTs.
What is an NFT marketplace?
To buy and sell NFTs, your customers must first choose the marketplace and NFT portfolios of their choice.
Similar to Amazon or eBay, an NFT Marketplace is a platform where users can store, view, trade, and in some cases create (create) NFTs.
Users will need a funded crypto wallet compatible with the blockchain network used by the market in which they wish to buy or sell an NFT. MetaMask, for example, is a popular wallet running on the most popular blockchain platform, Ethereum. Markets that use Ethereum include OpenSea, Rarible, and SuperRare, to name a few.
Sometimes users can fund their wallet with US dollars through Automated Clearing House (ACH) transfers or other means. Nifty’s, for example, allows users to enter their credit card number and make transactions in USD, even if the money is tied to a cryptocurrency known as stablecoin, which is designed to have a value per USD. against the USD. (This is about making cryptocurrency exchanges more accessible to newcomers.) The currency used in each scenario and whether currencies are interchangeable depends on the platform.
As with any financial account, users will need to register and share personal identifying information, such as bank accounts and credit card numbers. There will be transaction and processing fees for making purchases, as with any type of online purchase. Users should use their discretion.
Why NFTs Are So Attractive
Simply put, people love collectibles. And thanks to the increasing accessibility of NFT marketplaces, the title of “collector” now applies to someone who trades free Space Jam tokens as well as to figures such as the pseudonym Whale Shark, who owns more than 220,000 digital works of art and consulted with Paris Hilton on how to enter the market.
As a financial advisor, your first priority is to ensure the long-term financial security of your clients. It can be helpful to think of NFTs the same way you would a rare stamp collection, for example, or an original signed manuscript of the great American novel. NFTs look a lot like the old-fashioned comic book collection, or baseball cards and Pokemon cards. Except, thanks to the blockchain, their true scarcity (and value) is much less speculative because we have an irrefutable record of every token.
Assuming your clients have a good amount of money invested for their retirement, a large emergency fund, and enough disposable income for them to experiment with NFTs, collecting can be a fun way. and innovative to feel part of the future.
But if someone isn’t in a position to invest money in speculative art – whether it’s a hundred dollars or a thousand dollars here and there – there are ways for your clients to dip their toes in the market. NFT for free.
How to get involved in NFTs without spending a dollar
“Check out Twitter,” Lyall says. And he’s right.
With fast scrolling through the feed for #NFT and #NFT, you can find artists, platforms, and companies discussing planned drops (releases), industry news, and more.
Lyall also suggests checking out projects like OpenSea, the biggest NFT marketplace, to learn more about well-known artists, exclusive collaborations, and how much your favorite NFTs cost. Keeping track of these developments doesn’t cost anything, but it does help you become a more sophisticated shopper when you’re ready to start collecting.
And don’t be put off by the more expensive NFTs, advises Lyall. Tokens from one of the very first NFT collections, CryptoPunks, for example, are currently priced extremely high, even though they were free when they were first ditched in 2017.
Instead, “find an artist who really resonates with you,” Lyall says. Notice an emerging designer whose work is not yet known or valued. Buy early when the price is low – it could pay off later. Most importantly, do it for fun, not for potential profit. This is the secret to Lyall’s success.
“There are dozens of artists every day who abandon collection projects. It’s so hard to decipher. What is good? What’s wrong ? What is interesting? ” he says.
The playlists featured on Nifty’s attempt to help newcomers answer these questions, offering curated collections for people to learn more, including categories like collectibles, animated art , photography and more.
At the end of the line
At best, NFTs mean a revolution. Stamped on the same blockchain as the cryptocurrency, this new technology helps track ownership and authenticity like never before. This will delight the ears of art collectors, curators and alternative investors interested in owning original digital images, music files and other forms of intellectual property.
But at worst, NFTs can seem exclusive, which is ironic given the battle cry of decentralized finance (DeFi) and the general sense of optimism in the NFT community. Many expect NFT technology to democratize digital ownership and empower the little guy, but while we wait for everyone to familiarize themselves with the new technology, encourage your customers to have fun without too many constraints.
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