Are you familiar with NFTs? If not, this tip explains a little bit about what they are, why they seem so appealing and some things you should consider before purchasing any.
Helpful resources about NFTs:
Are you familiar with NFTs? If not, this tip explains a little bit about what they are, why they seem so appealing and some things you should consider before purchasing any.
- Helpful resources about NFTs:
- https://ethereum.org/en/nft/
- https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq
- https://www.forbes.com/advisor/investing/nft-non-fungible-token/
- https://www.investopedia.com/non-fungible-tokens-nft-5115211
- https://www.wsj.com/articles/bored-ape-nfts-so-expensive-11645709606
- Popular NFT marketplaces:
- https://opensea.io/
- https://rarible.com/
- https://foundation.app/
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Transcript:
Welcome to Money Tip Tuesday from the Making Money Personal podcast.
There’s so much buzz around the internet and in the press about NFTs.
You’ve probably read stories or watched videos of people buying some for millions of dollars. Even companies are hopping on the bandwagon to make and launch new collections every day.
If you’re not familiar with what they are, this tip can offer you more insight into these unusual assets.
So, for starters, let’s explain what the word NFT means.
NFT is an acronym that stands for Non-Fungible Token.
A quick search in Google defines fungible as something that’s “able to replace or be replaced by another identical item; mutually interchangeable.” Fungible assets can be exchanged for the same value – things like crypto coins and dollar bills are widely considered fungible.
Non-fungible means an asset is one of a kind. It’s not mutually interchangeable. It cannot be replaced or exchanged for something identical. Think of a piece of priceless art or real estate. These assets have an individuality that can’t be duplicated.
Historically, assets have been physical objects, something you can touch, or hold in your hand, but now, with NFTs, assets can go digital.
NFTs can be any file like a JPEG, PNG, an audio file, or video files.
You’ve probably seen some of the most popular collections floating around like the Bored Ape Yacht Club. The digital graphics show a bored looking ape in different themes and dressed in different outfits.
Well, believe it or not, one of these sold for $1.29 million.
If you explore the popular NFT marketplaces, you’ll find all kinds of other types of NFTs. Some are animated files where the characters move. Others are video clips, created or recorded. Some are even digital land plots for gaming platforms like Minecraft.
What’s so appealing about them? Who would spend millions of dollars on a digital file? Especially when you can easily right click the image and save it to your computer?
Well, the key lies in the technology behind NFTs. They run on the Ethereum network and use blockchain ledger technology which verifies the file is the original and not a copy. There is a lot more computer science explanation behind how this works, which we won’t cover here, but if you’re interested in learning more about blockchain technology, YouTube offers a plethora of videos to watch and you can read all kinds of online articles about it.
The gist of it is, NFTs provide a digital authentication record that you’re the NFT owner. Even though the image can be copied, your NFT contains data proving that you have the original.
Think of it as you would if you were collecting a piece of physical art. You can buy a copy of DaVinci’s Mona Lisa painting, but it’s not the same as owning the original piece.
The proof of ownership verified through the technology behind NFTs enables the file to be bought and sold like any physical asset would be. And this gets appealing to anyone interested in making money off selling certain types of assets.
The major appeal for many people is that they imagine they can make millions. And if you’ve read the stories, watched the videos and read the blogs you will find plenty of stories of people making a fortune off the sale of NFTs.
But is the use of NFTs legitimate or just a fad?
Well, for some people, NFTs can carry with them unique opportunities.
For one, if you’re a digital artist, NFTs could offer an opportunity to create and sell some of your own art creations. There are also ways to collect royalties when the NFT is sold or used. Not a bad option for people looking to sell their digital art.
On the flip side, maybe you’re not an artist yourself, but you want to support budding artists, you can purchase NFTs of their art.
Recently, business owners are exploring them as new opportunities to expand their product offerings. Nike is selling NFTs of sneakers for avatars in the Metaverse. The NFL launched its own marketplace called NFL All Day where they sell digital video copies of NFL plays they’ve named NFL Digital Highlights. You can go to their site to check them out.
But, like all budding markets, NFTs should be approached with caution because they are subject to certain dangers.
There are plenty of NFT scams out there. Surprise, surprise. People have found a new way to trick others into handing over their money.
First, there are reports of scams called rug pulls. Scammers get people to buy into the upcoming release of an NFT collection promising people that they’ll receive a portion of it after the release. But after the creators collect enough money, they close shop and all the information and pages disappear, leaving the hopeful investors angry about their loss. Kind like when someone pulls the rug out from under you.
The other danger of NFTs is speculation. Highly speculative markets should be approached with a great deal of caution. This can lead to bad investment decisions and loss of money. Let me remind you of some of history’s lessons like the tulip bulbs, the dot com bubble? People get roped in seeing the stories of others making it big, so they don’t want to miss out. But please don’t let the hype lead you into making a bad financial decision. If you’re interested in learning more about NFTs, then do your research and approach them with an educated, and levelheaded perspective.
Okay, so in summary:
For some digital creators, collectors and pseudo investors, NFTs can be useful tools to grow your collection, store assets and make money. But, there are dangers with all new technologies, and non-fungible tokens are no different.
Do your own research, investigate sources, and explore the platforms because NFTs may not be for everyone.
Stay levelheaded. Don’t get caught up in speculation or greed and fight that FOMO. It’s better to make a wise financial decision than a hasty one that will leave you filled with regrets.
I’ll take this moment to state the commonly referenced Latin phrase: Caveat emptor which means “let the buyer beware.”
If you’re not comfortable enough to purchase NFTs, I don’t blame you. But if you want to search around the marketplaces to see what kinds of cool digital creations people have made, it’s kind of fun. There’s a lot to explore out there.
Check the links in the show notes for additional information on NFTs and some common marketplaces to explore.
If there are any other tips or topics you’d like us to cover, let us know at tcupodcast@trianglecu.org and don't forget to like and follow our Making Money Personal FB page and look for our sponsor, Triangle Credit Union on Instagram and LinkedIn to share your thoughts.
Thanks for listening to today’s Money Tip Tuesday and be sure to check out our other tips and episodes on the Making Money Personal podcast.
Have a great day!
