You will have no doubt seen plenty about NFTs and their myths in the news and on social media in recent months, it is, without doubt, the new ‘Forex’ trading.
A couple of years ago all you would see on Instagram were posts from people posing next to Ferrari’s saying that they have made a million pounds in a month thanks to Forex.
Unfortunately, a lot of people lost a lot of money after getting sucked into it with no real knowledge of markets and currencies. Of course, it is possible to make a lot of money out of it but you do need to know what you are doing, it requires extensive reading and a lot of research, and it definitely isn’t a quick way to make money (unless you get lucky). NFT’s appear to have now filled the gap that Forex left.
So, what are NFTs? NFT stands for a non-fungible token which basically translates to it being a one-off digital certificate using blockchain technology (the same technology cryptocurrencies use) meaning that you can theoretically sell things digitally and have a way of proving ownership and authenticity. In theory, this is great, but the reality has turned out to be very different for many people.
How To Buy NFTs?
There are a series of marketplaces online that work in a similar way to your traditional auction sites like eBay where you can browse and bid on various forms of digital art. The only difference is when it comes to paying for it and what you actually get when you pay for it.
As NFTs use blockchain, payments are made via cryptocurrencies like Bitcoin or Ether so you will need a wallet to be able to go ahead and purchase them, you will then receive the digital certificate once you have purchased an NFT to prove that you own it.
The most popular marketplaces to purchase cryptocurrencies and NFTs from are OpenSea, Raible, and Nifty Gateway with OpenSea being the biggest. It is as simple as opening an account, connecting your cryptocurrency wallet, and then bidding on what you’d like to buy. Most items will have a countdown timer on them with various bids above/below the valuation of the item, it is then up to the seller to decide if he/she wants to accept the offer.
What kind of NFT items can you expect to find?
The majority of items are art-related, but not your traditional art. A lot are cartoon, pixel or avatar related and artists tend to release sets, the art will be of a similar theme but different characters enabling people to start collections from their favorite artists, and if those artists become well known the price of your art will start to go up.
Alongside the digital artists there are some of the more traditional, well-known artists starting to produce work to sell there. Damien Hurst for example has released a set of paintings that he has produced in real life, all along a similar theme but very unique, once they are purchased online, he burns the original that was painted in real life so that only the digital version then exists.
What are the potential pitfalls of NFT investment?
As with everything, there are people out there who want to try and scam money from those who perhaps aren’t as familiar with new tech as they should be when buying items and prey on the fact that they are perhaps a little naïve.
One thing you have probably thought about whilst reading this is, what is to stop someone else just screenshotting an image and selling it again? Well, the answer is absolutely nothing and plenty of people do it to make some easy money!
The point in NFTs is that there is only one owner, one person who owns the original, there might be copies but someone has the original. It is the same in the real art world where people own prints of well-known art, you know they aren’t real because Sharon from down the street is unlikely to have the Mona Lisa hanging in her lounge but whereas in real life art can be analyzed looking at brush strokes, texture, age, etc.
This is much more difficult with digital art, fundamentally all you must go on is the digital certificate. The main way to ensure you are buying a one-off, and you are buying the original is to find the artist on social media, check that he is in fact selling the work you are bidding on, and ensure that it is the correct link to the item, also ensure the site you are using is a legitimate one by looking them up and reading all of their terms & conditions properly.
Recently, someone purchased what he thought was Banksy’s first piece of digital art for $20,000 only to find out it wasn’t, and someone had fraudulently listed it.
If you ever find yourself in a tricky situation having been defrauded then ensure you get good quality investment fraud lawyers as they may be able to get you part or all of your money back.