4 Questions to Ask Yourself Before Buying an NFT
In your travels on the internet, you may have come across the term non-fungible token (NFT), spoken of through various rose-tinted spectacles. However, whilst NFTs certainly can, like any other investment, prove exceedingly lucrative, given the right circumstances, there are some things that you probably ought to ask yourself before purchasing one.
An NFT…A What Now?
It certainly helps to know what it is that you are purchasing, before going any further. NFTs, in simple English, are essentially the digital equivalent of a famous artist’s signature of authenticity on an original piece of artwork. A prime example would be the NFT of Nyan Cat, sold by Chris Torres in February of 2021 for the rough equivalent of around 587,000 US dollars. Basically, it can be a form of verifying that the data being downloaded is original data used by the creator of digital artwork, rather than equivalent data that has simply been copied and pasted millions of times over by others.
Ok, What Then Is Its Future Value Likely to Be?
Fundamentally, an NFT is an investment, and to buy NFTs is no different principally from buying houses or cars. An NFT of a video file that is about to, or is in the process of, going viral may be likely to skyrocket in value over the next few weeks, months or even years. However, as any stockbroker will warn you, the value of an investment can just as easily nosedive, and this can easily be the case if the meme in question is forgotten about as time goes on. Then again, however, this also depends on ‘the audience’ we are talking about.
Just because something is obscure does not make it worthless. On the contrary, an NFT of an obscure music file that once was a one hit wonder on social media may have a cult following, which if pointed at the right people, could be invaluable to its current owner. A good understanding of the history of the artwork in question, therefore, is essential when assessing the potential value of an NFT and how that is likely to change as time progresses.
Is It Genuinely Authentic?
Just as there have been con artists purporting to sell original paintings, so are there scams falsely claiming to sell NFTs of unique datafiles. Worse still, some of these scams may not only sell the victim an essentially worthless product for a small fortune but may also provide hackers with access to that person’s digital wallet, which in the case of money tied up in forms like Bitcoin, Ethereum or other forms of cryptocurrency can be extremely difficult to recover due to the lack of restrictions placed on those currencies.
How Will I Protect My Investment?
The biggest criticism of NFTs is what makes them unlike purchasing something like a patent on intellectual property, as it is not legally enforceable as well as the fact that NFTs are not necessarily immune to being copied. Therefore, it can be difficult if not impossible to claim anything, legally speaking, on the grounds of copyright violation should your NFT be downloaded and sold by other users. As such, great care must always be taken when sharing NFTs and they should not, ideally, be left open to public access. This is no different to the idea that you should not leave your car unlocked but with the potential added danger of your NFT not being insured, unlike your car.