Understanding NFT: Pros and Cons - Botsfolio Blog

Explore the world of NFTs, their benefits, and challenges. Learn about the good and the bad of Non-Fungible Tokens on Botsfolio's insightful blog.

9 minutes

NFTs (non fungible tokens) have become very popular among both the gamers, artists, their fans and development companies, owing to their revolutionary influence in the field of games and virtual collectibles. As per a report since 2017, more than $ 21 billion has been spent on such assets, of which $ 3 billion sales were made just in the last month.

Many internationally renowned personalities and brands, such as Mike Tyson, Melania Trump, Nike, Adidas, Coca Cola, Budweiser and even the Ferrari team, have launched their NFT Art collection generating millions of dollars in just a few days.

NFT Crypto allows gamers and collectors to secure rights to own certain unique assets, as well as sell them, earning real money. Some projects, such as The Sandbox and Decentraland , give users the opportunity to create and monetize their own structures or sell existing unique items on the secondary market. Read More on Popular NFT Platforms and Marketplaces where you can buy NFT art as well as sell with ease.

What Does NFT Stand For

NFTs (non fungible tokens) is a special blockchain asset which is unique, indivisible and cannot be exchanged even with each other. This is in complete contrast to blockchain cryptocurrencies (bitcoin, Ethereum etc.) that are: exchangeable with each other or fiat currencies at some exchange rate and can be traded or owned as a fraction (e.g. 0.0001 BTC)

Key Characteristics of NFTs (non fungible tokens)

  • Uniqueness: A non fungible token cannot be replicated, as it is registered on the blockchain and also tied to smart contracts. As a result, each NFT Art is identifiable based on precise aspects, such as the date of creation, value and properties. This means that each of these "digital certificates" is unique and not cloneable;
  • Can be customized;
  • Rarity;
  • Built-in features to establish and protect ownership.

On a technical level, there are "standards" from which NFTs are created and recorded.

ERC-721 Standard: it was the first standard used for the creation of NFTs. ERC-721 is based on "smart contracts" written in "Solidity", very simple for developers to create.

ERC-1155 Standard:This second standard token introduces the concept of semi-fungibility and allows developers to also build assets in ERC-721, facilitating financial instruments such as NFT Stocks.

Once the non fungible token has been created, it grants its creator the rights to its ownership. The copyright, in fact, is registered in a secure and incontrovertible way on the reference Blockchain, allowing a quick identification of the ownership of that non-fungible token.

So, when you buy NFT Art, you will simply own the contents of the token (art) rather than be credited as its creator.

Understanding NFT Crypto

Non-Fungible Tokens, or NFTs for short, are a kind of digital asset that use blockchain technology to indicate ownership of a unique object or piece of information. Unlike cryptocurrency strategies such as Bitcoin or Ethereum, which are fungible and can be exchanged on a like-for-like basis, NFTs are one-of-a-kind and cannot be replicated.To guarantee its legitimacy and scarcity, every NFT has a distinct identification that is kept on a blockchain.

Understanding the NFT Market

The NFT market saw explosive growth in recent years, driven by a number of factors like increased interest from collectors and investors, the rise of digital art and collectibles, and the growing adoption of blockchain technology. With some NFTs selling for millions of dollars, they have gained popularity as a means of monetizing the work of musicians, artists, and other producers.

  • Gaming industry, including gambling. The functions of selling, buying and transferring rare in-game items or skills greatly help in improving the game economy.
  • Decentralized assets.These assets can be not only financial, but also any other nft art – in the same game, for example, you can acquire virtual land plots. In a non-gaming environment – NFT tokens are used in ENS (Ethereum Name Service) to facilitate the purchase / sale of domains.
  • Artists and other creators can sell art to collectors digitally without involving middlemen such as promotional houses or art galleries, allowing them to keep most of the profits. It is possible to program NFT in such a way that each time a nft art object is resold, the creator receives royalties.
  • Combat identity theft. It is possible to digitize information about appearance, medical records, education, etc. Thus, eradicating the possibility of forgery of personal data.

The total market value of NFT Art tokens is growing every day by about 76 million dollars, and this suggests that collectible assets have already moved from the phase of a simple hobby to the phase of serious financial instruments such as NFT Stocks (and not only financial) instruments.

CryptoArt

Among the first sectors to have opened its doors to the market of non fungible tokens, is that of the so-called "CryptoArt". The Internet has obviously played a key role in it.

The first collection of NFTs that went viral on the net, the CryptoKitties, started a phenomenon that immediately saw many creators and investors interested and active on the NFT Marketplaces.

CryptoGaming

Among the most popular NFT related projects are those related to video games, also called Cryptogaming. In fact, new generation video games are aimed at the metaverse and developed in blockchain. These place the role of the NFT token as central to the management of resources and "unlockable" objects in the game itself.

All those components that were once purchased with micro-payments, in cryptogaming are managed directly with the non fungible tokens of the decentralized platforms on which the game is developed.

The NFT makes players more involved and gives them the opportunity to monetize much more, especially in "play-to-earn" mode by earning NFT crypto to be exchanged for other cryptocurrencies or traditional coins.

Investing in NFTs: Pros and Cons

Although many NFTs belonging to different collections, from video games (NFT crypto) to art (NFT art), have recorded exorbitant valuations even in terms of millions of dollars, investing in them is considered as an activity more linked to collecting than of real financial investments.

Yet, without a shadow of any doubt, the NFT market is a subject of enormous interest due to:

  • A speculative interest. Given the novelty, the prices linked to this market can easily become inflated, making possible a speculation that is also very profitable, although not without risks.
  • Collecting can be an additional motivation and, as in other non-digital sectors, has a large number of enthusiasts.
  • Gaming is a very large industry and NFTs can change the rules forever, giving players more autonomy and gain.
  • Art enthusiasts in view NFT technology the future for this entire domain and believe in these new digital assets as the new generation of contemporary artistic current.
  • The metaverse and web 3.0 are increasingly decentralized. NFTs are part of the tools built on blockchains and an increasing adoption of these technologies is expected, in more and more areas of human reality.

Is Investing in NFTs worthwhile?

Like in all investments, there are risks related to buying NFTs and to operate with awareness it is good to be informed and study in depth before taking action.

Pros Cons
  • The ability to buy / sell on special sites, and the more unique the copy, the more valuable it is.
  • Preservation of copyright forever.
  • There is never a doubt about the authenticity of the NFT, as they cannot be forged.
  • Expanding economic opportunities in games and other systems.
  • It takes at least a basic understanding of blockchain technologies to use non fungible tokens. Meanwhile, often people are interested in the very value of the token, and not in the underlying technology.
  • The ease of management depends entirely on the quality of the scalability of the blockchain on which the token is placed.

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Written By

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Jay Sharma

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Jay is a seasoned crypto entrepreneur and technology innovator. As the Founder and CEO of Botsfolio, he has been at the forefront of the blockchain revolution since 2017. His practical experience extends to the technical nuances of crypto mining, having successfully built and managed a substantial GPU mining operation. Jay developed a groundbreaking decentralised application for fractional real estate NFTs. This innovative project garnered significant recognition. Through his hands-on experience and analysis, he aims to provide valuable guidance and empower others to navigate the dynamic crypto landscape.

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