This guide will go into detail about investing in non-fungible tokens or NFTs. A brand new asset class with lots of upside for the crypto investor.
There are different cryptocurrencies and tokens in the market, that’s a fact. Developers and companies have been creating their own digital assets to sell to investors in the market and offer users different solutions and services.
One of the tokens that have been used by companies and services providers are called non-fungible tokens. Non-fungible tokens (NFT) are cryptographic tokens that represent an asset. The main feature of NFTs in the fact that they are not mutually interchangeable.
While the last year has been very positive for decentralized finance (DeFi) investors could be looking to buy non-fungible tokens. This could be also the moment to invest in crypto collectibles for users that believe this is going to be the next growing market in the crypto space.
According to a recent report released by NonFungible, the estimated market capitalization of the NFT economy could eventually reach a valuation of over $315 million during in 2020. Despite being a small market, it could continue growing in the future.
What are Crypto Collectibles or Non-Fungible Tokens?
As mentioned before, NFTs and collectibles are crypto tokens that represent a digital asset that is unique and scarce. These tokens have been growing as a way to promote crypto art, licensing, identity, and many other things.
Furthermore, crypto collectibles became very popular such as when Crypto Kitties became the most used decentralized application (dApp) on the Ethereum network back in 2017. Crypto Kitties allowed users to trade cat cards that were unique and represented a special cat on top of the Ethereum network.
Non-Fungible Tokens vs Crypto Assets: What’s the difference?
At first glance, you would say there isn’t much of a difference, because they are both digital assets and are being transferred on a blockchain network. However, where crypto assets like ETH, LTC, LINK, or any other crypto token can being traded publicly and on a global scale, NFTs aren’t.
Non-fungible tokens can only be traded privately, because of their unique property. In other words, only one item exists and can be traded. For instance, a cryptocurrency token like BTC has several items available(21 million) to trade.
What Can We Use Non-Fungible Tokens For?
If you invest in non-fungible tokens, then you will certainly need to know what we can use NFTs for. While we can be card collectors in the real world, we can also do the same but using blockchain technology. NFTs would allow us to have unique assets that could be used as collectibles, to invest, and also to exchange them in the future.
For example, the most expensive Crypto Kitty sold on CryptoKitties was worth 600 ETH, this is equal to $240,000 at current prices.
How do Non-Fungible Tokens Work?
Non-fungible tokens will be different according to who issued them and their functionality. For example, some NFTs would allow you to participate in special events, while others would be a collectible token you can have to remember a unique experience such as a football match or presidential election.
Take into consideration that if you invest in crypto-collectibles, some of them may not have specific functionality. These non-fungible tokens would then be used to speculate with their prices or just to hold them for long periods of time.
What is NFT in Crypto?
If you buy non-fungible tokens, then you should know what NFT means in crypto. As we have said before, NFT stands for Non-Fungible Tokens. Thus, this can be easily used interchangeably with crypto collectibles or collectables.
Some NFT in crypto are tied to physical objects while others allow investors to have an extra form of liquidity.
Why are Non-Fungible Tokens Exciting?
If you want to invest in non-fungible tokens this is because they are certainly exciting. But why are they exciting? Well, they allow you to be the real owner of a unique and special asset that no other person would ever own unless you sell it.
However, if you want to make some money on it or just give it to another person, you can transfer NFTs. This is a great thing to take into consideration. If you buy non-fungible tokens and you see their price grows, you do not need to hold them forever but you can sell them in the market for a profit.
NFTs are really authentic and unique. You will have the possibility to claim ownership over a special piece of crypto data and information that no other person would be able to have. If you are playing online games, you know that the items can be created and faked by game creators. However, if these games use blockchain technology, these tokens would be 100% authentic and users will be sure they are owning real and valuable assets.
Is Bitcoin Fungible?
There is a debate on whether Bitcoin (BTC), the largest cryptocurrency in the world, is a fungible or non-fungible asset. Nowadays, Bitcoin is not completely fungible. For example, if you exchange a banknote of €10, it will be accepted everywhere where the euro is accepted.
No person or institution can blacklist the €10 unless they know the issuance number and it becomes blacklisted by every shop. Something certainly impossible to do.
WIth Bitcoin would happen something similar. You can send and receive Bitcoin freely. Nonetheless, some addresses may be blacklisted. If you transfer Bitcoin from a blacklisted address, you may not be able to send these funds because they may be blocked by exchanges, wallets and other services providers. That means that your BTC will not be fungible if they come from a certain wallet.
Litecoin, for example, is trying to add privacy features for each LTC to become fungible.
What are Top Non Fungible Tokens right now?
There are different expensive non-fungible tokens. As we have already shown before, one of the NFTs exchanged through Crypto Kitties was sold for 600 ETH. This remains as one of the top non-fungible tokens in the world.
Another way to buy non-fungible tokens is participating in the Decentraland (MANA) marketplace. A user simply purchased a parcel of land on the Decentraland virtual world for $215,200 (2,772,000 MANA at the time of the sale in November 2018).
Finally, an official Formula 1 NFT was sold for 415.9 ETH. This is now worth over $166,000 US dollars, making it one of the top non-fungible tokens right now.
Which Big Brands are Involved in Non-Fungible Tokens?
There are several popular and recognized big brands that invest in crypto collectibles. Some of these firms include Ubisoft, Formula 1, Vodafone, Nike, the NFL, the NBA, Samsung and Louis Vuitton, among others.
These brands are working with NFTs in order to offer users cards featuring American football and basketball players, items inside games, and better services by avoiding counterfeiting.
Can I Create Non-Fungible Tokens?
There are different networks that are allowing for the creation of NFTs. One of the platforms that are allowing users to create collectible tokens is the RSK network. The RSK blockchain, for example, is using the Truffle framework and Open Zeppelin (OZ) libraries for developers to create and build non-fungible tokens.
There are many other services allowing companies and firms to create their own NFTs on top of a large number of networks. Everything will depend on your needs, technical specifications and goals.
Where Can I Trade Non-Fungible Tokens?
If you want to invest in crypto-collectibles and buy non-fungible tokens, you will certainly want to know where to trade them. Opensea.io is one of the largest marketplaces for NFTs and crypto items.
You will be able to buy, sell and discover limited-edition goods that cannot be found anywhere else. Furthermore, users are able to buy land in the Decentraland network and other virtual worlds using the Opensea.io platform.
If you want to trade or invest in crypto-collectibles, you can simply create an account in OpenSea and start enjoying some of the most unique NFTs created by companies, users and developers in the crypto market.
How to start trading NFTs At OpenSea Platform
Starting to invest in non-fungible tokens starts at a platform like Opensea.io. If you are new to blockchain networks and crypto-assets then creating an account at OpenSea could be a little bit scary and overwhelming at first. Therefore, because of the simple and straightforward steps, I’ll list them below.
The first thing you need is to get a wallet where the NFTs can be stored and traded from. At the moment, most modern browsers like Chrome and Brave are supporting web3 wallets. For Chrome, you need to install an ‘Add-on’ where Metamask is the most used web wallet at the moment.
The Brave browser on the other hand already supports different web3 wallets. Therefore, if you are using this browser then you don’t need to install additional add-ons.
Once, you have installed a wallet the next thing to do is to go to the OpenSea platfom and just simply ‘Unlock’ your wallet.
Click this button, which triggers a wallet pop-up that asks you to connect, also give your password and accept the terms and conditions. Now that your wallet is unlocked you are able to trade on the Opensea platform. Additionally, use your wallet to store the crypto collectibles.
Three Reasons to Invest in Non-Fungible Tokens
There are several reasons for users to invest in non-fungible tokens. However, in this guide, we will give you the three main reasons why to buy non-fungible tokens.
1. Non-fungible tokens can be tied to physical objects
This is a reality. NFTs can be tied to physical objects. You can easily transfer property, an art piece or any other object that is now represented in a non-fungible token.
2. Creates value for the tokenized asset
The tokenized asset will now be able to be traded, exchanged and reach a larger number of users that want to invest in crypto collectibles.
3. It creates an extra form of liquidity to investors
You can also sell your NFTs in different marketplaces such as Opensea.io and profit from price fluctuations.
Invest in Crypto Collectibles or NFTs: What do I get?
Investing in Non fungible tokens is brand new and not many crypto investors know what to expect out of it. Therefore I have listed some good examples that are already very popular and traded at high volumes.
NFT Use cases
- Art – Digital artists can protect their creations by putting them on the blockchain. With NFTs someone can buy it and showcase it somewhere online. Moreover, the creation is protected by blockchain technology showing proof-of-ownership.
- Collectibles – Take CryptoKitties as an example that can be shared and traded among each other. Besides, it’s even possible to buy tokenized versions of your favorite celebrities or sports stars. These tokens are also dragging traditional collectors’ items into the 21st century, such as baseball cards, coins, and stamps.
- Gaming – Maybe you know the online game called Fortnite where items like swords and other rare weapons can be sold. Currently, this trading is only prohibited on their platform only. With NFTs, coveted items can be easily transferable — solving one of the biggest annoyances that avid gamers face.
- Virtual assets – A good example is Ethereum Name Service that offers decentralized domain names turned into non-fungible tokens. As a result, these tokens can be traded on different platforms.
- Real-world assets – These tokens are still in the works yet. However, in the near future, it should be possible to tokenize real estate or a piece of land.
- Identity – Take back control of your own data by tokenizing your unique qualifications and store it on the blockchain.
In this guide, I have tried to explain as clearly as possible the options you have as an investor in this brand new asset type called non-fungible tokens. Moreover, in the past years, this market showed massive growth, and with a market size of $315 million in 2020 it still has lots of upside.
Starting to invest in non-fungible tokens can be done at several decentralized platforms like Opensea or OVR.AI. Just make sure you have a wallet that supports the Ethereum network and you are ready to go.
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