Pros and Cons of investing into NFT

Pros and Cons of investing into NFT

NFT
April 22, 2022 by Diana Ambolis
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What Was the Origin of NFTs? The Ethereum network, which also houses the Ethereum (ETH) cryptocurrency, gave birth to the concept of a non-fungible token. The Ethereum blockchain, unlike the Bitcoin blockchain, was designed as a network of smart contracts, a platform on which developers may create valuable assets by communicating and owning them through
Pros and Cons of investing into NFT

What Was the Origin of NFTs?

The Ethereum network, which also houses the Ethereum (ETH) cryptocurrency, gave birth to the concept of a non-fungible token. The Ethereum blockchain, unlike the Bitcoin blockchain, was designed as a network of smart contracts, a platform on which developers may create valuable assets by communicating and owning them through a verified, interconnected ledger.

The Ethereum blockchain was designed to push digital assets to the next level, and it has accomplished that purpose.

NFTs were born when two digital artists, Matt Hall and John Watkinson, produced Crypto Punks, which was made public in 2017. These pixelated computer photographs are one-of-a-kind — or as one-of-a-kind as digital photographs can be — and they fetch a high price. CryptoPunk #3100 was actually auctioned for $7.58 million in March 2021.

That isn’t the only NFT that has sold for millions of dollars on the blockchain network. A flurry of NFTs had just sold for exorbitant prices.

The Advantages and Disadvantages of NFTs

When you acquire an NFT, you’re making an investment just like any other piece of art. After all, whether the art is physical or digital, it has a sizable secondary market. There are pros and downsides to consider before investing your hard-earned money in a digital masterpiece called NFT.

NFT’s Advantages

When it comes to non-fungible digitized artwork, collectors look for the following benefits:

1. Market Value Increase

When you buy these tokens, just like any other investment, your money has the potential to appreciate in value. On July 6, 2017, CryptoPunk #3100, for example, was first sold for $2,127. Despite the person having received multiple bids, the artwork’s owner refused to sell until March 2021.

Nonetheless, that collector is undoubtedly performing backflips after receiving a $7.5 million return on investment when they sold.

2. Having a One-of-a-Kind Object

These digital riches are non-fungible, meaning they are irreplaceable. It’s a beautiful feeling to know you’ve got a one-of-a-kind object in the form of an NFT or other digital asset.

3. A feeling of eagerness

Blockchain technology is currently generating a lot of buzzes. Some analysts believe the technology will have the same impact on consumer behavior as the Internet. That’s an intriguing concept, and by getting an NFT, you’re assisting in the growth of technology.

4. Maintain a data log

Maintaining authenticity and chain-of-ownership documents for valuable artwork can be challenging at times. NFTs genuinely shines in this situation. Because NFTs are stored on the blockchain, all of them have clear ownership records, ensuring that your digital artwork is never stolen or its legitimacy called into doubt.

Some experts feel that technology will eventually evolve into a better means of managing and handling essential data and records, rather than only as a tool for managing digital valuables.

Also, read – WHY DO MILLIONS OF DOLLARS GO TO NFT?

NFT’s drawbacks

It’s impossible to deny that NFTs are fascinating. There are plenty of drawbacks to investing in them. The following are a few of the most significant disadvantages:

1. Physical Art Is Impossible to Digitize

Physical and digital art are regularly acquired for various reasons. Art can’t be digitized since it’s material. These tokens can’t compare to the thrill of seeing a one-of-a-kind painting in person.

2. Uncertainty in Value

Even for experts, NFTs are perplexing assets. When you purchase one of these, you aren’t necessarily purchasing the rights to the artwork.

People can still find copies of the work for which you have the token on the Internet, and there’s nothing stopping them from copying and pasting these files into social media, essentially displaying and distributing something for which you may have spent millions.

When you buy these assets, all you get is a record showing that you own the token that underlies the original item. The primary question here is, “How much value is there in owning an item you don’t actually control?” People that put their blood and sweat into these tokens may end up with worthless digital records, depending on how collectors respond to this problem in the future.

3. The environmental cost

The environment has recently risen to prominence as a hot topic of debate. Any record added to the Ethereum blockchain requires a significant amount of computing, which uses a lot of energy. As a result, widespread trade in NFTs and other blockchain-based assets isn’t always environmentally friendly.

According to a recent Cambridge University study, nearly everything associated with blockchain is highly unsustainable from an environmental standpoint due to the amount of energy needed.