Are NFTs Worth Investing In 2022?

Aug 9, 2022

Many people find studying and understanding new financial concepts challenging and interesting. When such financial concepts show some promise, people display immense enthusiasm to become early investors in them. When its supply is limited, an asset class in its nascent stages draws investors owing to its potential for value appreciation. NFTs are one of such asset classes. They have been increasingly popular.  DappRadar estimates that the value of NFT sales in 2021 was $24.9 billion. From $95 million in 2020, that was an immense increase. You can educate and familiarize yourself with NFTs by conducting additional research in addition to the material presented here.

What is an NFT?

NFT stands for non-fungible token. The most popular form of NFT is NFT artwork. Additionally, there are internet memes, virtual fashion, music, gaming, charity, monumental sports moments (digital video clips), trading cards, event tickets, and collectibles.

NFTs are unique cryptographic assets that exist on a blockchain. They differ from each other as they have metadata and unique identification codes. They are ‘non-fungible,’ meaning they cannot be exchanged or traded at equivalent values. Conversely, cryptocurrencies are fungible. For instance, you can trade one bitcoin for another bitcoin. You cannot do that with NFTs.  

Since Ethereum is considered a blue chip in the cryptocurrency industry and has a potential reputation for smart contracts, it serves as the blockchain example for NFTs. Furthermore, since every NFT is different, there is a market for collecting NFTs. For instance, in a market named SolSea, NFTs can be produced using a variety of new cryptocurrencies, such as Solana.

What are marketplaces?

NFTs are bought and sold on digital platforms called NFT marketplaces. There are many marketplaces for NFTs. One such online marketplace where you may mint, purchase, and trade NFTs from diverse collections is OpenSea.io. For those who are new to NFTs, there are help displays. For example, in an auction, anyone can post and place bids on their recently issued NFTs. NFT promotion businesses can also help you advertise your NFTs so that you can sell them for more money.

Another popular NFT marketplace is Rarible. This platform enables its users to trade collectibles, art, video game assets, and NFTs. It charges a flat fee of 2.5% on each transaction, along with any gas fees. 

RTFKT (pronounced “artifact”), a digital art company owned by Nike, offers customizable avatars in 3D on another marketplace. Owning this NFT entitles you to membership advantages in a virtual “yacht club,” which you can access.

A marketplace featuring one-of-a-kind NFTs created by the artist Josie is also available, and it runs exclusively on the Ethereum network.

Popular Indian NFT marketplaces include BeyondLife.club, WazirX, Bollycoin, RARIO, and Always First. 

How do NFT Marketplaces Work?

After you create your account with one of these NFT marketplaces, you can browse through the different available options on their platform open for sale. The platform allows you to add a payment method. Some marketplaces need you to link a crypto wallet so that you can pay with your crypto assets. There are others that allow you to use your credit card. 

Some platforms allow you to buy these tokens for a fixed price. Some use the method of auction. When you complete a transaction, the marketplace record the transaction on its blockchain, indicating the change of ownership. 

Why do people trade NFTs?

To increase their profits, many people trade in NFTs. Although many people hope for it, there are no assurances that your investment in NFTs will be successful. For some people, collecting NFTs is similar to gambling. NFT market values can fluctuate greatly. Unlike hard financial figures you can see in an annual report from a publicly traded company, the information you obtain online about an NFT may be more of a rumor.

People think that 2022 will mark the year NFTs become widely used as more corporate sponsors enter the NFT industry. However, even among individuals who work in the cryptocurrency industry, there is a significant gulf about the future of NFTs. Nevertheless, both parties may agree that there has been a growing interest in NFTs that inspire creativity and originality.

Again, while this blog does offer some basic educational details on the past landscaping of NFTs, we in no way want readers to assume that this material accurately depicts the NFT landscape. For better or worse, the NFT landscape changes every minute, not just once a month or once a week. So read frequently to stay informed.

Risks of NFTs

Smart contract risks

By exploiting holes in intelligent contracts, hackers may occasionally assault a Defi network and take substantial sums of cryptocurrency. As an illustration, NFTs valued at about $600 million were taken in the most recent Poly Network hack. The smart contract’s security was inadequate, providing an entry point for attackers and was the leading cause of the hack.

This incident proved that smart contracts can put networks at risk for assaults if there are weaknesses in the code.

Evaluation challenges

Evaluation is one of the greatest problems faced by NFTs. Since there are presently no standards, so there is still a great deal of un ty around NFT price determination. As a result, NFT values fluctuate greatly, influenced mainly by factors like uniqueness, innovation, and scarcity.

People struggle to identify the components that can influence NFT prices. Hence, price fluctuation persists. As a result, NFT evaluation is still quite tricky.

Legal challenges

Currently, there are no national legal definitions of NFT. This is because no international body still enforces laws governing NFTs worldwide.

Regulating authority is becoming more and more necessary due to the growing interest in NFTs. In addition, the uses for NFTs have also changed dramatically. In such situations, there’s a need for a regulatory structure with clearly defined norms and regulations.

Cyber threats 

In some cases of cyber threats, false online reproductions of whole NFT establishments were created to entice naive customers.

By copying their content, logos, and branding, fake NFT stores pass for genuine articles. 

Malicious actors may even imitate well-known NFT artists and sell their works under the guise of the famous NFT artist. Due to problems like false giveaways, copyright thefts, and the impersonation of NFT artists, online fraud is still a concern in the NFT industry.

P2P – A Safer Alternative

If you feel investing in NFTs is too risky, alternatives like P2P lending. LenDenClub, a popular P2P lending platform, lets you become a money lender on their platform for even INR10,000. Your money is hyper-diversified across a large number of loan requests through the platform’s AI mechanism. The hyper-diversification feature reduces your investment risk and gives you a 10-12%* return. Invest Now!

Conclusion

Before committing to something based on hype, a thorough study must be done. It is far better first to grasp all the hazards and difficulties associated with non-fungible tokens. 

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