Millions of people have at least some knowledge about non-fungible tokens (NFTs). However, what does it really mean to invest in non-fungible tokens-and what are the advantages and disadvantages? Undoubtedly, it is a good idea to understand any asset class before you start investing in it.
For inexperienced investors, investing in NFTs is a misnomer because NFTs by themselves aren’t exactly an asset class. They use blockchain technology to digitally signify ownership, making an NFT more like the title of a car rather than the car itself.
Inexperienced as well as experienced need to learn about non-fungible as much as possible. It is a good idea to read about Lazy Lions NFT.
Just like you wouldn’t buy a car simply for the paper title that comes with it, it isn’t a good idea to purchase an asset just because it’s been tokenized into an NFT.
However, that doesn’t mean that investing in tokenized assets is necessarily a bad idea. So, if you find an asset that appeals to you and you have the funding, then maybe you should buy it. For example, if the ownership of the asset happens to be tokenized, then you can likely enjoy the additional benefits associated with the non-fungible tokens. However, make sure to also understand the risks of NFTs investing too.
Advantages of investing in non-fungible tokens
Inexperienced as well as experienced investors have many reasons to buy assets that are tokenized into NFTs.
- Anyone can invest in non-fungible tokens. Hopefully, investing in tokenized assets is accessible to everyone. Asset ownership that is tokenized into an NFT can more easily as well as efficiently be transferred among people anywhere in the world.
- One important fact, NFT ownership is secured by a blockchain. Using blockchain technology to digitally signify ownership can make an investor’s ownership of an asset less risky. Importantly, blockchain tech can also make ownership of assets more transparent.
- It is an opportunity to gather more information about blockchain technology. Investors can become more knowledgeable about the topic while diversifying their portfolios by allocating a small sum to tokenized assets.
Disadvantages of investing in NFTs
Almost everything has its pros and cons, and NFTs are not an exception.
- You need to remember that NFTs aren’t an asset class. They are commonly and erroneously regarded as an asset class rather than a technological way to indicate ownership. General misinformation and the hype surrounding non-fungible tokens can cause the values of tokenized assets to be inflated and volatile.
- NFT generation is highly energy-intensive. Most non-fungible tokens are currently supported by the Ethereum blockchain, which uses an energy-intensive operating protocol called proof of work. Unfortunately, a single NFT requires as much electricity as the average home for about a day and a half.
- You may need to own Ether (ETH). With most NFT sales occurring on the Ethereum platform, owing to the blockchain’s native currency, Ether is often necessary in order to purchase an NFT. Investors wishing to buy NFTs with fiat money like the U.S. currency may have limited options.