If you’re new to the concept, Non-fungible Tokens (commonly known as NFTs) sound more like a mushroom dish than an investment opportunity. However, they are all the rage these days.
An NFT is a digital asset like music, video, digital art, or even video clips from sporting events. The concept was created in 2014 as part of the Ethereum cryptocurrency and is exchanged using the same blockchain technology.
NFTs are one-of-a-kind digital properties. Most digital creations are in unlimited supply. You can make a piece of digital art and sell it repeatedly. But, when the same item is turned into an NFT and put up for sale, the item becomes scarce and therefore more valuable.
When this concept of selling digital assets first arose, most NFTs were things that already existed. For example, many iconic NBA video clips have been turned into NFTs and sold to the highest bidder. Investors have spent hundreds of millions of dollars buying and selling NBA highlights over the last couple of years. Can you imagine how valuable it would be to own a snippet of the iconic footage of Michael Jordan dunking a basketball?
While the concept started as a way to sell existing creations, artists are now creating new works to be turned directly into NFTs. A great example of the creative use of NFTs is an animated series produced by actress Mila Kunis. The project, entitled ‘Stoner Cats,’ was entirely funded by NFTs to the tune of $8M. The show, which includes superstars like Jane Fonda and Chris Rock, will only be available to investors (NFT holders). The project launched in July of 2021 with over 10,000 NFTs sold for .35ETH (or .35 of an Ethereum coin valued at approximately $800). This relatively new investment provides opportunities for artists to monetize their digital works. As seen with the Mila Kunis project, it’s also a way for artists to crowdfund big projects.
So, where do we go from here? For many people and organizations, cryptocurrencies and NFTs feel like a threat to traditional investing. NFTs are new, and their value is based upon what someone is willing to pay for them. These factors make them a risky investment and not something you’d want to sink your retirement savings into. It’s common to fear the things we don’t understand, which is why I believe it’s essential that we educate ourselves about these topics so that we can wisely choose whether or not to engage with them.
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