What is it and is it worth the investment?

  • that basic The NFTs
  • areas of applicationopportunities and risks

who a NFT – Non-Fungible Token – want to buy or sell, find a lot on the financial market many options to. It is important to have a solid basic knowledge of non-fungible tokens; This is the only way you can decide for yourself how sensible an investment is.

Here’s what you need to know about NFTs

The term NFT has sparked a big race in the financial world: Not only private individuals, but also large companies such as Visa have already bought NFTs. The reason for this since the advent of NFTs is the affiliate phenomenon of fomo (“Fear of missing out”): You are afraid of missing out; after all, NFTs promise to make a big profit.

The term “NFT” stands for Non-Fungible Token. It is therefore purely digital, not interchangeable objects; They are uniquethat not replaceable is. This fundamentally distinguishes them from cryptocurrencies: the coins, such as bitcoins, can be exchanged for each other. You can think of this as exchanging a 5 euro note for another 5 euro note. The areas where NFTs are used are diverse; especially in the arts however, they are very popular. This can be logically deduced: works of art are unique pieces that do not exist again in the same version. If you relate this to the digital market, it becomes more complex: works of art can be copied as often as you like, so it is often difficult to find the original.

NFTs are designed to solve this problem using a “Smart contractssolve: This is a kind of “ownership contract” that on a blockchain is engaged. With a link, the contract points to a uniquely identifiable object, such as a meme or image. Only if the NFT is also written on a blockchain is it also considered verified. For example, one of the most well-known blockchains is Ethereum. In addition to the link, the NFT Smart Contract records when NFT was sold who he heard and if there is one transaction history is. In addition, it can clauses such as. states that the buyer of the NFT gets 10% of the purchase price if he or she resells it. The object itself, i.e. the file, is stored either on a server or on another blockchain. With regard to works of art, however, it can also be the case that it is an analogue painting that has been digitally reproduced. The owner can choose to to sell the unique piece in shares: For example, you can own one hundredth of a famous painting. Artists can profit from the sale of NFTs if they introduce additional clauses (such as the 10% clause in the example above).

Types of NFTs and Risks and Opportunities

NFTs are not only used in art: this is one of the biggest areas of application metaverse. It is possible to purchase avatars or objects for use in a metaverse. An example here is the luxury fashion brand Gucci, which has sold digital handbags as NFTs for thousands of euros. Also NFTs Sports exchange card are particularly popular; an example here is the German Football Association, which has issued sports trading cards NFTs to their players. Other examples are CryptoPunk NFTs, Tweet NFTs or Movie Scene NFTs; each unique item can therefore be sold as an NFT.

But NFTs also have downsides: they’re basically just a fiction of ownership. Owners usually only pursue the goal of owning a highly valuable unique item and also displaying it publicly. In addition, while NFTs are unique but not rare: The object for NFT can be digitally copied again and again and therefore appear several times as a copy on the Internet. In addition, there is a warning against cases of fraud and pyramid schemes.

In the long term, NFTs are likely to remain: Anyone can create and sell NFTs. Having success with the NFTs though especially famous artists: Only here many desire the object, which makes it possible to demand a large sum. Still, one must always be careful not to fall for short-term hype, but any investment to think carefully. Therefore, every purchase of an NFT does not make sense: one must always remember that the value is purely speculative and that the objects are not exchangeable. It may therefore happen that you cannot find a buyer for your NFT.

If you are considering investing in shares, you can read here how the online broker Trade Republic works.

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