NFTs have been all the rage for the better part of the last year. Whether you’re already convinced that NFTs are the key to successful investing, or if you’ve simply been watching their rise to popularity with skeptical curiosity, here are some key terms to know, as well as tips and tricks to spotting a good investment.
If you want to hold your own in a conversation about the latest investment trends, here are some key, basic terms to know.
Fungible: We covered this one pretty well in our blog post here, but it’s an important one that refers to the exchangeability of an asset. American currency? Fungible, because each dollar bill is worth exactly as much as the next. Something such as an original painting or, in this case, a digital asset, is not fungible because each one is unique and cannot be replaced by an identical item.
Blockchain: A blockchain is similar to a database, but instead of being owned by a singular person or company, it is decentralized and is run & utilized by anyone with an internet connection. You can think of the blockchain as a self-sufficient technology that records transactions in a secure, verifiable, and permanent manner.
Mint: Parallel to the U.S. Treasury minting our American currency, AKA turning it from pieces of paper and metal into valuable assets, “minting” is a process in which a digital file is secured and published on the blockchain. If you’d like to take advantage of the huge profits coming out of the NFT frenzy, but investing seems too risky–minting them is the next best way to make some cash. Of course, making a profit is contingent upon someone being interested enough to pay for your product.
Ethereum: Ethereum is a decentralized marketplace where investors can mint, buy, sell, and browse NFTs and crypto. It also has its own native cryptocurrency, Ether (ETH), which is the world’s most popular cryptocurrency next to Bitcoin. You can check out Ethereum here.
Peer-to-Peer: A peer-to-peer network is a network between two or more computers without the need for a centralized server between them. In this kind of network, each computer acts as its own server, with each user being able to personalize their level of cyber security. This means that the network does not have to worry about a central server being attacked and compromising the entire network, because if one computer goes down, the rest can continue to operate as normal. This kind of network is especially useful when it comes to cryptocurrency and NFTs, because it is substantially more secure and the market does not have to answer to any rules that could otherwise be imposed by a central authority.
Tips & Tricks
- Before investing in an NFT, look at its price history. A steadily falling price indicates that interest is declining over time and may not be a good short-term investment.
- Follow projects that interest you on social media. NFT content creators will often keep their Discord or Twitter updated on the different stages of the projects they are working on. The response to these updates also allows you to gauge the level of interest in a certain project and determine whether it will be a good investment.
- Start small. NFT vendors will often advertise flashy projects that sell for upwards of millions of dollars, promising quick profits, fame, and fortune. However, it’s smarter to seek out investments that are lower-risk, but show a promising amount of interest at a niche level. A good rule of thumb is to never spend more than you can afford to lose.
Places to Buy
The aforementioned Ethereum is a good place to keep up with new projects and the latest trends. This website is great for getting in on a particular project at the ground floor. Next, you can list your newly purchased NFT on websites such as OpenSea or CryptoSlam. These are primarily second-hand marketplaces where investors start to see the profits of their investments.
If you’re interested in learning more about NFTs, be sure to go back and read all of our March blog posts: What are NFTs and How Do They Hold Value?, Factors to Consider Before Investing in NFTs, and Are NFTs Here to Stay?
We’ll see you back next month for one of our favorite topics to discuss: cyber security!
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