NFTs: What they are and why to collect now
NFT - a new kind of digital assets (photo: Freepik.com)
In addition to traditional types of collecting — such as numismatics or philately — new forms have recently emerged. Collecting NFTs, digital assets with artistic value, is gaining significant popularity.
RBC-Ukraine explains why NFTs could become a profitable hobby for collectors right now.
What is an NFT?
An NFT, or non-fungible token, is a digital asset that confirms unique ownership of a virtual item — such as an image, video, music, or even a tweet.
Unlike cryptocurrencies, where one Bitcoin can be exchanged for another, each NFT has a unique identification code and specific data. NFTs operate on the Ethereum blockchain, ensuring the reliability and transparency of transactions.
NFTs can represent ownership of digital art, in-game items, and collectibles, making them a modern equivalent of trading cards or rare antiques.
But what does it really mean to own an NFT? Essentially, it grants ownership of a blockchain record that verifies the asset’s uniqueness. This ownership can potentially generate profit when the NFT is sold.
NFT investment prospects in 2024
NFTs have become a form of "digital art" for investors seeking innovative ways to earn. While the NFT market fluctuates, new projects are emerging in 2024, offering diverse opportunities for collecting — from art to sports memorabilia.
However, unlike physical assets, the value of NFTs is heavily driven by demand, making them a risky investment. Successful investors often focus on tokens from well-known artists or limited collections that tend to appreciate over time.
It’s important to note, though, that as with any emerging sector, losses are a real possibility. Before purchasing an NFT, it’s essential to assess the risks and decide if you are prepared for this type of venture.
Collectible potential of NFTs: what’s worth collecting?
If you’re a fan of collecting, NFTs offer an exciting alternative to traditional items.
In 2024, the most popular NFTs remain in art, gaming, and music. Renowned artists continue to release exclusive NFT works, and gamers seek rare in-game items to enhance their avatars' uniqueness.
Some platforms even offer NFT tickets to events, which may gain value over time as memorabilia. Collectors often target limited editions for their uniqueness and potential financial return.
NFT - a promising type of collectibles in the digital age (photo: Freepik.com)
What are the risks and challenges?
Despite numerous opportunities, NFTs carry significant risks, especially for newcomers. High market volatility and the threat of fraud are key reasons for exercising caution.
In 2024, phishing attacks and token thefts have become more frequent, with hackers breaking into accounts and transferring assets to other wallets. It’s also crucial to understand that while NFTs can hold substantial value, they, like most digital assets, are not backed by physical resources.
Therefore, it’s essential to use reputable platforms for storing NFTs and secure your digital wallet. Employing hardware wallets can provide an extra layer of protection.
Should you invest in NFTs in 2024?
If you’re seeking new investment ideas or have an interest in contemporary art, NFTs could present an exciting opportunity. However, it’s important to remember that the market is highly volatile, with NFT prices fluctuating rapidly — making it a suitable investment only for those comfortable with risk.
Before buying, thoroughly research the platform hosting the token and ensure its reliability. NFTs can be an exciting venture, but it’s wise not to invest more than you can afford to lose.
Sources: Investopedia, Coinbase, and Unbiased.com.
