NFT Pros and Cons: Are They the Right Move for You?
We’re excited about the emergence of NFTs – but is it the right move for you? The reality is that it’s an emerging trend which comes with risks. In this blog, we’ll set out the NFT pros and cons so you can make up your mind as to whether you should get involved.
NFTs (non-fungible tokens) are unique digital tokens and representations of physical or online assets. The ‘non-fungible’ part means that they’re irreplaceable. Things like dollar bills and cryptocurrencies (e.g. bitcoin), on the other hand, are fungible as it’s possible for you to trade one $20 bill for two $10 bills and arrive at the same value.
Because of their exclusivity, NFTs ‘stamp’ their uniqueness on pieces of work to grant you complete ownership. Otherwise, anyone could just copy a digital file, claim it as theirs and call it a day. However, in the case of NFT artwork, you still might not get to retain the copyright and reproduction rights, which could stay with the artist.
NFTs cover many different assets. So long as that asset is capable of being digitized, it can be represented by an NFT – whether that be art, music NFTs, in-game avatars or even a tweet. In fact, the selling price of the NFT version of the first-ever tweet reached over $2.9 million.
NFTs are based on blockchains, which are basically digital transaction databases that safeguard information. Most NFTs are on the Ethereum blockchain, though other blockchains have their own versions of NFTs. To store NFTs, you use digital wallets, same as with cryptocurrencies.
Also like cryptocurrencies, you can find NFTs on a variety of marketplaces. OpenSea is the most well-known one, though others include Rarible, Nifty Gateway and Foundation. In particular, many NFT art marketplaces have cropped up due to a recent surge in NFT art.
Now that you’ve gotten the general gist of what NFTs are, let’s take a look at the pros and cons of NFTs.
NFT Pros and Cons
Whilst there are plenty of benefits of NFTs, there are some downsides too. A proper understanding of both will help you decide if they’re right for you.
Pros of NFTs
Offers security: We’ve already discussed the ownership aspect, but NFTs are also important in keeping your assets safe. Since they’re stored on blockchains, and it’s impossible for individual NFT tokens to be identical, your ownership over digital assets is assured and can be securely traced. This makes it harder for fraudsters to steal your assets, although as we’ve seen with cryptocurrencies, theft is still possible.
Market efficiency: Because they’re set on blockchains, there’s no need for agents and intermediaries, thereby connecting you directly with your audience. If you’re an artist, you no longer need to rely on galleries or auction houses to sell your work. Instead, you can sell it straight to the buyer as an NFT, which also lets you keep more of the profits. And aside from making it quick and easy for you to get paid, NFTs allow for a far more global reach, which could benefit you if you’re a less privileged trader.
Blockchain learning: NFTs offer you as an investor the perfect opportunity to learn more about blockchain technology whilst diversifying your portfolio. After all, blockchain technology has global uses as a storage infrastructure for information to be recorded and distributed. It also lies at the heart of nearly every cryptocurrency and is becoming increasingly important.
Fractionalizing asset ownership: NFTs also democratize investing by fractionalizing ownership of certain assets like, say, artwork and fine jewelry. It’s therefore possible for you to be one of multiple owners of a digital painting, which could increase its worth and revenues. It’s much harder to do that with a physical asset, but NFTs make it possible digitally.
Cons of NFTs
Energy-intensive: NFTs have a high carbon footprint, with a single NFT transaction consuming as much electricity as the average home for about a day and a half. This means that if you make, buy or sell an NFT through one of the many NFT marketplaces running on the Ethereum blockchain, you’re responsible for using some of that same energy. Ethereum itself can match entire countries in terms of energy consumption.
Inflated asset value: As you’ve probably already gathered, NFTs are simply a means of indicating assured ownership over assets and aren’t actually the assets themselves. Unfortunately, that isn’t always understood, meaning there can be some misplaced hype around NFTs that drives the price of assets up. Which, of course, means you end up having to pay more.
You may need to own Ether: Technically, any NFT seller can ask for payment in whatever currency they wish. Regardless, your options are limited if you plan to buy NFTs with U.S. dollars or any other kind of fiat money. As most NFTs are on the Ethereum blockchain, purchasing an NFT usually requires owning some amount of its native currency, Ether.
The choice is yours
Now you know there’s NFT pros and cons. Some invest in them for the bragging rights of ownership and others for the underlying assets. The choice is yours, but one thing you probably shouldn’t do is invest in NFTs just because they’re tokenized. As with cryptocurrency, common sense investment rules still apply, and you’d do best by looking at the underlying asset first. After all, NFTs are only representations of actual assets, not the assets themselves.
Earn NFTs with MyConstant
At MyConstant we’ve weighed up the NFT pros and cons, and launched our own NFT offering. We’re also giving out NFTs and guiding you on how you can score NFTs as rewards when you reach certain milestones.
We also have a range of cryptocurrency and USD products that help you take your crypto further and earn interest on crypto up to 14% APY, or you can deposit your crypto in our multi-cryptocurrency wallet (and even earn interest on stablecoins).
Other benefits of our platform include:
- 24/7 customer service.
- Rates as low as 6%.
- Early repayments for lower rates.
- Instant matching.
- Store and borrow against over 70 different cryptocurrencies.
Sounds interesting? Sign up for a free account today and start investing in NFTs if they’re right for you.
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