All you need to know about NFTs (that thing everyone is talking about)

Last month, the most digital artist Beeple had ever made on a piece of art was $100 — but on March 11, an NFT of his work fetched over US$69 million at Christie’s, making him one of the “most valuable living artists” according to the auction house.

News of the sale was followed by a slew of further sky-high NFT auctions and sales that took over the headlines and left everyday investors scratching their heads; everyone from Paris Hilton to Twitter CEO Jack Dorsey have gotten into the trendy technology and it shows no sign of slowing down.

What are NFTs?

But what on earth is an NFT—or a non-fungible token—anyways? And should you be bidding and buying them like ETFs if you ever want to retire someday?

The trendy blockchain technology seems overwhelmingly complicated to comprehend at first glance, but as it turns out, the cryptocurrency phenomenon might actually be a really great concept for artists and those looking to support their work.

Below, we spoke to a handful of cryptocurrency experts to get their insights on exactly what an NFT really is, whether or not you need to be buying one as soon as possible, and how it could change the landscape for artists and musicians struggling to get fair compensation for their work. 

What is NFT crypto and why are some now worth millions?

“Simply put, NFTs are like rare collectible baseball cards or action figures that your parents can’t accidentally throw out,” explains Michael Tessler, CEO and President of Multihouse. “They leverage digital scarcity, ledger technology, and exciting new advances in security to give value to what traditionally have been non-physical items.”

While NFTs can quite literally be just about anything—from a JPG to a document—typical NFTs are a version of a piece of art that has a certificate of proof on a ledger on the internet, and according to DJ Roller, Managing Director at Tetavi, all its value comes from who made it (the artist) and how much people (the buyer) think it’s worth.

According to Roller, NFT art is art which is different from securities investments, it’s another way to diversify your portfolio. Your investing in not just the art but the artist and this has potential residual value. It’s a hedge against inflation, it can go up in value when markets are going down.

“Art is also beautiful and the value of art goes well beyond the wealth that could be created by investing in art. No other type of investment has the potential to create the same personal reward the way art does, and NFTs are emphasizing that landscape,” adds Roller.

How do NFTs work, anyways?

According to Kurt Wucker, Entrepreneur and Writer at CoinGeek.com, NFT is, technically speaking, nothing more than a buzzword. “Generally, an NFT means ‘a unique thing’ and people are using Ethereum blockchains (the secure explorer service that NFTs are built on) to prove the amount of uniqueness of said thing.

“Every single hash that is produced on bitcoin or any other blockchain is itself an ‘NFT’ in the most generic sense—however, people do mine ‘magic numbers,’ which would be bitcoin hashes that are unique, like a vanity address,” adds Wucker.

Think about it like this: an NFT allows for exclusivity when it comes to licensing, ownership, and chain of custody up until the point of creation.

However, NFT creation is still at a point that doesn’t make it inclusive for up-and-coming artists or those working with a budget. According to Wucker, if you’re going to use Ethereum, you can’t make a low value NFT because it can cost hundreds of dollars to mint one, which obviously censors out users who might want to make $10 pieces of unique art.

In that case, do NFTs really bring anything to the table for everyday investors and artists?

“I firmly believe that NFTs will fundamentally change the way people interact with digital goods” shares Stefan von Imhof, Co-Founder, Alternative Assets Club. “After being shunned by traditional art galleries for decades, this technology has opened up a new avenue for wealth creation.”

According to von Imhof, as NFTs become more accessible, it will empower people to follow their passion for art or gaming, and have a career they never previously thought possible. “It means digital artists will finally, actually get paid and that’s a really big deal,” says von Imhof.

NFT’s will also change the world of gaming—from one in which a player’s account is banned for trying to sell an item for real money, to one in which vibrant million dollar sub-economies can exist inside of a game.

Should you, an everyday investor, bother investing in NFT?

The recent spike in NFT interest has brought a huge number of new NFTs onto the market—from a virtual property listing selling for US$500K to the first-ever tweet fetching US$2.9M last month alone. However, according to von Imhof, while some NFTs are high quality based on the reputation of the artist or project behind them, the vast majority are unlikely to retain their current value.

“Let’s be honest: once the short-term hype dies down and demand falls, most NFT prices will drop. In the long run,” says von Imhof. “However, I expect a K-shaped recovery with ‘blue chip’ pieces continuing to appreciate over time, while the less popular NFTs will lose some or all of their value.”

To those who want to invest during this wave of NFT hype, von Imhof urges would-be investors to keep the quality of NFTs in mind rather than assuming that just any NFT will automatically be a smart investment.

“Look for the Googles and Amazons of the NFT world. Look for the blue chip NFTs that will do well in the long run,” he suggests.