NFTs, or non-fungible tokens, have been getting a lot of publicity lately, thanks to several high-profile (and really big money) sales in the past 18 months. Before that, not very many people had even heard of an NFT, let alone were willing to invest in one.
But whether you are familiar or not with the NFT markets for digital artwork, make no mistake that the market for NFTs has been robust, although volatile. Some estimates are that monthly sales of NFTs approach $2 billion, with a total market capitalization of approximately $7 billion.
NFTs are digital art that can be shared along a blockchain, which is a secure database shared along a computer network. Blockchains are best known for their role in cryptocurrency systems, where blockchains are utilized to maintain a precise record of transactions and ownership. Just like with cryptocurrencies, blockchains are used to determine which NFT is owned by whom.
The difference is that cryptocurrencies are considered fungible, in that individual tokens are identical to each other and can be exchanged for similar value. One bitcoin owned by person A, for example, has the same value as one bitcoin owned by person B. What that individual bitcoin is worth may change with fluctuations of the market, but that doesn’t change the fact that one bitcoin is equal to another bitcoin.
How Do You Invest In NFT’s?
NFTs, on the other hand, are unique assets that cannot be replicated, and therefore one NFT is not necessarily equal in value to another NFT. NFTs can be bought, sold, or traded, but because no two NFTs are identical, the two NFTs do not have the same value simply because they are both NFTs.
What is generally misunderstood or overlooked is that when buying an NFT of a piece of digital art, the investor usually does not also secure the copyright to the original artwork. They are only receiving ownership of the digital representation of the art. Because NFTs are so new, there is no doubt that intellectual property law will evolve with this new market. In the meantime, if you have any questions, regarding your NFTs give Ference & Associates a call at 412-741-8400.