What You Need To Know About NFTs

Non-fungible tokens or NFTs are big business at the moment, gaining more traction every day. They’re the hottest digital asset right now, selling for hundreds of thousands of dollars. If you’re looking to invest in it, there are many different things that you need to know about it.

Are NFTs worth the money? Does it deserve the bad rap it gets from some people? Is it a bubble that will pop any time soon? Here’s what you need to know.

What Are Non-Fungible Tokens?

The term “NFT” comes from non-fungible tokens that are part of the blockchain. They’re in the same league as cryptocurrencies and run on the same technology but with different elements. What makes NFTs different from cryptocurrency is their fungibility.

In assets, something is fungible if something is replaceable, interchangeable, and similar to others of its kind. Non-fungible tokens are unique and irreplaceable, with only one owner at a time registered at the blockchain’s digital ledger.

NFTs can be any type of digital asset, considering the token itself is a unique cryptographic string of characters. While much of its use is in tradeable digital collectibles, its benefits extend beyond. For example, some medical startups call NFTs “the future of the healthcare industry” due to their uniqueness and verifiability.

What Types of NFT Are There And Where Can You Buy Them?

People think that NFTs are invaluable because you can right-click a picture and save it like any person on the internet. The truth is that the cryptographic string on the blockchain ensures that there is only ever one owner for the NFT.

If you’re looking to invest in NFTs, there are many varieties that you can choose from. Depending on the type of NFT you want, you can find almost anything. These include:

  • Art
  • Music
  • Trading Cards
  • Memes
  • Videos
  • Gifs
  • Domains
  • Images

You can also buy them from different marketplaces, depending on your interest. The most famous NFT marketplaces right now are sports-related, with marketplaces like Solare and NBA Top Shot among the most common marketplaces around.

What Do You Need To Buy NFTs?

If you’re looking to buy an NFT, you need to start with a digital wallet. Most NFTs are sold in exchange for cryptocurrencies, usually using Ethereum within the Ethereum Network. Digital wallets are a must to exchange cash for crypto and then trade the latter for NFTs.

Digital wallets, known as crypto wallets, work as digital addresses where you can keep your cryptocurrency. It can also work as a great way to keep your NFTs in one place. You would need to go to the platform’s website, then register for an account. Here, you can send the crypto you bought from exchanges or buy it here directly.

Pick the marketplace where you want to buy the NFT. If you have enough crypto to get the NFT, you can start the buying process. Most NFTs can be purchased at a flat price, while others are sold at auctions. 

Register with the marketplace you prefer and follow their process. From this point, everything is as easy as picking the ones you like. If it’s an auction, you would want to leave your offer and consistently check on the NFT until the bidding period ends.

Are NFTs Taxable?

It’s crucial to know that non-fungible tokens are subject to taxes, much like cryptocurrency. As they are treated as personal property or stocks, you will be taxed for capital gains for every purchase. You would have to declare each one. You would likely prefer to get taxed for long-term capital gains.

In some cases, you may experience NFTs getting taxed through the collectible tax rate, which is far higher than capital gains. The IRS is yet to rule NFTs for tax purposes, so it’s best to talk to a tax professional to make sure you’re covered.

There’s also a possibility that you can get taxed for the value of the cryptocurrency that you’re using to pay for the NFT. If the value of the crypto you used increased before the tax period.

Should I Buy NFTs?

Just because you can buy NFTs does not mean you have to buy them. One of the most common issues with NFTs is their value volatility and the relative risk of buying the token. There isn’t a lot of history to them just yet, so you can’t judge them according to their short-term relative history.

We know about NFTs, and the success stories tied to them are unbelievable. Many of the best sold NFTs went for millions of dollars, with many selling for a few hundred thousand dollars. These numbers are compelling. It also helps that NFTs are performing well.

If you’re wary about investing thousands in NFT, start with a small batch to test the waters and dip your toes. See if you have an eye for them. Investing in NFTs is a personal decision and a big financial one too. If you have some spare cash, it’s worth considering buying an NFT if you think it can make good money.

How Much Value Can I Get From NFTs?

The NFT market works as a large art emporium. The value of NFTs is based entirely on how much other people are willing to pay for them. There is heavy demand at the moment, which means it will consistently drive prices up.

NFTs are an excellent investment, but they can resell for less than what you bought them for, much like stocks or crypto. If people think there is too little value in the NFT you own, whether it’s too common or nobody believes in its value, you may not even be able to move it.

On the flip side, the right NFTs can net you a lot of money on the open market. Celebrity NFTs and sports NFTs sell for a high price, primarily due to the size of their fandoms. Sports NFTs are quite common due to their names being well-known worldwide.

Final Thoughts

Non-fungible tokens are rising in demand. Whether or not they’re here to stay, they are very profitable, and they’re opening a lot of possibilities in digital art and even further than that. It’s easy to see how the big dollars can blind you or scare you away, but it’s vital to learn more and try it out for yourself.