Pros & Cons of NFTs - Part One - Pros.
Digital certificates are becoming an asset class just like others
NFTs are on everyone's lips. You can read information about them in all media on a daily basis, podcast series are booming.
In this and the coming week we want to dare with our blog an attempt to work out once the basic pros and cons. This week we start with the pros.
With the current Internet hype around so-called NFTs, sometimes unbelievable sums are paid almost on a daily basis. Even though the average asset value has fallen massively compared to the boom in the last quarter of 2021, the outlook and indicators are currently pointing north again.
Stay tuned! Next week the Cons!
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Stay tuned! Next week the Cons! 〰️
New blockchain business models on the rise
The acronym NFT stands for Non Fungible Tokens, a type of digital certificate of authenticity based on blockchain technology, which is also behind the cryptocurrency Bitcoin. In short, NFTs make virtual collectibles such as digital art, music or tweets forgery-proof and therefore tradable. The most widely used crypotocurrency in the NFT world, i.e. blockchain business model, is Ethereum, followed by Solana.
Ethereum Fundation
However, one should not lose sight of new business models in any case. A revolutionary new approach with the Signumart.io platform and the Crypoto currency wallet Signum XT appears to be particularly interesting here. In any case, keep your eyes open! There are very interesting new business models emerging with a focus on significantly lower minting costs at the moment of NFT generation as well as drastically lower energy costs.
Signum XT Wallet on Chrome
Signumart.io
NFT Value
How much an NFT is worth is solely determined by the market. If a good is limited, the price increases depending on demand. This also applies to the digital world.
A new and young tech-savvy community is deciding just that:
Digital tokens are important to us, and we are willing to spend a lot of money on them. That's a good thing. Because there's far more behind it than hedonistic fun by people who don't know where to put their money.
Pro #01
The first reason to be identified is probably the appreciation for digital forms of art or games and thus a possible added value for the community. Here, the NFTs are not considered in isolation, but are also provided with corresponding benefits in their additional value. There is no limit to creativity here.
Pro #02
The second reason inherent in the emergence of NFTs is the appreciation for important and singular moments. While in the analog world physical objects, such as a piece of the Berlin Wall, are traded expensively, many people of generations Y and Z also perceive the founding of Instagram, TikTok or Wikipedia as memorable. So investing in the first tweet of a revered founder makes perfect sense.
Or think of a graffiti project taking place and celebrated in the urban habitat. Over weeks, the project emerges. Some moments can be understood as a kind of milestone and are documented photographically and with video sequences. Afterwards, the finished project may exist in the urban environment for a certain period of time and then has to make way for a real estate project. The unique digital documentation in photography and video can have an increasing value in the community.
urban art/graffiti project in the central district of São Paulo, Brazil
Pro #03
As a third aspect, the prizes reflect a fascination with technology and fun to try. Those born "digital natives" may find this natural. But those venturing into this terrain for the first time may see the NFT market as an investment in their digital education. And then there's the rapidly growing number of digital galleries around the globe. As an example, consider the National Museum of Singapore Teamlab.art or the NFT Gallery Crypoto Portal in Prague.
Many people are already using NFT technology. Those who love soccer buy digital trading cards. Music lovers invest in the first recording of a beloved song. The music market may be facing another massive upheaval of the business model due to NFT technology.
These investors represent the vanguard of modern financial technology. They know how the blockchain works, what cryptocurrencies are, and how assets can be digitally secured.
Concerns?
Of course, the NFT hype can develop into a bubble that bursts with a loud bang. At the moment, however, we are probably seeing a simple correction. So the dangers are limited as long as you follow the rules for all speculative asset classes:
Only put in capital you're willing to lose.
In this way, NFTs can even enrich a classic portfolio. Because a good portfolio always includes a small speculative portion. And this can also consist of NFTs.
It can be fun.
In the coming week, we will take a look at the cons. Stay tuned!
