With the popularity of non-fungible tokens (NFTs) exploding, many regulators are trying to regulate this trendy new asset. Recently, MP Pierre Person introduced an amendment to the 2022 Financing Act aiming to clarify the taxation of NFTs.
But by the way, what exactly is an NFT? How to benefit from this? What are the risks of investing in NFTs? We tell you everything in this article!
What is an NFT?
A Non-Fungible Token, non-fungible token or NFT, is a unique 100% virtual token (or a digital version of something that exists in the real world) that is issued on the blockchain, usually Ethereum, and transferable directly between two people .
An NFT is different from classic cryptocurrencies such as Bitcoin or Ether. Crypto currencies are indeed fungible, i.e. interchangeable: 1 Bitcoin is worth 1 other Bitcoin, while an NFT is not fungible.
So it is a unique asset that cannot be replaced by anything else: 1 NFT is not worth 1 other NFT. Indeed, a non-fungible token has unique properties and exhibits certain proofs of authenticity and signatures such as a unique identifier, a unique creator or even unique content.
How are NFTs used?
The world of art and digital collectibles seems to be one of the most popular uses for NFTs, such as with NBA Top Shot NFT Trading Cards or selling artworks like Beeple or Art Blocks Curated at Christie’s.
Another industry at the heart of the recent NFT revolution, gaming brings together many ways to take advantage of these non-replaceable tokens. For example, you can buy items in games or manage real estate NFTs in metaverses. Decentraland, The Sandbox and Enjin are the most popular blockchain games. AxieInfinity is also one of the best known NFT video games.
With NFT collections in the sports world and some NFT games like Sorare, the sports world is integrating more and more NFTs that are used to create new products/services and provide unique experiences to fans.
Other uses of NFTs
Since NFTs can represent the proof of properties of many underlying assets and have many uses, they can also be found in logistics, avatars, music, domain names, ticketing, luxury brands or even real estate among other sectors.
Why invest in NFTs?
NFTs are seen by some as a way to take advantage of the blockchain to support a creator and have a special relationship with them. Others believe that NFTs are the future of how culture is stored. For some people, NFTs are a tool for speculation and investment.
Because NFTs are unique, the accompanying sense of scarcity can increase interest in certain NFTs, pushing up their price. Indeed, it is possible to make significant profits if you invest in the right NFT. Use cases for NFTs are also increasing, making this market increasingly popular and paving the way for significant growth and development potential.
How to invest in NFTs?
To invest in NFTs, you must choose and set up a wallet to send your recently purchased NFTs to. You then have to choose the platform you will use depending on the type of non-fungible tokens you want to acquire and the type of currency you want to use as a means of payment (fiat currency versus cryptocurrencies).
Among the most popular are the following platforms:
- Binance NFT;
- Axie Marketplace;
- crypto cats;
- Super rare.
To maximize your investment in NFTs, it is recommended that you focus on what you know how to do. So use your area of expertise to choose the best NFTs based on your goals.
Investing in NFTs: what are the risks?
A volatile market value that is not based on anything concrete
For those interested in NFTs, especially those related to art or collectibles, be aware that their value can rise or fall quickly. It is based on scarcity, but mainly on the market sentiment and reputation of an NFT at any given time. you. These assets are highly volatile. So you can lose your investment easily and quickly.
The lack of liquidity
The NFT market is not particularly liquid, which makes it more difficult to determine the value of an NFT, but also its resale. This situation is problematic for those wishing to speculate in the NFT market.
NFT platforms can be hacked. Therefore, it is not recommended to leave your tokens on the wallet of the platform you are using and always transfer them to your private wallet.
Scams and Copyright Issues
Beware of scams as some people may sell items as NFTs that do not belong to them or are linked to an NFT that is not at all what was originally described. We should also not forget that almost anyone can create and sell an NFT. Not all NFTs are created equal.
The risks associated with the inaccessibility of the NFT
An NFT is essentially just a code or link to what the NFT stands for. So this connection can be broken if there is a problem with the server or in the code leading to your NFT or if the company hosting your NFT goes out of business. While it may seem crazy to some, it’s also possible that you could lose access to your NFT simply because you forgot your wallet password.
Image source: Freepik
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