A couple of years back, you would've laughed at the thought of selling (or buying) a meme. Yes, the funny, often-relatable pictures and videos you see floating around the web.
Today, not so much, as Non-Fungible Tokens or NFTs are on the rise. India recently got its first NFT exchange for memes with The Meme Club and looks ready to welcome meme-mania. But the NFT craze isn't limited to digital items. Even physical items linked to NFTs have found value in the crypto world.
Just consider the case of the veteran actor Amitabh Bachchan. His NFT marketing services worked magic last year, as he auctioned his NFT collection for a whopping Rs 7.18 crore! Of the assets sold, there was one Iconic Vintage Posters NFT. It featured around seven autographed posters that were handcrafted. Yes, you can buy physical assets using NFTs as well.
So, if you, too, find yourself drawn to the world of NFT tokens and want to invest, we've got you covered.
As you can see, NFT in cryptocurrency has a unique place.
But to simplify, NFT tokens are like smart contracts created on the blockchain, saying "This is original" and "X is its true owner". So, whoever owns the asset gets the ownership rights publicly documented on the blockchain.
And when someone else buys the NFT, the ownership is transferred, and this change is publicly reflected in the same ledger. As a result, you have clear visibility of a specific NFT's past and present ownership, making the verification process more straightforward.
Moreover, NFT prices are usually fixed by the creator or determined based on the highest bids. So apart from ownership, price is a factor to look out for when investing.
Now that you've learnt all about NFT investing, let's understand where and how to begin your NFT investment journey.
NFTs are sold on dedicated marketplaces called NFT exchanges. Each of which is powered by a specific blockchain network. As a result, you can trade NFT in cryptocurrency only. In most cases, the marketplaces use the Ethereum network to carry out the transactions.
Here are some good marketplaces for NFT trade in India:
To buy NFT of your favourite collectibles, you only need to follow three steps.
Before you can invest in NFTs, you need to buy a cryptocurrency. Why? Because you can only trade NFTs in cryptocurrency. Today, you can purchase cryptocurrency like Ether on dedicated exchanges like WazirX or Binance.
Then, you will need to create a digital wallet compatible with the cryptocurrency you've bought. Using a simple registration process, you can set up the wallet – a digital address to store the currency on platforms like Metamask or Coindesk.
Once the wallet is functional, you must transfer the cryptocurrency to the wallet. This wallet will also double up as a storehouse for the NFTs you buy later.
Today, there is no dearth of marketplaces where NFTs are traded daily. However, don't buy into what NFT marketing services are advocating.
Perform adequate research on the marketplace by comparing and contrasting the NFT ownership verification process, transaction process, cryptocurrencies accepted, and investor reviews, among other factors. These will help you make an informed choice.
Not to mention, the NFT prices usually don't vary across marketplaces. But the charges for transactions do. So remember to compare transaction charges when zeroing in on the marketplace.
But after you've chosen one, you will need to create an account to begin trading.
Ultimately, once your account is set up, you can shop around the marketplace and buy the NFTs you desire. You will find different sorts of NFTs listed for either a fixed price or auction. In the latter case, you will need to participate in the bidding to get the NFT. But you can use the cryptocurrency in your wallet to carry out the purchase in either case.
Once the buying or bidding process is successful, the amount will automatically get deducted from your wallet. The marketplace may charge a transaction fee for the same.
And that's about it! The process is relatively easy to understand, as you can see. However, when trading NFTs, you should remember they are volatile assets and carry substantial risk. But how can you determine that?
You collect valuable NFTs, they increase in price, and you sell them for a profit. Or you invest in what seemed like a valuable NFT. But even after a few years, its price never increased, so nobody wanted to buy.
Sounds familiar? Yes, NFTs work exactly how share trading works. However, since NFT prices are affected by factors like rarity, utility, and tangibility, their rise or fall is harder to predict.
However, if you decide to join the NFT craze, you may want to steer away from what NFT marketing services are saying and consider a few things. First off, the credibility of the token. Besides NFT prices, you should make sure the token has:
Secondly, remember NFT prices are affected by scarcity. The rarer the item, the higher its value. So, if a particular NFT catches your eye, ensure the asset has a promising future before taking the leap.
You can sell an NFT in the following ways:
- Minting an NFT
Minting is the process of creating a new NFT and registering it on a blockchain. This makes it a unique, verifiable digital asset. To mint an NFT for sale, you need to first select a platform that provides the tools to create and manage NFTs.
Then, you need to set up a digital wallet that supports NFTs. This wallet will store your NFT and handle transactions. Once done, you'll have to upload the digital file you want to mint, such as artwork, music, or video. Make sure it’s in a supported format.
Follow the platform’s instructions to mint the NFT. Once minted, the NFT is live on the blockchain and available for sale.
- Reselling an NFT
Reselling involves putting an already minted NFT up for sale on a marketplace. To resell an NFT, start by selecting the platform and link your digital wallet to the marketplace.
Navigate to the section where you can manage your NFTs and select the one you want to sell. Confirm the listing details and pay any applicable fees. Once listed, potential buyers can view and purchase your NFT.
- Listing an NFT
Listing is the process of making your NFT available for purchase on a marketplace. To list an NFT, visit the marketplace and select the NFT you want to sell from your collection. Select the price or auction terms and fill in the listing details. Make sure to review and finalise the listing by confirming it on the blockchain.
To attract buyers, you can share your listing on social media or within NFT communities.
Advantages:
- Ownership and authenticity: NFTs provide verifiable proof of ownership for digital assets, ensuring the buyer has a unique, original item. Buyers can also track an NFT's history, including previous owners and creators using blockchain technology to verify its authenticity.
- Empowering artists: NFTs enable artists to monetise their digital creations, offering new revenue streams and exposure. Moreover, artists can earn royalties from secondary sales, allowing them to benefit from the increased value of their work over time.
- Easy access: NFTs can be bought and sold on global platforms, increasing market reach and liquidity. Some NFTs also allow for fractional ownership, making it possible for multiple people to own a share of a high-value asset.
Interactive content: NFTs can incorporate interactive elements, such as virtual experiences or digital goods in games, expanding their functionality beyond traditional media.
Disadvantages:
- High risk: The NFT market can be highly volatile, with prices fluctuating based on trends and speculation rather than intrinsic value. This can lead to significant losses for investors if market conditions shift.
- Environmental concerns: The minting and trading of NFTs require substantial energy due to blockchain transactions, contributing to environmental concerns and high carbon footprints.
- Ownership confusion: Buying an NFT does not necessarily grant copyright or intellectual property rights, which can lead to confusion about what is owned and the rights associated with it.
To determine if NFTs are the right investment for you, it's important to consider several factors. This is because while NFTs offer potential high returns, they are also speculative and volatile. Therefore, it's important to determine if they fit within your broader investment strategy and risk tolerance.
Moreover, the market for NFTs is relatively new, and prices can fluctuate dramatically, which might not be suitable for more conservative investors. You must conduct thorough research on NFTs, including the different platforms, types of NFTs, and factors influencing their value to make an informed decision.
Diversification is also important. NFTs should be part of a well-balanced portfolio, rather than your sole investment. Additionally, make sure you're aware of legal and tax implications related to NFTs to understand how transactions and profits are taxed.
NFT for beginners can be a tough road to navigate. Especially since the entity is highly volatile and is evolving every single day.
But are NFTs legit or merely a passing fad? Well, only time will tell. So, before you jump on the bandwagon and buy an NFT, make sure you understand the ABC of the digital asset. Only then can you make the most of your investment.
Nevertheless, if you are looking for loans to fund any investment purpose, Tata Capital has a variety of offerings. Check out here.
To start investing in NFTs, start by understanding what NFTs are, their market dynamics, and how they work. Once you're aware of the basics, select your preferred NFT marketplace, set up a digital wallet, and buy cryptocurrency. Browse the marketplace for NFTs that interest you and place a bid or buy directly.
NFTs can be a good investment for some, offering high returns and unique ownership of digital assets. However, they are also highly speculative and volatile. So, conduct thorough research, assess your risk tolerance, and consider whether NFTs fit your investment strategy before investing.
The cost of an NFT can vary widely based on its type, creator, rarity, and demand. Prices can range from a few dollars to millions of dollars.
NFTs are not real money; they are digital assets representing ownership of unique items or content.
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11 September 2024
10 mins read
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