If you’re reading this article, you’re probably quite interested in the current NFT craze. NFTs, or, non-fungible tokens, are units of data on a blockchain that are completely unique, and as such, can work as a tradeable digital item, to great effect. It’s only natural that you’re curious about them – after all, it’s a chance to get one-of-a-kind digital goods from artists, musicians, and all other manners of creators. But even then, there are some things you should check before using your hard-earned money to buy these non-fungible tokens.
NFTs are a very new phenomenon, less than a decade old, and because of that, you should first research them extensively before making a move.
To help you with that, below you’ll find a few tips concerning what to focus on and what to avoid to make sure your cash is well spent.
Make Sure that Your NFT Marketplace Is Not a Scam
When you decide to buy NFTs, you’ll need to find a reliable place to get them. Websites like OpenSea or mintNFT host all sorts of non-fungible tokens, including digital art, photographs, sports collectibles, and even whole virtual worlds. The purchase is safe and convenient thanks to a large number of renowned cryptocurrencies these stores allow you to use. Such pages are usually safe from fraud.
The problem is, scammers know that too, and because of that, many of them try to emulate the looks of respected marketplaces. These fake sites are often so well-done that you might have a problem distinguishing between a real one and a sham. Luckily, there are some yellow and red flags that can help you here.
First of all, look at the prices and see if the NFT that you want is much more expensive or significantly cheaper than it should be. To illustrate the point, it might be suspicious if a creator known for very expensive tokens suddenly has its digital items priced much lower. That might be an indication that the site you’re using is a fraud. Moreover, always check the seller before you pay for anything. On true OpenSea, verified and trusted providers have a blue checkmark next to their name.
Be Aware of Potential Fees
Most sites set a certain amount of money as a toll seller has to pay each time someone purchases their product. This is essentially the same principle as with the exchange of cryptocurrencies like Bitcoin or Ethereum. What most sites don’t do is charge the buyer. On marketplaces like OpenSea, what you get is what you pay for – no more, no less. However, there are some stores that set a transaction toll for both sides of the NFT business. This means you need to choose your platform well or risk paying a significant amount (e.g., 5% fee for an NFT worth tens of thousands of US dollars) for something as simple as a digital transaction.
Understand the Environmental Impact Some NFTs Have
Non-fungible tokens are “minted” (or tokenized) using the various blockchain technologies. One of the most popular ones is Ethereum (ETH). Unfortunately, while it’s a highly successful and digitally safe solution, it’s also harmful to the environment. To illustrate the point, a single Ethereum operation is so energy-intensive (over 230 kWh) that it takes more than a hundred thousand VISA transactions to consume a comparable amount of power. A more grounded example – an average US household uses almost 900 kWh of electricity per month.
Because of that, it might be a good idea to resign from purchasing NFTs made on this cryptocurrency. There are many others that are reliable, safe, and popular enough to mint on NFTs of great value, so consider switching to them.
Ask Yourself if You Even Need to Purchase NFTs
The main selling idea of non-fungible tokens, whether they are digital items, music, or art, is that there is always only one original, the one you purchase. Unlike traditional art, however, there is no visible difference between the “true” NFT and any other digital copy. In “material” goods there are always some imperfections found in various reproductions, but here, a downloaded JPG copy of an NFT is identical down to the last pixel. With a copy, however, you don’t get the blockchain address, which is always one of a kind.
This makes it a viable trading item, in that, for what it’s worth, the buyer will always hold the “original item’. But even if you want to take part in buying NFTs and selling them for a profit, later on, consider how volatile the market is. Just because you bought a unique digital item doesn’t mean that you’ll be able to earn something in a future sale. It might be that the worth of this piece will crash, and you’ll be left with a useless digital file and significant financial losses.
At the end of the day, what decides if you’re buying non-fungible tokens is entirely up to you. You can go your whole life without ever buying or selling them, and it won’t be a big deal. However, if you do decide to do so, be sure to understand what you’re getting into fully. Make sure the site you’re using is not a scam, check if you can be charged for making a purchase and how much that would be, and know what cryptocurrencies to avoid in order to save the environment. Also, be aware that you might not be able to make a profit from NFTs. As with any other investment, proceed with caution, do extensive research, and hope for the best.