Advantages And Disadvantages Of Non-Fungible Tokens
Non-Fungible Tokens have become extremely popular during the COVID-19 epidemic. So what are the pros and cons of NFTs applied to the business models?
Nowadays, technology has revamped all aspects of the world. Serious ailments that formerly had few or no treatment choices are being treated, vehicles operate on battery power rather than fossil fuels, and individuals on opposite sides of the globe may communicate via video chat. But how far will technology go in terms of influencing people’s perceptions of the world?
Blockchain technology, which fueled the cryptocurrency mania that propelled Bitcoin into the tens of thousands of dollars range, has just blown off a new trend. Collectors and investors are spending hundreds of thousands of dollars, if not millions of dollars, to hold non-fungible tokens, often called non-fungible tokens or NFTs in short. Investing in such a new rising currency, do investors have to confront numerous risks and burdens?
General Theories About Non-Fungible Token
NFTs are digital works of art that exist on the blockchain network and are diverse in a variety of forms. Images, music, memes, video clips, and even tweets are some of the most popular forms of digital art. The most typical feature of NFTs is non-fungible. Fungibility simply indicates that the commodity contains several units, all of which are identical and interchangeable, and all of which are indistinguishable from one another.
The United States dollar, for example, is a highly fungible asset. According to TitleMax, the United States presently has 11.7 billion $1 notes in circulation, each worth the same $1. You may lend a handful of these dollar notes to a buddy and the value of the bills you get is indistinguishable from the dollars you gave out due to their fungibility. Non-fungible assets are one-of-a-kind in nature. For example, the Mona Lisa, one of the world’s most iconic paintings, is irreplaceable.
The pros of NFT
The following are some advantages collectors look for when purchasing non-fungible digital artwork:
- Increase in Market Value
When you acquire these tokens, just like any other investment, there’s always the possibility of your money growing in value. CryptoPunk #3100, for example, was initially sold for $2,127 on July 6, 2017. The artwork’s owner refused to sell until March 2021, despite the fact that he or she had received several bids. Nonetheless, given the more than $7.5 million return on investment, they received when they sold, that collector is probably performing backflips.
- Possession of a One-of-a-Kind Item
These digital treasures are non-fungible, which means they can’t be replaced. When you know you have a one-of-a-kind piece, whether it’s a painting, a piece of furniture, or a digital image, audio clip, or other digital assets, it’s such an incredible feeling.
At the present, blockchain technology is generating a lot of interest. Some predict that technology will have the same impact on consumer behavior as the Internet did. That’s a fascinating concept, and by purchasing an NFT, you’re actively contributing to that technological advancement.
- Data Record
Maintaining records of authenticity and chain-of-ownership for priceless artwork appears to be difficult at times. Because NFTs exist on the blockchain, there are clear ownership records for all of them, which means your digital artwork should never be stolen or its legitimacy questioned. The technology has ultimately grown into a better means to manage and handle important data and records, not only as a tool to manage digital treasures.
Cons of NFT
There’s no denying that NFTs are intriguing. However, there are also significant disadvantages to investing in them. Here are some of the most major disadvantages:
- Impossible to Digitize Physical Art
The motives for owning physical art and digital art are frequently different. Physical art cannot be digitized. Seeing a one-of-a-kind picture with your own eyes has an attraction that these tokens can’t match.
- Value Uncertainty
NFTs are perplexing assets, even for specialists. When you buy one of these non-fungibles, you aren’t necessarily buying the art’s copyright. People may still locate copies of the work for which you hold the token on the Internet, and there’s nothing stopping them from copying and pasting these files into social media, effectively showing off and sharing something you may have spent millions for.
- Environmental Expense
The environment has recently been a prominent issue of discussion. Any record added to the Ethereum blockchain necessitates a considerable amount of compute, which consumes a significant amount of energy. As a result, broad trading in NFTs and other blockchain-based assets isn’t always a green process. Indeed, almost everything related to a blockchain is unsustainable from an environmental aspect due to the quantity of energy consumed.
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