The Non-Fungible Token (NFT) marketplace is vast and caters to all types of traders. From beginners who might want to purchase fan art for pleasure to the seasoned veterans who spend several million to acquire future classics — there is something for everyone.
What Must You Know Before You Trade In NFTs?
NFTs is among the leading technologies in the cryptocurrency space, along with DeFi and smart contracts. Here are the things to know before you invest in them for making profits:
· The Most Promising Categories In NFT: People might think that digital artwork is the most promising category in NFT. However, some types of NFTs could be more lucrative over the long run. These include gaming assets, sports collectibles, and music. Premium NFTs such as those made by established artists have more value than general NFTs created by regular sellers.
· Due Diligence: Knowledge or awareness about the object being bought is essential while dealing in NFTs. Digital art and collectibles are now trending, but several purchased NFTs will eventually become worthless with no buyers for them. Collectors and investors will have to keep themselves updated with the latest developments and trends to have an advantage in the volatile markets. One must research with due diligence before making any trades.
· Market Volume And Liquidity: Market volume and liquidity are matters of concern when it comes to NFTs. Unlike cryptocurrencies, where the market is mainly liquid for large-cap cryptos, NFT markets are more illiquid, and it can be challenging to sell an NFT in an aftermarket. It is vital to know that purchasing an NFT can be a long-term commitment due to illiquidity.
· User Experience: An NFT marketplace is much more than a simple place for trading tokens or collectibles. Platforms like Axie Infinity and Decentraland, for example, have created utility tokens that allow users to trade collectibles and assets with each other without having to be dependent on the platform itself. Choosing the correct marketplace for trading NFTs is vital.
· Fees: One significant factor to keep in mind is transaction fees. You should know both the platform’s and the NFT blockchain’s underlying gas fees, so you are not taken unaware. The prices include additional costs that go to the platform or creator after a sale and can range from 2.5% to 15%. Before making any dealings, ensure no hidden costs are involved.
How Does The Future Look Like For NFTs?
NFTs became more mainstream when Christie auctioned a digital work by Mike Winkelmann. The revenue being generated by them continues to rise by the day. The NFT marketplace, for instance, grew over 800% in the first few months of 2021 to $490 million. It has been estimated that almost 85,787 NFTs were traded in May, amounting to nearly $5.8 million a day.
These numbers show that it is safe to assume that NFTs are here to stay. There are risks involved, however, and people should take care before investing their money. There are several ways NFTs can be used beyond only collectibles in the future. Some future applications include:
· Gaming: NFTs allow players to own digital items such as skins and unique assets (As discussed in Chapter 5).
· Document Storage: NFTs can be used for secure storage, retrieval, and authentication of documents.
· Anti-Forgery Applications: NFTs can be excellent for dealing with data duplication, forgery, and modification.
· Environment-Friendly Paperless Transactions: NFTs allow organisations to store information and transactions in a secure, paperless way which is beneficial for the environment.
Why Is NFT Adoption Bound To Grow?
NFTs will find increasing use and acceptance across various fields due to the nature and wide case-uses of the technology. Already, the technology is making waves in several sectors, with artists and content creators adopting NFTs for IP protection and trading. In digital art, NFT technology has provided an unprecedented ability to content creators so that they enjoy a safe, secure environment where their copyrights are protected. Several large and well-known corporations such as Marvel, Nike, UFC, FC Barcelona, Gucci, and more have adopted and released NFTs, and the trend shows no sign of stopping.
Probable Future Use-cases For NFTs
These are the immediate probable uses of NFTs in the foreseeable future:
· Buying and selling digital art
· Trading rare items and guaranteeing their authenticity
· Providing more autonomy to players in the gaming industry
· Enriching travel and tourism experiences in the hospitality industry
· Helping the fashion sector ensure authenticity and prevent illegal reproduction
· Tokenized game tickets and merchandise in various sports
Conclusion
NFTs are an exciting chapter in the field of blockchain. They will find increased usage in coming times, and those who choose to ride this trend will undoubtedly make excellent profits with a wise investment. However, like every other transaction, people need to take all necessary precautions for maintaining security and follow the best practices involved.
