By Nicholas Prentiss, Baker Tilly
In today’s day and age, digital trading is everywhere. Cryptocurrencies are being mined daily, blockchains and secured wallets are being generated and released left and right. The new trend that has caught the eye of investors is the nonfungible token (NFT) market.
NFTs are digital records of proof that represent all types of creations, including popular memes, famous tweets, master recordings, unique artwork, and even GIFs of NBA’s greatest buzzer-beaters. When an investor buys their chosen digital asset, they are given a NFT that, essentially, provides a certificate of ownership and authentication that says that asset belongs to them now and that it is the original version. The NFT resides on a blockchain, which is an immutable digital ledger. It handles the tracking and management of individual NFTs and protects and authenticates each token. If the NFT owner decides they no longer want that asset, they can sell it to someone else and so on, with every transaction recorded in the blockchain along the way. The emerging market provides seemingly endless opportunities. Like any new “trend,” there are advantages and risks to be considered.
Let’s start with some of the advantages that NFT trading has to offer. NFTs can represent a large variety of options, which may appeal to a wide population of investors. By investing, one has the opportunity to not only diversify their portfolio, but to collect and own unique items which can be authenticated and resold.
One of the major advantages that NFTs offer is the potential for collecting. Similar to buying antique cars or Beanie Babies, the market for NFTs can provide individuals a place to collect and trade unique items that may appreciate wildly over time. The NFT market is potentially a massive opportunity to digitally collect and trade in a world that continues to trend toward the digitization of all things.
Another advantage of trading within a blockchain is that each individual token carries a unique identification number which is virtually impossible to duplicate. These security measures provide additional assurances to investors that the tokens they purchase are, in fact, one of a kind.
The NFT market carries a lot of intrigue and potential; however, it is important to emphasize the NFT market is still in the early stages of its development.