A big question in the crypto economics space is whether Non-Fungible Tokens (NFTs) could be better than cryptocurrencies as an investment vehicle. The argument goes something like this: NFTs are digital natives and thus not subject to all of the problems cryptocurrencies face. In this article, we will look at both investment options, while considering the pros and cons of each.
First, we’ll look at why some think NFTs will become better than cryptocurrencies and then we’ll consider the other side of the argument.
NFTs-What Are They?
You certainly must have heard about non-fungibility in the virtual market. Well, NFTs are non-fungible digital tokens that have an attributed uniqueness to themselves which cannot be swapped with something else. They are part of the ethereum blockchain. Literally, anything, from a picture to a GIF, could be an NFT once it gets digitalized. They are most popular and sensational for the idea of selling and popularizing art through their digital platform. One can buy or sell a digital item that is an NFT using blockchain technology.
Cryptocurrency on the other hand is fungible in the sense that it can be traded for something else that has an equal value. Consider etherium for instance. You can trade ethereum for some other cryptocurrency or even money when it is worth the same amount.
NFTs have several distinct advantages over cryptocurrencies:
- The infrastructure is already in place for non-fungible assets to be traded.
- There is no transaction fees associated with transactions of NFTs. This makes them more accessible to individuals looking to transact smaller amounts.
- There is less risk associated with the loss of a private key necessary to access the NFT wallet.
- There are no maintenance costs to hold NFTs. If you want to invest in an NFT, you simply pay the purchase price.
On the other side of the argument, it is worth considering why some think NFTs will not replace cryptocurrencies as an investment vehicle:
- Low liquidity – at least for now. The CryptoKitties game created a huge spike in demand for ERC721 tokens, but that demand has since subsided.
- NFTs don’t really involve trading or exchanging any kind of value making them less likely to be used as an actual currency and more like a collectable.
- NFTs can be duplicated and resold on secondary markets, meaning their value will decrease over time as the supply increases.
On the other side of the argument, cryptocurrencies have several distinct advantages over NFTs:
- More risk (potentially) – The biggest risks associated with investing in cryptocurrencies are scams and hacks. But even legitimate coins can crash due to market conditions.
- The larger market size means there will always be people who want your cryptocurrency.
- A faster development process, with more technical expertise involved, can lead to quicker technological improvements.
- Cryptocurrencies are more widely accepted by service providers, making it easier to transact with people you don’t know.
There are also some reasons why NFTs might be better for investment vehicles than cryptocurrencies:
- Less risk (potentially) – Cryptocurrencies are subject to highly speculative market conditions causing significant volatility.
- Long confirmation times – It can take several days for transactions of cryptocurrencies to clear, sometimes even weeks if the coin is experiencing high demand on the network.
- High transaction fees – The mining fee associated with cryptocurrencies makes it more expensive to use them as a currency than an NFT, especially when transacting smaller amounts.
As you can see, both cryptocurrencies and NFTs have their advantages and disadvantages. When choosing to invest, you need to have such details in mind. The good news is that sites like insidebitcoins, provide information about the best cryptocurrencies and NFTs as well as other related issues. With such information, it becomes easier to decide which investment vehicle works best for you.
NFTs- The million dollar investment today!
The idea behind NFTs is what would drive its worth to millions. Just because they digitalize and popular real-world items like dogs, ducks, clocks, and whatever imaginable, lends more interest of the people to these non-fungible tokens. There are widespread beliefs and predictions that NFTs would certainly blow off the crypto market and run more popular than them.
According to predictions and mainly according to science, there will be almost everything done online just in a matter of some years. Be it authenticating something, or doing real estate transfer taxes, everything would be online. This gradual shift of every other process do the online mode would give a rather big expansion to the NFT market.
The potential of these non-fungible tokens can be gauged by the fact that they were nowhere to be seen a year back, and today! There are literally stories at every other front about people who earned millions through them. Even a kid as small as 5 years of age knows their potential to sell them off for a million dollars! It would definitely not be an exaggeration to say that these virtual tokens will move ahead all!
Within a matter of just one to two years, from the calender getting changed to 2022 from 2022, more than $20 billion of these tokens were traded! That’s tremendous for something that just entered the market.
These tokens are described as virtual assets because of their characteristic to not get created a copy. There is a high possibility that an NFT bought for only a hundred dollars may sweep to a million dollar worth in just no time!
Check for the search engine’s global search value for ‘NFTs’ and be sure to be taken by surprise! The volume’s huge. The internet is filled with stories of NFT-made millionaires.
The crypto market on the other hand has been experiencing an all-time low with bitcoin losing more than thirty percent in just five weeks. The uncertainty and fear across the crypto market have been clouding the entire environment. On the other hand, there is positive news about NFTs reaching out to people every other day.
Both NFTs and cryptocurrencies have their advantages, but it’s still too early in the game to determine if non-fungible tokens will ever overtake cryptocurrencies. As it stands now, they don’t directly compete for the same use case. They are both digital currencies with different qualities that make them better suited for different use cases. We will have to wait and see what both of them have in store, in the coming years.