Invest ahead with NFTs

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April 17, 2023
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Non–fungible tokens, or NFTs, are the latest cryptocurrency phenomenon to go mainstream. So, what's behind this latest trend?

The first tweet ever tweeted in the history of Twitter. The tweet was by Jack Dorsey (CEO of Twitter Inc.), and this tweet was somehow just purchased for $2,915,835.47. This new phenomenon is not a trend unique to the Twitter world. The NBA sells little moments of basketball games for hundreds of thousands of dollars.

These are all sorts of digital things that people are purchasing a version of them for substantial amounts of money. It's a story about human psychology and how we value something shifting because of technology. Some people think technology may revolutionize our society whilst simultaneously accelerating the climate disaster.

What is an NFT?

An NFT is a non-fungible token. And what this means is an NFT is a unique token on the blockchain which cannot be replaced by something else. Non-fungible things have more value than fungible things. NFTs can be anything digital, including drawings, music, photographs, videos and any digital file. It is interesting to note that digital art is not the only way to use NFTs. They can be used to represent ownership of any unique asset, like a deed for an item that can be digital or even a physical item. These tokens are transferable but nonreplicable tokens on the blockchain. NFTs don't have a monetary value. However, the value of NFT's is generated through individuals online interactions.

How does it work?

NFTs work like unique digital collectables, one-of-a-kind, that cannot be exchanged for another token like it can be done in other cryptos. "A creator of these tokens launches it on a blockchain and offers it for sale. Again, the buyers can offer it for sale to secondary buyers either directly or through marketplace platforms," explains Sattvic Vishwanath, co-founder and CEO of Uno coin Technologies Ltd.

What are the risks associated with buying NFTs?

Currently, there are several risks associated with crypto-collectables as NFTs possess significant market risks, including financial and regulatory risks. As we have witnessed the many fraud cases, experts feel that any digital underlying can be easily replicated and can lead to counterfeiting, which is one of the most critical risks associated with NFTs.

What can the buyers do to safeguard against these risks?

Buyers can avoid risks by ensuring they have a trusted source to buy the NFT directly or over a platform. The buyer needs to validate that the creator of the token he is buying is genuine. Additionally, buyers also must review relevant terms and conditions associated with the transaction, including exclusivity and responsibility of the platform, in case of a breach.

"The other significant risk the buyer poses is in custody Ing the NFT - he needs to be cautious about hacks and fraudsters, and he should take care of the token as if it is real cash," Vishwanath noted.

In addition to this, to prevent cyber breaches, buyers should back up their private keys and explore hybrid wallets and all other basic security measures associated with protecting a crypto wallet.

By Xolane Makhubu