I have spent the past weeks getting my hands dirty into NFT collection. I have since collected about 10 NFTs yet not a single cent spent. So I want to share what I have learned so far, and will update whenever I uncover new things or if what I wrote is incorrect.
What Is NFT, Really?
NFT stands for non-fungible token, and to understand what it means, you have to know the definition of “fungible”. It basically means “interchangeable”, or “not unique”. Commodity and most goods are fungible, meaning you can exchange one for another with a known value. So in layman terms, NFT are unique tokens.
There are also a lot of physical objects in life that are non-fungible. Artworks are generally non-funglble because they are unique. What makes NFTs special is that it makes digital objects that are easily replicable (just copy-and-paste) one-of-a-kind, whereas physical objects are difficult to replicate hence the fungibility is easier to determine. Even so, it can be challenging to prove the authenticity of a physical object and the scarcity. How do I know I bought a piece of genuine artwork, since counterfeits are aplenty?
So, NFTs achieve two important objectives. One, it makes a piece of digital object unique. Second, it offers authenticity of the digital asset by capturing important information, tracking the history of this object, previous owners, selling price.
Once you understand this, you can free your mind and conclude that any digital entity can be NFT-ed. Not just limited to animal images with thousands of variants.
What Is The Value of Collecting NFT?
Why collect NFT? It’s the same question to why you collect other physical good like watches, handbags, painting, signed record of your favourite music artist, or a limited edition Marvel comic. On one hand, you like the product which you can enjoy emotionally. On the other hand, you want to resell it in future for a profit. What makes NFT really attractive is the scarcity. Like any good, the more scarce, the greater value. NFTs can be easily proven to be unique thanks to the blockchain technology behind it.
Successful high-priced NFT collections are backed by aggressive marketing and promotion to hype up the demand and thus value. If no one is keen on the NFT collection, then no one wants to pay any price, making it “worthless”. All these aggressive promotion are done most commonly on Discord, a community platform, for members to interact with one another. These members who have probably owned some NFTs have vested interest to see their NFT collection succeed, so they push hard to help promote and bring in more members. Sounds familiar, like MLM?
This is also why you should not anyhow buy NFT thinking any NFT will appreciate in value. There must be some vested interest to make the process of collection more meaningful. For me, I would collect vinyl, or Transformers figures, but not Hermes handbag. After all, what makes something of value is that another person is willing to pay money a high price for it.
At this point, I think most people are simply attracted to the potential of making quick bucks from NFT. My answer is: don’t. Remember the Hello Kitty hype where everyone queues to collect the limited-edition plush toys? Today, these collection are put on sale in Carousell, and no one is buying them even at a throwaway price of S$10. For those NFT collection that are of “blue chip” status, like Bored Ape Yacht Club, these NFT are very expensive with a double risk: that the demand falls and the value of ETH crashes. But we know the influential NFT owners would not let them happen.
What creators should do then is to create value, more than just the image or video attached to the NFT. These additional value, which are called “utility”, allows the NFT owner to enjoy special privileges, and these terms are already embedded in the NFT. For instance, Kings of Leon created an NFT with a list of privileges like front row seats to their concerts, VIP meet-and-greet, transportation, physical merchandise, etc. Check the NFT listing here.
I don’t deny that there are potential projects out there. This is like trying to find gold on your own in the wilderness. You can spend a lot of time digging around, and you might get lucky, but you might also waste your time and money ending up with nothing more than specks.
The Biggest Obstacle of Collecting NFT
Unlike other good, you can only buy NFT using a blockchain cryptocurrency, not fiat money (regular currency). This is already one hurdle. Therefore, to buy an NFT, you need to set up a wallet, which I will cover in the next article.
The other risk is the volatile value of the cryptocurrency that you may be dealing with, so even if you hold the NFT, the value of the equivalent cryptocurrency might drop.
The Future of NFT
I believe that NFT has a future. The intent of NFT itself is very good: it offers a means to authenticate ownership without going through a centralised institution. Everyone is trying to figure out how to use them, but right now more people are interested in making money. People needs to move away from just creating GIFs or weird images into other prospects that NFT can bring to many other types of use cases. For instance, issuing NFT as proof of ownership, like concert tickets or memberships. Whatever value is tied to the NFT is associated with a tangible benefit instead of just a “meaningless” image for snob appeal.
Should You Collect NFT Too?
My recommendation is YES. In fact, if you look around, there are a lot of free NFTs to be collected. They are probably not of high value, but going through the motion of collecting will make you appreciate NFT more and then you can perhaps start to buy the more popular NFT collections of higher value.
Are you ready to grab some free NFTs? Click here for my next article to set up your first crypto wallet. Or if you already have wallet, click here to learn about the list of NFTs I collect. You can also read about how to find NFTS to flip.