Deep Dive #3: What are NFT’s? How can I invest?

A deep dive covering NFT's, what they are, how to invest, & more

This article aims to provide an introduction to NFT’s by covering information that serves as a good starting point. There is no perfect guide, but hopefully, this will provide you with a strong start. If you have any questions when reading, please comment on the article, and I will be happy to respond. Also, as always, this is not financial advice (Full Disclaimer at the bottom, I include this everywhere : ) )

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Table of Contents

1. What is an NFT

2. Different types of NFT’s

3. Important metrics & other ways of assessing a project

4. Some of the larger projects

5. How to Buy an NFT

6. Common buying strategies

7. The Current Trend

8. Tools

9. Common scam methods to watch out for

10. Articles I found helpful in research/channels I would recommend checking out to continue your research

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What is an NFT

An NFT is a non-fungible token which essentially means that it is a unique token rather than 1 of many tokens that have the exact same value. A common analogy used within the NFT space to explain the difference between fungible tokens is:

• A Fungible token is like a $1 bill, you don’t care which one you have when you trade one for the other as long it is also a valid dollar bill.

• An NFT (non-fungible token) would be like if you took a $1 bill and had someone famous sign it. So long as you can prove that the signature is real that signed $1 is now unique, scarce (not many signed copies are likely available), & therefore more valuable than other non-signed $1’s.

An important point to note is that while this is how they function the majority of NFT’s arent stored on the blockchain but instead have a contract on the blockchain that contains their ownership rights, potentially IP rights, & a URL or other method pointing to where the digital asset is held. Due to this what you are buying isn’t really stored on the blockchain but the certificate proving you own it is.

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Different types of NFT’s

• Membership Passes: These are any NFT’s that provide some sort of utility that allows you to interact with a club, access special benefits, etc. The Bored Ape Yacht Club collection is like this whereby owning one you are part of the club. Being part of the club gets you access to free/discounted related NFT’s created by the project, events held such as a Yacht party they held in New York, the marketing you get from other holders following/promoting you, & more.

• Art: This is where one of the goals of the NFT or the only goal is to provide visually appealing art. Some are individually made and sold but many are made in collections where the artist creates a set of traits which are then randomly combined to create many unique combinations with varying levels of rarity.

• Digital Land (VR/AR): This is where you buy the rights to a piece of digital property that people can interact with via virtual reality or augmented reality. Owning the land may allow you to decide what is presented there/charge taxes to enter the space, etc.

• Gaming: This is where the NFT you buy may then be used in a game once you link your wallet to prove you own it. An example would be if there was a sword fighting game and you bought a sword NFT or other related piece of equipment you could then use it in the game.

• Music/Audio: This is where music or other audio is sold as an NFT. This area has seen a lot of popularity as it allows music creators to cut out the middlemen and sell directly to their customers without losing a cut of the profits to production companies.

• Investments: The digital land we mentioned earlier can fall under this category but it can also be more broadly applied. Some NFT’s will earn you passive income in a fungible token just by holding it. Some might also give you the ability to mint/buy other projects that the NFT creator has partnered with giving you the opportunity to get in earlier than other investors on new and exciting projects.

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