In this article, we’ll break down the various forms of NFT investing and provide some guidelines to follow when researching how to invest in NFTs. In addition, we’ll discuss the utilities of NFTs and different platforms to consider when investing in NFTs. Plus, we’ll look at different ways to gain exposure to NFTs without actually taking responsibility for the asset.

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What are Non-Fungible Tokens (NFTs)?

As one of the hottest buzzwords around, NFTs and NFT investing are becoming a household topic of conversation. This is often due to the confusion around the utility and the fundamental nature and value of non-fungible tokens (NFTs). Regular cryptocurrencies and everyday paper fiat money are fungible. Accordingly, one BTC in Alice’s wallet holds the same value and is exchangeable with one BTC in Bob’s wallet. However, non-fungible assets are representative of unique pieces of data. Currently, the primary association with NFT investing is surrounding art and music. Be that as it may, NFTs hold valuable utility across a range of other industries. 

NFTs operate similarly to cryptocurrencies using cryptography, mathematics, and computer science, to verify ownership and authenticity of data. Moreover, NFTs brings the ability to tokenize real-world assets on the blockchain. This opens up a wealth of opportunities for industries such as real estate, healthcare, education, the energy sector, and climate change. NFTs can represent just about anything – even experiences, such as musicians offering limited edition NFT albums with exclusive meet-and-greet access. Furthermore, tokenizing everyday items on a blockchain creates unprecedented transparency, thus, increasing efficiency and honesty within industries such as the supply chain. 

Like cryptocurrencies, anyone can create an NFT. What brings value to NFTs is the utility they bring to the holder. That said, with NFT art, assets are worth as much as one is willing to pay. Before diving straight into NFT investing, it’s worth doing some thorough research on how to invest in NFTs safely and reliably. 

How to Get Started with NFT Investing

After understanding the concept a bit better, the next question people often ask is about how to invest in NFTs. There are various ways to get into NFT investing catering to numerous market demographics. Plus, it’s possible to gain price exposure to NFTs without investing in the asset. Moreover, some NFTs offer unique fractional ownership options. Regardless of your preferred NFT investing avenue, it is crucial to do your own research on any platform or application offering NFT transactions. 

NFT Marketplaces

One of the most popular ways people come across when researching how to invest in NFTs is through NFT marketplaces. NFT marketplaces are decentralized applications (dApps) operating on blockchains, run by a globally-distributed network of computers called nodes. As such, there is no single point of failure or risk of censorship and offers complete transparency of every single NFT transaction. Accordingly, this offers immutable cryptographic ownership and genuine authenticity. 

There are many different NFT marketplaces, each with its own unique parameters. One of these marketplaces is OpenSea, which offers various NFTs, including digital collectibles, art, domain names, virtual land, etc. Branding itself as the “eBay” of NFTs, OpenSea is currently the largest peer-to-peer NFT marketplace. Plus, OpenSea hosts other NFT marketplaces such as Rarible, providing an all-in-one solution for NFT investing. However, OpenSea only operates on Ethereum. As a result, other NFT marketplaces, such as Curate and Cardano’s Verlux, offer cross-chain NFT investing. This means that users can trade different NFTs across different blockchains. The chain on which the NFT marketplace operates is something to bear in mind when learning how to invest in NFTs.

In addition, the gas cost is something to remember with NFT investing when using NFT marketplaces. Gas fees cover the computational energy requirements to process transactions and fluctuate according to network activity. If there are many people processing transactions on Ethereum at once, gas costs in a transaction can sometimes far exceed that of the NFT asset’s value. Some NFT marketplaces, such as Curate, offer users a gasless experience. Others, such as GhostMarket (on the Fantom blockchain) and SolSea (on Solana), offer sub-cent costs for NFT transactions. However, these NFT marketplaces may not offer as wide a variety as some of the more prominent applications on the leading smart contract blockchain, Ethereum.

Blockchains and Layer-2 Solutions 

As a result of the extremely high gas fees due to network congestion on Ethereum, developers have been working on introducing layer-2 solutions. Instead of operating on the main Ethereum chain, developers can use a layer-2 solution to speed up transaction times and reduce costs drastically. The number one NFT marketplace, OpenSea, has recently begun integrating layer-2 solutions to aid their user experience. 

Also, pioneering a truly layer-2 NFT marketplace, Immutable X, is witnessing increasing adoption since its launch. Immutable X uses zero-knowledge (ZK) technology to offer an NFT marketplace with zero gas fees, instant transaction confirmation, and provably carbon-neutral NFT assets. 

Some blockchains are designed from the ground up to support interactions and activities with NFTs. Another form of NFT investing is through users purchasing various NFTs directly from a blockchain instead of a dApp running on top of it. This includes the likes of the Flow or WAX (Worldwide Asset eXchange) blockchain. 

For a deep dive into Ethereum and how the network operates with computational gas costs, see our Ethereum 101 course. Check out the leading Web3 and blockchain education suite today! 

Metaverse and Blockchain Gaming

Another avenue of NFT investing to consider when researching how to invest in NFTs is within a virtual world or blockchain gaming platform. All crypto and blockchain gaming applications operate on a foundation of NFTs. Any collectible, rare, or unique item within a blockchain game registers as a non-fungible asset. This means that all turns and moves are verifiably fair, transparent, and immutable. Also, purchasing in-game items such as armor pieces in a game means that the user has actual ownership of that asset. In turn, users could potentially use that same armor in another game. 

When users begin a new game or enter a new virtual world, they must often create an avatar of themselves. These will likely be using an NFT token standard as well. Users or avatars can purchase NFTs within the metaverse to add to their physical appearance. This could include items of clothing or accessories. Plus, many projects are now offering pets for avatars in the virtual worlds! 

If you are considering how to invest in NFTs in the virtual world, you must first get some of the platforms’ native tokens. For example, The Sandbox offers many different worlds within its project for users to explore. Using the native SAND token, users can buy, sell, and trade in-game NFT assets across different NFT marketplaces. This is a similar experience to Decentraland (and its native MANA token) and Somnium Space (and the CUBE token). 

Fractional Ownership 

Another advantage of NFT investing is fractional ownership. A globally distributed group of like-minded people can communicate and cooperate towards a communal goal using blockchain technology. This is called a decentralized autonomous organization (DAO). There are many different types of DAOs that provide community governance of projects. Moreover, several emerging DAOs are offering NFT investing to gain exposure to a portfolio of NFT assets.

For example, HEAD DAO pays out its native HEAD token to its community that represents the NFT collection at the time within the project vault. Further, holders can use the HEAD token to vote on specific protocol parameters or project updates. In addition, Fractional.art offers users of the platform the ability to buy, sell, and mint fractional NFTs (f-NFTs).

NFT Utility Tokens

When exploring how to invest in NFTs, another option could be to invest in the utility token of an NFT project. Instead of purchasing a single expensive NFT asset, users could invest in the project’s native token, offering valuable utility to the holder. NFT utility tokens could offer exclusive rights and access to holders. Plus, the value of the utility token will increase with the adoption of the NFT project. 

It is worth bearing in mind that NFT utility tokens are meant for utility rather than a unit of exchange or an appreciating asset. That said, investing in NFT utility tokens allows users to gain price exposure to the success (or downfalls) of an NFT project, lowering the entry barrier for NFT investing for smaller investors. 

NFT utility tokens are not strictly non-fungible assets. However, they provide utility for the application to operate and enable holders to gain price exposure to the success of an NFT application.

Stocks

Another way of gaining exposure to NFTs without learning exactly how to invest in NFTs is through stocks. As non-fungible assets are seemingly becoming an increasingly attractive trend among social media users, some traditional investors are investing in stock shares of large corporations using or with plans to use NFTs. This includes the social media giants Twitter ($TWTR), Pinterest ($PINS), and Snap ($SNAP). Plus, Facebook’s recent rebrand to Meta corresponding to its move to a virtual world means that investors are also looking at Meta for NFT exposure. 

However, it’s not just the Silicon Valley social media giants. Toy company Mattel Inc. ($MAT) and “pop culture lifestyle brand” Funko ($FNKO) are both working with blockchain technology to release their own digital collectibles. 

Considering NFT Utilities when Investing in NFTs

NFTs offer fully-reliable, transparent, and trustless tokenization of unique data on a blockchain. This utility is applicable across a wide array of industries. Moreover, NFT investing is revolutionizing the way of living for some people. For example, with art and music NFTs, the artists will receive a percentage commission every time a sale is made, or a song is listened to. Unlike in the traditional industries, with third-party intermediaries taking hefty cuts, artists receive the total amount they deserve. 

Moreover, some music NFT streaming platforms pay their listeners in cryptocurrency while listening to songs. Further, the artists receive their commission instantly, unlike the traditional streaming platforms offering annual or bi-annual payouts. Thus, NFT investing in arts benefits both audiences and artists. 

Also, using NFTs in the supply chain, hospitality, and healthcare will radically increase the efficiency and transparency of operations. Plus, tokenizing houses on the blockchain means people can purchase real estate worldwide without the expensive intermediaries.

Beginner’s Guide to NFT Investing – Summary

We hope this article has given you a better insight into NFT investing and how to invest in NFTs. NFTs offer a vast scope for utility; however, they are most commonly associated with music, art, and collectibles. NFTs are increasingly gaining more attention through blockchain gaming and the metaverse. Accordingly, the avenue for NFT investing is broadening, with a wide choice of ways to gain exposure to NFT assets. 

This includes using NFT marketplaces, blockchain gaming, or exploring the metaverse. Also, investors can choose to invest in the utility token of an NFT project or blockchain. In addition, those who don’t want to or have the time to learn how to invest in NFTs can gain exposure through traditional stocks. However, like all trades and crypto investments, NFT investing comes with the risk of an asset dropping in value to zero. By operating as a decentralized free market, non-fungible assets are only worth as much as one is willing to pay. Plus, assets cannot be artificially inflated through centralized manipulation.

Centralization, censorship, and manipulation of assets are some of the fundamental reasons why Satoshi Nakamoto introduced blockchain technology. For a deep dive on why the legacy financial system is in dire need of an overhaul, see our Bitcoin Monetary Revolution course at Moralis Academy. No matter your age, knowledge, or experience level, Moralis Academy is the best place to kickstart your blockchain education! Alternatively, for readers wanting to learn more about decentralized applications (dApps) and the metaverse, see our “What are dApps?” and “What is Metaverse?” articles next! Or, see our “Top Games” article for the hottest trending blockchain games!