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Ways to invest in NFTs
The easiest way to get an NFT is to buy one through a specialist marketplace. These platforms are online auction houses, similar to eBay, that set a starting price for each work and then let users submit competing bids. If you win the auction, you take ownership of the NFT.
There are other ways to take advantage of the growing popularity of NFTs too, however. You can simply get the cryptocurrency that’s used for most NFT transactions, or you can create and sell your own – if you have the know-how to do so. The links below cover your different options in more detail.
What are NFTs?
They are unique digital tokens that represent an online file. NFT stands for ‘non-fungible token’, which simply means that it is one of a kind, as opposed to something like money where one £1 coin (or one Bitcoin) is interchangeable for another.
In terms of what they represent, NFTs can be almost anything. The crucial factor is scarcity, as NFTs make it possible to prove that a file is unique. One of the most common uses for this technology is for digital art, where a piece can be turned into an NFT to be sold, sometimes for very large amounts of money.
How do NFTs work?
On a basic level, NFTs work like a product serial number – but in digital form. They prove ownership of an asset by assigning it a unique code that is stored on a publicly visible blockchain. This means there cannot be more than one NFT for the same thing, and the uniqueness of the code is what gives an NFT its value.
Similar to cryptocurrencies, NFTs are underpinned by blockchain technology. This means that cryptography is used to create an immutable public ledger showing who owns each NFT. You, therefore, need a cryptocurrency wallet to store NFTs, as it is your wallet address that will display on the blockchain to prove you own the asset.
How to invest in NFTs
If you want to try to capitalise on the growth of the NFT market then we have outlined the different options available below. It’s a good idea to familiarise yourself with all of them so you’re in the best place to decide what’s best for you and your budget.
- Buy an NFT. The most straightforward way is to sign up to an NFT marketplace and buy something that you expect to appreciate over time. You need to have your own wallet to do this, as that’s the only place you can store any NFTs that you own.
- Create and sell your own NFT. All the leading marketplaces offer the option of creating your own token. If you think you can create something that will have value, then it’s quite simple to upload a file as an NFT and sell it to try to make money. Again, you need to have a wallet to do this and the transactions take place in cryptocurrency rather than a fiat currency such as GBP or USD.
- Buy cryptocurrencies used by major NFT marketplaces. NFT marketplaces will usually only accept a small number of different cryptocurrencies as payment methods. These cryptos are likely to perform well if NFTs as a whole start being more regularly traded, so buying them is one way to invest in the future of NFTs. Some of the coins to consider for this are Ethereum and Polygon.
- Invest in crypto stocks. Buying shares in companies that stand to benefit from a growth in the cryptocurrency market can be a safer way to get exposure to the industry. It’s easier to sign up and get shares through a broker than it is to buy an NFT, and the practice is more strictly regulated. Some stocks to think about are the cryptocurrency exchange, Coinbase, or the broker platform, Robinhood.
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