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  • Evan Werckenthien

Non-fungible token (NFT)

You may have heard of NBA Top Shot selling over $400 million in digital highlight clips, the CEO of Twitter selling his first tweet for $2.9 million, or digital artist Mike Winkelmann, also known as Beeple, selling a piece of art for $70 million. These are all types of NFT or non-fungible tokens.


NFTs allow you to buy and sell ownership of unique digital items (think digital picture/art, meme, or GIF) while keeping track of the authenticity through blockchain. In other words, they are like computer files combined with a proof of ownership and authenticity, like a deed. This is similar to how Bitcoin and other cryptocurrencies are recorded and transferred. NFTs can technically contain anything digital, including art, pictures, tweets, video clips, or items in a video game.


An NFT can either be one-of-a-kind, like an original real-life painting, or one copy of many, such as baseball trading cards. If you are wondering why you would buy a tweet or digital art that you can find and download online…. it is a fair question. Think of it like owning the Mona Lisa--anyone can buy a copy for $10, but there is only one true original.


However, a craze has ensued, with some speculative investors viewing this as the next big thing or the next bitcoin boom, looking to get rich. Hence the selling of a tweet for $2.9 million or a collection of digital art for $70 million.


Many critics of NFT say this appears to be a bubble and is a fad that will, to an extent, pass. I agree with this and would not recommend looking at it as an investment. One needs to look no further than at the creation of CryptoKitties in 2017. CryptoKitties are like a digital version of beanie babies. During the course of only a few months, prices shot up over 300% before eventually crashing down to a tenth of what they were at their peak. Some individuals who got swept up in the mania and purchased at high levels lost a lot of money.


Looking beyond the pricing bubble and craze, I believe there is a space for the NFT technology to be used. The new technology is an innovative way for artists and other digital creators to make money online. It is also a way to verify authenticity and ownership of online property. This is just another innovation to come out of the blockchain revolution, and just like any other new technology or idea, there are some negative aspects of it. However, in the future, with some iterations to the technology in NFTs, it may eventually alter our habits as digital consumers.



Evan Werckenthien, CFP


317-587-0858

Evan@EWwealth.com


600 E. Carmel Drive Suite 130

Carmel IN 46032





Sources:

https://time.com/5947720/nft-art/

https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq

https://blog.malwarebytes.com/explained/2021/03/nfts-explained-daylight-robbery-on-the-blockchain/


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Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA / SIPC . Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. E.W. Wealth Management and Cambridge are not affiliated.

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