Non fungible tokens (NFTs) made a big splash in 2021 with a massive bubble. Unfortunately, this bubble popped just as quickly as it came.
The good news is that NFTs are a pretty decent technology that will explode in popularity again at some point in the future. In fact, they will likely break many of the cryptocurrency records that DeFi has already set in the industry.
With that in mind, this article will cover some ways that you can prepare for the inevitable reemergence of NFTs in the cryptocurrency industry.
3 Ways To Prepare For The Emergence of NFTs
Here are the three most obvious ways that you, a cryptocurrency investor, can prepare for the emergence of NFTs. These strategies are relatively simple, but it’s worth mentioning. This is a new technology that will completely revolutionize the way the world works and it is still in the very early phases of adoption.
The first way to prepare for the emergence is, well, actually understanding NFTs. If you ask the average person about NFTs, then they will almost certainly have no idea what you are talking about.
This is very new technology. It can best be compared to the internet in the early 1990s or even the late 1980s.
Pretty much no one, outside of cryptocurrency enthusiasts and those in the tech industry, know a single thing about NFTs.
An in-depth explanation of NFTs is far beyond the scope of this article. But the basics are that an NFT (short for non-fungible token) is a one-of-a-kind token stored on the blockchain. This token can subsequently represent ownership of either digital or meatspace assets.
In other words, if you have the private key to the Ethereum wallet that owns the NFT, then you own the underlying digital or meatspace asset. Those assets can literally be anything – digital art, songs, special skins in video games, real estate, meatspace art, titles for cars, and so on.
Also, it’s all stored on the blockchain, which makes it immutable. That means no one can alter the NFT or the ownership of it.
To summarize, you want to have some understanding of how NFTs work so you have a head start on everyone else when NFTs become the norm. Again, understanding NFTs now would be the equivalent of understanding the internet in 1990. Those that had an understanding of the internet in 1990 had a major advantage compared to those that did not understand it until 2000.
Invest In The Right NFTs
A big part of understanding NFTs, at least from an investment perspective, is understanding what are the right (read: profitable) NFTs for investment.
The thing with NFTs is that anyone can make one. There are quite literally no barriers to entry on the creation of NFTs. This means that enterprising individuals and businesses have started creating worthless NFTs because NFTs are the profitable thing to do.
You can think of this as companies during the Dot Com bubble creating businesses that were nothing more than a website with a very ambitious plan.
What we are trying to say is do not invest in an NFT just because it is an NFT. The general rule is to only invest in NFTs that have actual demand. For instance, an NFT of a song by an A-list band (ie. Coldplay) or from a memorable NBA moment (Lebron’s first 3 pointer in the NBA) is probably a good investment.
Buying an NFT of a picture from an Instagram account with 100,000 followers is probably a bad investment.
Unfortunately, this mostly comes down to experience with choosing the right NFTs. It will also cost a decent amount of money to purchase high-quality NFTs, but you can view it as an investment similar to a Rembrandt painting.
Buy & Hold
Finally, if you do hold an NFT and are worried about the price, don’t be.
You only lose money when you sell it for a loss. And NFTs are likely going to increase in price again, just like cryptocurrency in general.
This also makes it a great time to buy NFTs. Just refer to the previous section about only purchasing high quality NFTs.
3 Reasons Why NFTs Are The Future
The previous section covered how you can prepare for the emergence of NFTs. We did not cover why NFTs will be a staple of the future.
This section will cover some of those reasons.
Digitization of Everything
It is an accepted fact at this point that digitization is the future. Just about everything in modern society has some sort of digitization element to it with some industries being more impacted than others (ie. music and photography).
Basically, we have digitized everything from information to music to photographs. Will the digitization line arbitrarily stop at ownership titles or contracts?
That seems extremely unlikely. And it has always been a losing bet to bet against technology, so this is one thing you do not want to bet against.
Virtual Reality NFTs
Another interesting point with NFTs that is rarely ever brought up is how they can tie into virtual reality. Virtual reality technology is not the best at the moment, but that will likely change.
Technology always improves.
Basically, an NFT will serve as an ownership tool in a virtual reality world. If you want an example of how this could play out, then watch or read Ready Player One. The general gist is that an NFT could be used as a sort of trophy case in a VR video game. An example would be having the Lebron James first three pointer video NFT or digital artwork NFTs as an exhibit in a VR library.
This ties into the general idea that NFTs will make a big emergence in the video game industry. But it makes digital art NFTs feel more “real” when it is applied to VR.
Immutable Proof of Ownership
Finally, NFTs serve as a way of having a digitized, immutable proof of ownership. This can apply to any industry that relies on paper contracts to prove ownership. Most notably, this applies to business incorporation, real estate titles, and car titles.
These are not quite the NFTs that you can really invest in directly (other than the companies). However, it does seem like a very logical use of an NFT.
Here’s Why The 2021 NFT Bubble Popped
We know, many people believe that since the 2021 NFT bubble popped that NFTs are dead.
Well, they aren’t dead forever. The bubble popped for the same reason that every technology bubble pops.
People get excited about new technology, those seeking to make a quick profit move into the industry, and the supply exceeds the demand.
That’s really all there is to why the bubble popped. And it does not mean that NFTs are dead – it just means that real use cases for the technology have not yet been realized.
That sums it up for how you can prepare for the records that NFTs will break. Just know the technology and maybe even invest in some high quality NFTs while the price is still low.
This is one technology in the cryptocurrency industry that you definitely do not want to ignore.