It is nearly impossible to read an article or open social media without seeing NFT news and/or a Bored Ape NFT. Even the beloved Staples Center in Los Angeles, California is being changed to Crypto.com Arena. NFT’s are everywhere.
We recently discussed the rise of NFT’s over the past year and what to expect of them in 2022. Additionally, the rise of individuals buying a domain related to NFT’s. But today we discuss – Are NFT’s safe to buy in 2022?
Background on NFT’s
Unfamiliar with NFT’s? Let’s do a quick background on NFT’s and their rise over the past year.
An NFT, or Non-Fungible Token, is a unique digital asset part of the Ethereum blockchain, an open-sourced blockchain. A form of digital collector item. They represent real life objects like art, music, videos and in-game objects. Some examples of NFT’s include: unique digital artwork, a video, gifs, an essay, digital collectible, a video game item, designer sneakers, an online ticket for an event and a domain name. They are bought and sold online, and many times purchased using cryptocurrency.
They are different from a cryptocurrency like Bitcoin. For example, Bitcoin is interchangeable. One Bitcoin equals one Bitcoin. They are the same physically and worth the same amount. However, NFT’s are not interchangeable. Each NFT is like an original Mona Lisa or The Starry Night. Unique, and not worth the same value.
Are NFT’s Safe to Own?
NFT’s are safe to buy, especially with their current popularity. However, that does not mean they do not come with risks. Some possible risks? Your NFT losing value, damage of the physical asset, cyber security and fraud. Like everything, it is important to do your research before making the investment. Additionally, making sure you take the proper steps to ensure both your ownership and its security.
Overall – the technology behind NFT’s ensures it is protected from being stolen or changed. Buying an NFT is generally as safe as buying cryptocurrency.
What are the Risks?
1. NFT’s are unregulated
Like everything, investing in NFT’s comes with risks. First, like many cryptocurrencies, NFT’s are unregulated. Anybody can create and sell an NFT. Just look at Paris Hilton, Snoop Dogg and others, who made their own and sold them for millions. Since anyone and everyone can make their own NFT to sell, it is possible for an NFT to eventually lose value.
The lack of a centralized authority means all transactions are permanent. Whoever has the information for the account and NFT – it is theirs. Even if it’s from theft. Essentially, if your NFT is stolen, there is almost nothing you can do because of the lack of a centralized authority.
2. Cyber Attacks
Since NFT’s are all online, the risk of cyber scams and hackers are high. Like a social media or email account, there is no way to guarantee your NFT is protected from theft.
Hackers would most likely target digital services and networks used to store, buy and sell NFT’s. Additionally, fake sellers pose a threat and could try to sell you an NFT that does not exist.
When you buy an NFT, there are ways to protect yourself from these attacks:
- Use a very complex password and never reuse passwords
- Store NFT on a secure wallet or an external drive
- Do not purchase NFT’s over social media, purchase in a secure marketplace
- Enable two factor authentication
- Update software regularly
- Do not go for a deal that sounds too good to be true
- Do your research
3. Copyright Infringement
Third, copyright infringement. It is possible that the NFT is stolen or made without the artist’s permission. Take Corbin Rainbolt, an artist who frequently shared his work on social media. He discovered at least two of his pieces were being sold as NFT’s without his consent.
This case highlights a huge problem with NFT’s. That anybody could claim a digital photo as their own and sell it, even if they did not create it. Furthermore, the publicly recorded digital ledger of the blockchain does not protect against this since people do not need to use their real names. It is difficult to enforce any rules when nearly every user is anonymous under a username.
Takeaway
Reading the risks of investing in NFT’s can be very intimidating. There are many risks and many unknowns when it comes to this industry. However, this is true of any industry and investing opportunity.
NFT’s are new and interesting. They offer a chance for people to support local artists, a favorite NBA player and for you to own something that is 100% yours. NFT’s are becoming popular across various industries, including fashion, sports and gaming. This will only continue for NFT’s in 2022.
If you are interested in investing in a NFT, just make sure you do the thorough research required and take proper steps to protect your NFT and yourself.
Ready to Buy a Domain?
Interested in buying an NFT related domain name?
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