Bitcoin…what about NFTs?
By: Matt Ward Date: 3/11/2021
We all have heard of Bitcoin, but we may not all understand it. Bitcoin is a cryptocurrency. A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. In terms of security and for accounting purposes, the technology behind Bitcoin is what is really intriguing, and the technology is called Blockchain. Blockchains, which are organizational methods for ensuring the integrity of transactional data, are an essential component of cryptocurrencies and the driving technology behind the asset.
NFTs, or non-fungible tokens, are all the hype lately. NFTs are typically video clips or art images that have a digital signature attached. For example, the 2 most talked-about NFTs right now are the 10-second video clip of Beeple’s artwork that sold for $6.6 million, and the NBA Top Shot video highlight of NBA superstar Lebron James slam-dunking. One individual paid $200,000 for the clip.
The NFT allows these video clips and other artworks to become publicly authenticated, serving as a digital signature to certify who owns it & verifying that it is an original artwork for example. NFTs cannot be exchanged like-for-like. Each NFT carries a unique value, which unlike other mediums, such as dollars, gold, and other exchagable goods that have an agreed-upon common value.
The classic argument being used is the Mona Lisa painting. You can take a picture of the painting but it does not have any value because you don’t have the provenance or the history or the work. NFTs all got started with the NBA Top Shot website. NFT trades between video highlights that have a unique digital signature were going for thousands of dollars. Again, the most discussed NFT trades in the sports industry is the Lebron Dunk that sold for $228,000.
As with any early, niche investment area, the risks of major loss are extreme, and the hype is also really high right now. It seems from one side of things, this could be a fad, but from another, if properly regulated, seems like this could add value to performers and athletes, among others. This is something we view as highly speculative and encourage you to seek financial guidance if you have questions, we are here to help.
Will musicians, athletes, and artists now have a way to exchange their products and services and for non-fungible tokens? Will NFTs become a new medium for exchange between products that otherwise would have been stored and free on the internet? Superbowl-champion, Rob Gronkowski thinks so. It is said that Gronkowski is launching Digital Trading Cards in the form of NFTs and believes he will be making millions in this space.
Matt Ward, CFP
New Century Investments
Registered Investment Advisor