Where Can I Buy Non-Fungible Tokens?

Where Can I Buy Non-Fungible Tokens? A few years ago, the idea of cryptocurrency going mainstream was ludicrous.

Bitcoin and other blockchain-based assets were relegated to the edges of the financial world, and professionals were highly skeptical of anything that existed entirely online. In fact, Warren Buffett – the “Oracle of Omaha”  – went so far as to say that Bitcoin is a “mirage” and “rat poison squared” during a 2018 discussion of cryptocurrency.  

Today, Bitcoin has gained a foothold in established investing circles. Major organizations like Tesla (TSLA), Square (SQ), and PayPal (PYPL) have traded cash in for the cryptocurrency, and Cathie Wood of ARK Invest has projected rapid growth in coming years.

Everyday investors are getting used to the idea, and it has become relatively common to hold Bitcoin in a diversified portfolio. 

Now that cryptocurrency in general and Bitcoin in particular have moved out of the “unconventional” category, another class of digital assets is stepping up to take its place. Non-Fungible Tokens, better known as NFTs, are the newest craze among innovative investors. Here’s what you need to know – and where to buy non-fungible tokens.

What is Fungible and Non-Fungible?

The first step in getting acquainted with NFTs is to explore the difference between “fungible” and “non-fungible.”

At the most basic level, fungible refers to items that are divisible and interchangeable. For example, one $20 bill can be divided into smaller values and exchanged with other $20 bills. 

One barrel of oil can be exchanged with another, and one Bitcoin can be exchanged with another. These items don’t have characteristics that set them apart from equivalent items, and they can be broken down and traded in smaller parts. 

Non-fungible items are completely unique – and they cannot be divided. They can’t be replaced with an alternative, and any exchange or division would result in a different set of physical characteristics. For example, art is non-fungible, as it cannot be divided or replaced with an identical item.

While you could trade one of Renoir’s masterpieces for another, the works are different even if their value is similar – and you certainly can’t sell half a painting.  

With that in mind, the next question is, what is an NFT? How are people investing in NFTs, and what are the benefits of this type of asset? 

What is an NFT?

An NFT or non-fungible token is a digital asset that has unique characteristics and properties. It is one-of-a-kind, like a work of art, but it exists in the digital world.

The original item, the NFT, can be bought and sold like art. However, it is worth noting that like physical paintings, copies and prints are widely available and can be owned by many. 

Artists that create their work in digital format have embraced NFT technology to track ownership of items they have sold. Through the NFT process, they may be able to receive payment for their work, and in some cases, they may receive a commission each time ownership changes hands. 

Those who purchase NFTs gain certain rights to the digital asset. As the owner, they can choose whether and how it is displayed and duplicated. From an investment perspective, purchasing NFTs is similar to purchasing art. Collectors acquire the works in hopes that they will increase in value.

What is a Famous Example of a Non-Fungible Token?

When NFT technology first became available, it was used for an online game called CryptoKitties. Players traded and sold virtual kittens, tracking value and ownership through the Ethereum blockchain. As more people became familiar with the concept behind NFTs, new uses popped up. 

The vast majority of NFTs are images, videos, and animations – and the most popular are selling for hundreds of thousands. In some cases, millions.

For example, the artist who created Nyan Cat put together an updated GIF to celebrate the digital character’s 10th birthday. He auctioned the new GIF as an NFT and earned $580,000.

In another example, billionaire Twitter co-founder and CEO Jack Dorsey sold an autographed version of his classic “just setting up my twttr” Tweet for an astonishing $2.9 million. 

For many, the apparent value of NFTs is a difficult concept to grasp, as this sort of art is freely available for anyone to access and download online. However, it seems there is a market for this type of asset, and a number of sites have launched for the exclusive purpose of trading NFTs. 

What Technology is Behind NFTs?

NFTs rely on the same technology that supports cryptocurrency: blockchain. However, it includes an enhancement.

The original technology established ownership of interchangeable tokens like Bitcoin and other cryptocurrencies. The tokens were divisible, and owners who traded one Bitcoin for another ended up with the same store of value. 

The first non-fungible token standard, Ethereum’s ERC-721, made it possible to attach unique, identifying information to a digital asset. Known as “smart contracts,” these bits of code can include the owner’s identity, secure file links, and/or rich metadata.

Since Ethereum’s version of smart-contract-enabled blockchains prompted the CryptoKitties craze, other blockchains have developed their own NFT standards. 

Where Can I Buy Non-Fungible Tokens?

Investors and collectors in search of NFTs are left with a single pressing question: where can I buy non-fungible tokens? The good news is that you have lots of options. The recent explosion in NFT popularity has prompted a number of platforms to introduce NFT marketplaces. Some of these include Rarible, OpenSea, and Nifty Gateway. 

The marketplace you choose depends on which NFT you wish to purchase. As with fine art, creators select their favorite NFT service to handle the sale of their pieces. 

NFTs: The Bottom Line

Non-fungible tokens have gained sudden interest, and some items are selling at extraordinarily high prices. However, it is not yet clear how this type of asset will do from an investment perspective.

If the concept catches on in the mainstream collecting world and is eventually established in larger collector circles, it is possible that some NFTs will increase in value, generating profit for investors upon sale. 

Outside of certain popular pieces, such as Jack Dorsey’s Tweet, the future of this market is extremely uncertain. Any purchase of NFTs should be considered – at best – high-risk speculation. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.