If you are thinking of buying an NFT as a Christmas gift, read this first.
- NFTs are digital collectibles that live on the blockchain. They have grown significantly in popularity this year.
- NFTs can have both monetary and sentimental value, but there is a risk that their value may not last.
NFTs have skyrocketed this year. Blockchain data platform Chainalysis estimates that at least $26 billion has been spent on NFTs so far in 2021. Their growing popularity means many people are considering giving NFTs this holiday season.
But what exactly are NFTs? Should you get them for your nearest and dearest? If so, how do you do it? We spoke with six experts in cryptocurrency and NFT to find out. If you’re considering making it an NFT Christmas, our NFT gift guide has all the information you need.
What are NFTs?
NFT (non-fungible tokens) are digital collectibles that live on the blockchain. They can be just about anything, from pieces of digital art to game assets, music, and sports trading cards.
Pamela Drake, a professor of finance and business law at James Madison University, explains that NFTs are special because the authorship and ownership information is embedded in the token. “What makes NFTs different from other collectibles is that there is a system for verifying the identity of the seller and for the authentication of each NFT using the blockchain,” she said.
Think of it as the difference between buying a print of an artwork and a signed print, or even the original. There may be hundreds of thousands of copies, but the original and autographed versions are unique. Also, because the key information is stored on the blockchainthere will be no doubt about its authenticity later.
Is an NFT a good gift?
It can be hard to find something special for someone who has everything. NFTs are not only one of the big phenomena this year, they are also rare and may even increase in value over time. Also, there are no supply chain issues when purchasing these digital items.
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Vivian Fang, Associate Professor of Accounting at the University of Minnesota Carlson School of Management, says the two big benefits of NFT gifts lie in the potential growth in monetary value and sentimental value. “If one chooses a token with high growth potential, the value of an NFT gift can continue to increase for years,” she said.
“NFTs are also fairly novel to most, making them unique gifts, especially for those who are tech savvy. The sentimental value of such gifts will only get worse as time goes on, as people can still remember his first NFT gifts decades later. the line.”
However, Fang warned that many NFT projects could fail, making the market extremely speculative. The concern is that the gift you buy will lose its value in a few years.
Professor Drake agrees. “While there is a lot of hype (and press) surrounding NFTs, it remains to be seen whether this phenomenon has lasting power as an investable asset, or whether it is pet-rock syndrome or tulip mania,” said.
Some people have compared NFT gifts to giving someone a lottery ticket or scratch card. But it can be more than that. As long as the NFT has value to the recipient, it won’t be as important if it later loses value. For example, if you buy a Michael Jordan NFT for a longtime fan, they might be happy to have it no matter what happens with the price.
What you need to know before gifting an NFT this holiday season
Before you dive in and buy NFTs for everyone you love and close to, keep in mind that they won’t be right for everyone. We talk about the possibility that they lose value, but there are other factors to take into account.
1. Gasoline and transaction fees
Hemang Subramanian, an associate professor of information systems and business analytics at Florida International University, says you have to keep fees in mind. Many NFTs are minted in the Ethereum (ETH) network, struggling with high gas rates.
Subramanian points out that there are ways to lower gas rates, but he also says they’re not the only additional costs involved. “Furthermore, NFT platforms charge 2-12% artist fee and platform fees for listing NFTs,” Subramanian warns.
2. The recipient will need a wallet
Like Dan Hunnewell, founder of Cryptobaristas and coffee brothers told us, it’s a good idea to make sure the recipient has a wallet and understands the value of what they’re receiving. Crypto Baristas are hand-drawn characters supporting the world’s first NFT-funded cafe.
“You certainly don’t want your gift falling on its face if you’re trying to give something to someone you know nothing about,” he said. “If someone is already an NFT enthusiast or understands the concept, they may be a perfect candidate for an NFT.”
Your recipient will not only need a wallet, but there are many different NFT platforms and it can be difficult to transfer your assets from one platform to another. Finally, keep in mind that some wallets have age restrictions, so it can be difficult to give an NFT to someone under the age of 18.
RELATED: See The Ascent guide for the best NFT wallets.
3. Not all NFTs were created equal
There are a plethora of different NFTs out there, from videos of sporting moments to terrain on the metaverse. You will need to find the right NFT for each of your loved ones. For example, it doesn’t make sense to give an NFT of a Whitney Houston song to someone who doesn’t even like her music.
Alex Salnikov, co-founder and product manager of popular NFT platform Rarible, said personalizing NFT gifts presents a huge opportunity. You can choose a digital collectible that is in line with the recipient’s favorite creator or hobby. “If you really want to get personal, a PFP avatar (profile picture) that matches a recipient’s personality or style is a thoughtful gift they can show off on social networks like Twitter,” he says.
4. Copyright and fraud
There are a couple of copyright issues to consider. First, when you buy an NFT, you don’t buy the copyright. This still belongs to the creator who could sell other similar works in different formats.
Additionally, there have been cases of NFT fraud where unscrupulous players mint and sell NFTs of an artist’s work without their permission. A Crypto.com spokesperson told us:
“When people buy NFTs, they should carefully research the artist and the art itself, as there may be situations where the NFT is not genuine.”
5. NFTs have a bad reputation on environmental issues
These digital collectibles may come with a significant carbon footprint. So much so that one artist on Twitter called it an “ecological nightmare pyramid scheme.” Be careful if you are buying for someone who is concerned about their carbon footprint.
Greener NFTs are possible, as Salnikov points out. “Solutions exist to help significantly limit minting-related energy emissions, and Rarible is at the forefront of creating a sustainable digital future for users.”
For example, Rarible has partnered with more energy efficient blockchain networks to minimize its footprint. It also works with a blockchain-backed carbon removal market so users can offset carbon costs.
How to gift an NFT
Buying an NFT as a gift is not as simple as going to the store and picking up a scented candle. Just as you wouldn’t buy a random piece of art because you wanted to have “art,” you’ll need to find the right NFT.
- Find the NFT you want to buy and create an account. There are various NFT platforms including Rarible, OpenSea, Nifty Gateway and Mintable. It can be a bit daunting when you first log in, so try to find specific topics that reflect the interests of your recipients.
- Buy Ethereum (or whatever cryptocurrency you are trading your NFT with). the top majority cryptocurrency exchanges sell Ethereum and make it easy to deposit normal money like US dollars.
- Set up a crypto wallet. There are several external crypto wallets, but Metamask is the most common. Move your crypto from the exchange to your wallet. You can then connect it to the NFT platform and purchase the NFT of your choice.
- Transfer the NFT to the recipient. You will need to ask them for their wallet address, which will either be a long string of letters and numbers or a QR code. If they don’t have a wallet, you may need to set one up for them.
Learn more: Major NFT Markets
If the idea of wallets and asset transfer sounds overwhelming, you could instead give someone their own cryptocurrency so that they can simply buy the NFT themselves. If you’re shopping for an NFT lover, but don’t know much about the NFT market, there are other options. For example, they might appreciate a digital frame to display their NFT collection. Or a hardware wallet to securely store your assets.
All in all, NFTs could be a great gift this holiday season that people will remember for years to come. Buying one as a gift could also be the start of your own journey into digital collectibles. Be warned, though: as Crypto Baristas’ Hunnewell told us, it could be addictive: “Once you get into the world of NFTs, it’s hard to get out, and that’s a good thing!”
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