What is an NFT? Ask the average person and they might tell you the acronym stands for “Nobody can F***ing Tell.” At first glance, after all, NFTs seem like a bunch of complex nonsense and yet the truth is they’re both NBD (“no big deal” for the acronym adverse) and a potentially valuable investment opportunity.
What is an NFT? The Simple Truth
NFT stands for “non fungible token” and represents a digital asset that is just that: non fungible or, in simple speak, unique. A fungible token, by contrast, would be something of which multiple copies may be made. Dollar bills, for instance, are fungible; a painting by Van Gogh is not.
NFTs thus share something in common with fine art or other collectibles. However, they differ in that they do not (at least not yet) correspond to real-world objects. Popular NFTs have been made of work by digital artists such as Beeple or popular musicians such as Grimes. They exploit blockchain technology (yes, that same technology that is responsible for the advent of cryptocurrencies) to produce a unique identification code that allows the buyer to demonstrate that they own the original of a given digital creation.
Is there any difference between owning an original and a copy of, say, a popular GIF, though? The answer is both yes and no. No, because the two items are visually and experientially identical, and yes because, well, thanks to NFT technology a mechanism exists to prove which is the real deal.
An NFT is nothing more than a fancy bit of code that allows digital creators to do what other artists have been doing for millennia: monetize their creations. They have thus become immensely popular because they both provide artists a source of income and the wealthy a new playground wherein to toss around their millions.
You don’t need to be rich to invest in NFTs, however.
Beeple’s “EVERYDAYS: The First 5000 Days” may have sold for a record-breaking $69.3 million at Christie’s auction house but many NFTs go for mere hundreds or thousands of dollars (and then frequently re-sell for significantly more). Thus, just like cryptocurrencies, NFTs are a viable speculative investment for everyone, not just the billionaire class.
Should I Be Buying NFTs?
While the answer to this question depends on myriad factors we’re in no position to address, what we can say is that if you purchase an NFT, you need to protect your investment in the same way you would any other asset.
Previously, we addressed the importance of accounting for your digital assets in your estate plan and this advice applies as much to NFTs as anything else you might own online. Naturally, the best way to do this is to speak to an estate planning attorney experienced in the subject.
To learn more about how non fungible tokens, cryptocurrencies, and other paradigm-shifting assets are changing the world of estate planning or to talk about how to incorporate these into your estate plan today, do not hesitate to reach out to the Deliberato Law Center either by calling us at (216) 341-3413 or using the contact form on our website.
Contact the Estate Planning Attorneys at Deliberato Law Center