I recently finished reading The Metaverse, The Bitcoin Standard, and The NFT Handbook, complemented by extensive research in this field. This comprehensive article synthesizes insights from The NFT Handbook while exploring five key topics: What NFTs are, their applications, drawbacks, reasons to buy, and how to select them wisely.
Having immersed myself in this space, I currently hold one cryptocurrency and own an NFT certificate, with more projects underway. This article blends factual information with personal perspectives—feel free to share your thoughts after reading.
What Is an NFT?
An NFT (Non-Fungible Token) is a unique digital asset verified and secured by blockchain technology, ensuring authenticity of provenance, ownership, and uniqueness.
- Token Aspect: NFTs are minted on blockchains (e.g., Ethereum), similar to how Bitcoin operates on its native blockchain. They are tradable and transferable, inheriting cryptocurrency liquidity.
- Non-Fungibility: Each NFT is irreplaceable. Unlike interchangeable assets like dollars or Bitcoin, no two NFTs are alike.
- Umbrella Term: "NFT" encompasses diverse subtypes—art, collectibles, virtual land—each requiring individual evaluation beyond the generic label.
Six Key Applications of NFTs
1. Digital Art & Collectibles
NFTs authenticate ownership of digital creations (images, GIFs, 3D models). However, their value hinges on collective consensus—like traditional art. Example: A $2.9M Twitter NFT now struggles to resell (TechNews), highlighting speculative risks.
Bottom Line: Understand traditional collectibles first. If you can’t explain their appeal, avoid NFTs.
2. In-Game Assets
NFTs represent virtual items (e.g., race cars in F1 Delta Time). Value depends on the game’s longevity—risky if the developer fails.
3. Digital Trading Cards
Card games (e.g., Magic: The Gathering) use NFTs for tradable cards. Like in-game assets, their worth ties to the publisher’s health.
4. Virtual Real Estate
Platforms like Decentraland sell NFT-based land. Success relies on user adoption—buyer beware.
5. Blockchain Domains
Decentralized domains (e.g., .crypto) simplify crypto payments. Unlike traditional URLs, they’re permanent after minting.
6. Event Tickets
NFT tickets enable transparent resales with smart contract-enforced royalties, cutting out scalpers.
Six Major Drawbacks of NFTs
1. High Gas Fees
Ethereum transaction costs can eclipse NFT prices. Upgrades (e.g., Ethereum 2.0) aim to reduce fees.
2. Storage Vulnerabilities
NFTs verify ownership—not content hosting. If linked files vanish (e.g., Dropbox), you’re left with a "digital shell."
3. Impersonation Risks
Scammers fake artists or projects. Solution: Verify creators and platforms meticulously.
4. Duplicate Copies
Artists can mint identical content anew, diluting your NFT’s uniqueness.
5. Unfulfilled Promises
"Utility" NFTs (e.g., exclusive access) may default if creators abandon projects. Legal safeguards are rare.
6. Blockchain’s Flaws
- No Recourse: Disputes? You’re on your own.
- Security Threats: Fake apps, phishing, and 51% attacks plague small chains.
- Abandoned Projects: Most NFTs become "dead coins."
Five Reasons to Buy NFTs
1. Meaning
Support artists you admire—NFTs eternally record your patronage.
2. Functionality
Useful NFTs (e.g., domains, game items) solve real needs.
3. Investment
Mostly speculation. Warren Buffett critiques NFTs as valueless without underlying businesses.
4. Prestige
Show off rare NFTs—human nature loves exclusivity.
5. Collecting
Passion-driven, but weigh competition: thousands vie for the same "golden" NFTs.
How to Choose NFTs Wisely
Ask these five critical questions to spot resilient projects:
- Does the creator have a sustainable business model beyond NFTs?
- Will NFT proceeds enhance their offerings?
- Is this a Hail Mary or a strategic add-on?
- Is value based on hype or lasting reputation?
- Are they playing short-term games or long-term ecosystems?
Key Insight: Avoid "decentralized dreams." Back centralized teams with proven execution.
👉 Learn about NFT market trends
FAQ
Q: Are NFTs environmentally harmful?
A: Ethereum’s shift to Proof-of-Stake (PoS) reduced energy use by ~99.95% (CoinTelegraph).
Q: Can NFTs be copied?
A: The content can be replicated, but the blockchain-verified ownership remains unique.
Q: How do I avoid NFT scams?
A: Research creators, use trusted platforms, and never share wallet keys.
Q: Are NFTs a good investment?
A: Treat them like high-risk speculative assets—only allocate discretionary funds.
Q: What’s the future of NFTs?
A: Beyond art, expect utility in identity, licensing, and metaverse economies.
Disclaimer: This content is educational—not financial advice. Always DYOR (Do Your Own Research).