Introduction
Many investors add NFTs to their portfolios as a diversification option. NFTs are multi-faceted and have many dimensions that investors can read about in this article.
What is an NFT?
NFTs stand for non-fungible tokens. They are also a type of cryptocurrency but they have the ability to render media files such as audio, video, and graphics. NFTs are popular among artists, musicians, and real estate dealers among others. NFTs have been elevated to mainstream popularity during last few years.
At a foundational level, NFTs are viewed as a token that is used to represent ownership of a digital product. However, NFTs have many use cases and they can be divided into many parts.
Types of NFTs
Here are some of the most important types of NFTs that every investor should know about:
PFP NFTs
PFP is short for Profile Picture NFTs. They have gained notoriety with social media applications such as X offering special display options for users who wish to use NFTs as their profile pictures.
One of the first NFTs collections to be used as profile pictures were CryptoPunks that was issued by Larva Labs in 2017. Another popular collection of PFP type is Bored Ape Yacht Club (BAYC).
Generative Art NFTs
Generative Art is the expression that is created by AI and other machine learning programs and they have been around since 1960s. The developers can set a particular aesthetic and design format that the machine or algorithm can use to create expression in a randomized manner.
Music NFTs
Music NFTs have the ability to store music notes and entire clips. Professional musicians intend to have a greater control over their production by distributing their work in the form of NFTs.
In this manner, the proceeds from the sales go directly to the creator and cut down the need for third party distributors that can divide the revenue for the musician.
At the same time, investors have a chance to make good bucks if they purchased music NFTs from an up and coming artists that could skyrocket the value of their purchase.
Soulbound NFTs
Soulbound (SBT) are based on the World of Warcraft a digital gaming platform where players cannot sell or purchase in-game products. The game is often quoted by Ethereum co-founder Vitalik Buterin, who also penned down a paper in 2022 citing SBTs as non-transferable virtual currencies that represent social identity within decentralized communities.
Each NFT in this instance will be a soul that represents unique features as in a resume such as accomplishments, affiliations, and credentials etc.
Sports NFTs
Sports NFTs have a market evaluation of $1.4 billion with many of the biggest sports clubs and genres invested in the venture. Sports fans have forayed from baseball cards to NFTs and the product has seen various types of sports such as basketball, soccer, football and others pouring into it.
Sports NFTs may also grant special privileges to the collectors such as direct interaction with their favorite athletes, limited edition sports goodies, and access to luxury box suite etc.
P2E NFTs
Web3 projects have adopted NFTs in various places such as virtual real estate and P2E or Play-to-Earn gaming systems. These games are known as GameFi sector and they are more interactive, tradeable, and scalable in comparison to most gaming software.
Players in the game have the ability to earn native tokens by completing tasks and gaining levels etc. At the same time, players may also be able to trade their earned tokens on the spot market or exchange them for unlocking in-game features.
Fashion NFTs
Fashion brands are using chips to track the supply chain and authenticate brand integrity. Meanwhile, in the virtual world the Haute Couture culture is promoted in the form of NFTs with biggest designers such as Dolce and Gabbana and Tommy Hilfiger.
Metaverse has also issued skins or avatars in the form of NFTs that players can create, custom, sell, and purchase in virtual reality worlds such as Decentraland, etc.
Utility NFTs
Utility NFTs are a stand-in for utility tokens. They have a specified purpose to serve such as granting club membership or used as coupons for purchases etc. Some of the popular products in this category are PROOF and Moonbirds etc.
Conclusion
NFTs are a simple concept that has recently adopted many important utilities. With the progression of time, NFTs are becoming more popular and they are considered a valuable investment option with many practical use cases.
