Three-part series on cryptocurrency
Part 2: An explainer about NFTs: A good collectible, bad investment
NFT stands for “Non-Fungible Token,” a token meaning something digital and non-fungible meaning they're unique and not interchangeable with anything else.
John Berlau of the Competitive Enterprise Institute says the best analogy in the real world are collectibles, such as baseball cards and comic books.
“The difference being, and the improvement,” he explains, “that these NFTs are almost impossible to fake.”
An NFT can be anything digital, such as online art, or video clips, or the brief line of a popular song, that can be sold or traded.
George Kamel of Ramsey Solutions says in the “real world,” an art collector can purchase a piece and then it belongs to him. The NFT works in a similar manner except it’s digital.
“So you see something you like online, but rather than buying it physically,” he says, “you can go to an online marketplace and buy the digital original from the owner.”
The market for NFTs is new and therefore very volatile, especially for amateur investors, so Ramsey’s Solutions doesn’t recommend them as a way to build wealth.
Kamel says while someone might make a lot of money on NFTs, it's unlikely to be the amateur investor.