NFTs are a fast-growing and lucrative market. Investing in these digital assets often means being able to make money in more ways than one. In this article, we’re going to talk about everything from investment strategies to how you can turn NFTs into cash.
What are Non-Fungible Tokens (NFT)
Non-fungible tokens (NFTs) are non-divisible digital assets. No matter what, there is only one token of a certain NFT. The idea behind NFTs is quite similar to a physical asset. If you had an antique car, you wouldn’t be able to cut it up into pieces and then sell each piece as an individual asset on the market.
That’s because who would want to buy a random piece of a car and be unable to sell it separately? The same goes with NFTs.
Not only can NFTs be bought and sold, but they can also actually be traded or used. A great example of this is Cryptokitties. In this game, you can buy and sell cartoon cats using smart contracts. This makes each cat a unique token that you can’t replicate easily. The value of a Cryptokitty increases if someone transfers it from owner to owner on the Ethereum network.
What Makes NFTs so Attractive?
One of the main reasons NFTs are so attractive is because of the possibility to invest in them. Namely, you can make a profit in different ways: buying tokens for the purpose of selling them later or purchasing them well below market price.
Besides, you can also make a profit when tokens hit an exchange. You can buy NFTs from a low price and hold them for a long time to see the value rise. Then, you can sell your tokens for profit.
Moreover, if the value of an NFT increases after it’s sold, the person who bought it at a low price will be entitled to double the amount of money that was paid for it. Why? Because he or she has owned it for a longer period of time.
Limited Supply of NFTs
Another reason that makes NFTs so attractive is that they’re limited in supply. That makes them valuable and more desirable. For example, if you want to buy a car, you can do that by either: buying it at a retail price or purchasing an expensive used car.
If you buy the car at retail price, this means you have access to plenty of these cars and there’s no scarcity value because the supply is high. However, if you decide to purchase an expensive used car, this means there are very few of them on the market. This is because not many people would be willing to sell their old cars for a low price.
The same goes with NFTs. The more limited in supply they are, the more valuable they are.
5 ways to Make Money With NFTs
Let’s go further to discuss the ways you can start making money with NFTs:
1. Invest in NFTs
First thing first, you can invest in NFTs. If you want to buy NFTs and guess the future of their prices, then the best way to do this is by buying them in an exchange. In most cases, you can buy some of these tokens at a low price and hold them until their value increases. Then, you sell them at a high price or profit from a small increase in their value.
Besides, if you choose to invest in NFTs without purchasing it on an exchange, take your time to study the markets and make sure not to purchase too many Tokens at once. If you can find a token that shows promise, try purchasing as much of it as possible.
2. Buy and sell NFTs
Another way to make money with NFTs is by buying and selling them on an exchange. Cryptokitties is one of the most famous examples of this strategy. What would happen if someone decides to buy a few Cryptokittens at a low price? He or she would hold them for a long term, hoping for the value of these tokens to rise later on.
However, if the value of the tokens doesn’t increase but stays flat or even decreases, then he or she can sell those tokens at their original price or even at a low price. Selling them at a low price, of course, will make the person who holds them for a long time a profit.
3. Turn NFTs into Cash
Another way to turn NFTs into cash is through the process called minting. What this means is that you can easily create new tokens in an ERC-20 compatible wallet and then use them as an asset on an exchange such as Bittrex.
We already mentioned that ERC-20 tokens are used to mint these NFTs and in this case, all you need to do: is create the tokens, send them to the blockchain by using your wallet and trade them on an exchange to make a profit.
A great example of this strategy is the Crypto Kitties blockchain that was created by the Ethereum network’s creator. In this case, the goal of Crypto Kitties is to create digital cats that can be used as assets on the Ethereum network and buy or sell them using ERC-20 tokens.
4. Invest in Open Source and Bounty Programs
If you like working on open source projects, then you should consider investing in NFTs related to open source technologies. For example, if you are an avid supporter of a certain project both in terms of contributions as well as donations, then you can invest in these NFTs as a way to profit from it. Make sure to read the project’s whitepaper: a well-written and comprehensive whitepaper will draw in investors.
Another way to make money with NFTs is to participate in a bounty program. Firstly, you need to research the program and either invest in it or join it. We highly recommend researching the project and reading the whitepaper before making any investments.
5. Invest in Governance Proposals
Finally, you can probably make a profit by investing in governance proposals on open-source protocols such as Aragon, Democracy Earth Foundation, Tezos, or DAOStack. The reason for doing this is that the projects that participate in these proposals will be able to receive a percentage of the funds raised by the NFTs.
If an NFTs project’s governance is voted in as an accepted proposal, then this will increase its value. Therefore, you can hold on to it until it reaches a high value and then sell it at a high price or make a profit.
When you want to make money with NFTs, you should definitely keep in mind that NFTs are not yet mainstream or as popular as the internet. However, things will change in the future and this is why it’s important to be prepared.
If you like making money from investment strategies then investing in NFTs can be a great way to do this. It is also important to know how you can profit from trading these tokens and holding them for the long term.
In any case, it’s important that you understand what you’re doing because there are no guarantees of winning a lot of money if your project doesn’t work out.