A company called Beeple posted news of an NFT sale made to the tune of just under $70 million. That sale made a lot of people wonder how to get into the NFT game and how to survive it financially. Some NFT enthusiasts mint their own, while others are content to purchase them.
What is an NFT drop? Non-fungible tokens, also known as NFTs, are basically tokens for a project that could be digital art, video clips, still images, and much more. When you use crypto to purchase an NFT, you are buying a digital work of art, a digital representation of one, or some other thing represented by the NFT.
An NFT drop may be free or it may be “dropped” on the market ready to be purchased. An NFT drop isn’t always a FREE drop, and there are plenty of scams waiting to trick you into thinking you’re getting in on something new or desirable in NFT form.
What Is An NFT Drop?
If the above description of NFTs sounds a bit simplistic, you’re correct–there are a variety of aspects to an NFT drop that may or may not be opaque to the end-user or NFT collector.
NFT drops are a kind of public relations move, a way to stir up interest in a platform or the NFT itself and make visible the latest effort by the company performing the drop.
An individual NFT drop may require you to sign up for a specific platform, site, or service. It may or may not be a free NFT; there are plenty of cases where the drop is for a price rather than a giveaway.
Do I Own This NFT?
NFT trading and selling can be tricky. Yes, when you buy an NFT, you own it the same way you own a painting or sculpture. And just like a painting or sculpture, you do NOT automatically obtain the RIGHTS to that work just by purchasing the NFT.
If there is no fine print–or if there is the right kind of fine print associated with your NFT purchase, you may discover that the rights to the work are NOT yours. To purchase the rights you will usually have to (in both “real world” and NFT transactions) have that detail specifically outlined in your purchase agreement, contract, terms of service, etc.
What You Need To Know About NFT Drops
A lot of the talk in places where you might discuss purchasing NFTs has to do with contemplating the reputation, market enthusiasm, and artwork of the author of a given NFT.
It’s a lot like the bricks-and-mortar art world. An artist’s reputation, output, controversial nature, and other variables all affect the value of a given artwork or NFT. If you want to better understand the market for non-fungible tokens, you could do a LOT worse than studying the buying and selling practices of the art world in general since many of those principles and tactics seem to also be at work with NFTs.
And as mentioned above, there are plenty of scams and opportunities to be scammed in the world of this type of trading.
Counterfeit works, bogus sites created to fool you into thinking the vendor is actually someone else, rug-pull schemes where the creators of a site or NFT suddenly disappear without warning, leaving the investors with the “rug pulled from under them”, hence the name.
Essentially, to avoid being scammed, it’s good to apply the same best practices to your cryptocurrency transactions (including NFTs) that you do for your social media accounts, email, Facebook, etc. You want to avoid responding to unsolicited third-party calls (via your texts, emails, social media, etc.) to act on NFTs you know nothing about.
Some crypto blogs point out that an over-used tactic for scammy NFT drops involves direct messaging on social media apps. It’s a very good policy to simply choose NOT to respond to any such messages related to investing or crypto, EVER. You can’t be scammed if you don’t respond.
You also want to avoid giving in to FOMO (fear of missing out), and emotional investing in general. Nobody wins when they make irrational or fear-based choices about their investment dollars. Instead, be careful, methodical, and deliberate.
Many blogs and cryptocurrency investors tout the benefits of buying NFTs and virtual currencies ONLY after having done your own careful research. You’ll want to steer clear of enticing NFT drops that are outside your budget or ability to pay, and it’s also just as important not to give in to the enthusiasm some investors show in the early days.
These people could be lured into buying too much, too soon and don’t stop to think about whether the purchase is a good one just because it fits within a certain price range.
NFTs And Cryptocurrency: The Similarities
The obvious: both are digital, both are bought/sold/traded online in highly enthusiastic communities. Some crypto and NFT people get rich seemingly overnight, others lose their investments just as fast.
The not-so-obvious: just like crypto itself, the reason NFTs can sometimes command the million-dollar price tags has a lot to do with the same investor enthusiasm that keeps the price of Bitcoin high (at press time), and if that interest takes a sudden drop, values will likely fall accordingly.
NFTs, like the brick-and-mortar art world, are valued purely on things like the buyer’s willingness to pay, the market’s willingness to support the work financially at those price points, etc. When a Banksy sells for millions, it’s because someone was simply ready, willing, and able to put out the cash.
In the world of non-fungible tokens that same principle applies. As always, there is a substantial risk of loss of investment funds in this area.
The unregulated nature of crypto generally means you’ll need to take many more steps in order to protect yourself and those steps are all self-regulated. Setting a stop loss point to divest yourself of a commodity that is tanking in value is one way to do that, but having a larger and more comprehensive exit strategy with your digital investments is also crucial
Joe Wallace has covered real estate and financial topics, including crypto and NFTs since 1995. His work has appeared on Veteran.com, The Pentagon Channel, ABC and many print and online publications. Joe is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News.