NFTs are a trending asset type and many are looking to them as an opportunity for investment. For many of us, the acronym alone may leave us with more questions than answers.
Being fungible means an item may replaceable. A Non-Fungible Tokens (NFT) therefore, is a digital asset that is a one-off unlike a share or a unit in a listed unit trust is fungible because each share or unit is identical.
In effect, NFTs are seen as unique pieces of digital art. Considering that many things now can be stored online and could easily be replicated as a digital file, this might seem odd. An original piece of artwork (such as the Mona Lisa) would be considered a non-fungible token, as there is only one Mona Lisa. This is how people are treating NFTs.
It’s a new form of fine art collection, only the artists are not necessarily Van Gough or Da Vinci. One of these new artists was the founder of Twitter, who sold the very first tweet for more than $3 million. It’s not too dissimilar to buying an item of significance, such as the dress Marilyn Monroe wore to the President’s birthday, or the ball that Shane Warne claimed his 700th wicket with. An NFT could be considered as something very unique that held an important place in time.
Of course, like all art, NFTs are subject to copies, just as the Mona Lisa is reproduced on keychains, or replica cricket balls with Warne’s signature are still available for purchase. Owning the original denotes a particular status though, and NFTs are starting to take off as more covet the prestige of having ownership of the original.
What is the outlook for NFTs?
There is no clearcut answer to this question.
In a modern world where people may have excess disposable income on their hands, the ownership of special things becomes a status symbol. As others become more involved in cryptocurrency, more interest may be shown in digital memorabilia, digital art or NFTs (which can be the same thing).
While you may have further questions about NFTs and their potential for growth, it is important to stress that like with many investments, it is up to your discretion. Conducting additional research could assist in furthering your understanding.
We’re ready to help. Contact Ken Yew, our Senior Manager Superannuation on +61 3 9820 6400 to discuss the next step to take with your SMSF investment strategy.