You may think that NFTs are .jpg images or digital art. (Or, depending on what you've heard, you may think NFT is not much of a thing.) But NFTs offer more substance than just a profile picture, and they offer significant benefits to creators, brands, and consumers. We take the mystery out of NFT and explain how you can benefit from this space. But before you take on this alternative investment, you need to be aware of all the risks.

NFT stands for non-fungible token NFTs are not cryptocurrencies, but like cryptocurrencies, they use blockchain technology to assign ownership to digital (and physical) assets Think of NFTs and cryptocurrencies as trains running on tracks (blockchains). Think of NFTs and cryptocurrencies as trains running on tracks (blockchains). The blockchain provides the security and infrastructure that keeps NFTs and cryptocurrencies safe, without being controlled by a central authority or bank.

What makes NFTs special is that each NFT has a unique numeric identifier and can tokenize real-world items. (In other words, assets can be securely bought, sold, and traded on the blockchain.)

Let's break this down: if you purchase a movie on Amazon Prime, you can only access that movie on the Amazon Prime platform. You do not "own" the movie, you simply have permission to access it. However, if you purchased the movie as an NFT, you have full ownership of that file and do not need access to the platform you purchased it on. You cannot contest, delete, or revoke ownership of that file.

NFT is the first blockchain-based tool to enable digital ownership in our lifetime. Digital ownership means the ability to access, use, and share funds, data, digital files, and collectibles without the need for a third party; NFT proves ownership, grants ownership, controls scarcity and supply, and provides the ability to pay for the content and creative materials we put out into the world Provide the ability to pay and be rewarded. [NFTs are often art, but can be tied to any asset, digital or physical, including music files, restaurant and hotel reservations, experiences, merchandise, real estate, and even voting records; NFTs can also be used to verify products and goods to prevent counterfeiting, i.e., record ownership to confirm authenticity can also be used for.

For creators, the ability to distribute their work as NFTs on the blockchain offers more wealth than using a centralized third-party system, such as Spotify, iTunes, or traditional art agents, which take fees and cannot provide lifetime royalties offer the potential to generate.

Art, whether digital or physical, is the most popular type of NFT today; NFT can provide community opportunities and access to clubs. Some NFTs provide access to self-care tools and events, from sound baths to yoga sessions to remote cooking classes.

Other NFT projects will provide access to IRL events and experiences, similar to membership cards. NFTs can also be music albums, like Imogen Heap's collection of six audiovisual albums NFTs. Not only can she distribute her music as she sees fit, but as an artist she also benefits from royalties, scarcity status, and creative control.

Many NFTs are also creating impact IRL, from global women's education donation projects like the Flower Girls NFT to reef restoration projects like the Super Coco NFT. Other NFTs can be used as vouchers for unique experiences, and after the experience, the NFT can be taken home as a keepsake.

Before investing, it is important to understand how crypto and NFTs are taxed; NFTs are subject to capital gains tax and typically the cryptocurrency used to purchase NFTs may also be taxed.

Like most alternative investments, NFTs carry special risks. Dave Nadig, research director at ETF Trends, says he is bullish on the technology for the long term, but he does not recommend investing more than you can afford in assets. He told Kiplinger's in 2021, "It's not an investment in securities, it's an investment in collectibles."

In the same article, Kim Caughey Forrest, chief investment officer of Bokeh Capital Partners, also expressed skepticism: "People are asking themselves, is this the next bitcoin? I don't think anyone should invest in NFTs at this point. It's too new." She added that the NFT price spike in 2021 was driven by simple "FOMO," or fear of missing out.

The NFT hype in 2020 and 2021 was irresistible, especially with some NFTs trading for millions of dollars and making headlines. Research firms L'Atelier BNP Paribas and NonFungible.com found that NFTs will be a $250 million market in 2020, with investments up 299% year over year.

However, that hype has cooled in 2022, with CBS reporting a 47% quarter-over-quarter decline in global NFT sales in the first quarter. More recently, Marketwatch reported that trading volume on OpenSea, the largest NFT marketplace, has declined by more than 45% over the past 30 days, while the number of traders has dropped by 13%.

While it may seem complicated, the process is not much different than buying a digital product (such as an album on iTunes or a sewing pattern on Etsy). Here's how to get started.