Understand what you buy

By Dale Gillham. Published at May 7, 2021, in Investor 101

As the world becomes more familiar with blockchain and cryptocurrencies, the opportunities that this new age technology presents keeps expanding at a rapid pace.

In March, Twitter founder Jack Dorsey sold the very first tweet as a non-fungible token (NFT) for $2.9 million. To put it in simple terms, an NFT is a unit of data stored on a digital ledger (known as blockchain), which certifies that digital asset as unique.

Excuse my ignorance, but I am not sure why anyone would want to buy a tweet as an investment, let alone pay nearly $3 million for it. I guess we will all find out in due course if the investment was worth it.

According to news.com.au, blockchain works by creating an open record of transactions that is nearly impossible to alter.

Rather than storing data in a database, the data fills up “blocks” which are then linked to previous blocks that are all chained together. In other words, as new data becomes available, it is entered into a fresh block and once that block is filled, it is chained to the previous block in chronological order. Each block is valued equally and essentially an original one-off digital record that is authenticated using blockchain technology.

NFTs are purchased using cryptocurrencies and, so far, NFTs collectibles (as they are known) range from digital paintings to artwork, music, games, films and even sports memorabilia.

While collectibles can be a good investment, regardless of whether they are owned in their physical capacity or digitally, only one person can own an NFT of the original item.

It is possible that we will see an explosion in the sale of digital collectibles via blockchain in the coming years, as we all become more familiar with this technology. That said, I would recommend those who own collectibles and who may be thinking of using this technology to do their research to fully understand what they are buying and its true value.


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