What The Hell Is an NFT? A Dummies Guide In Full
What the hell is an NFT? As someone who formerly worked in the world of Financial Advising and now works in Accounting, I must say that I get this question quite a lot! Baby Kongz, Cyber Kongz, fish tokens, Cats, Dogs, what the heck is all this and why does it exist! In this blog post, I will seek to provide something of a dummies guide for how NFTs work, why you should likely steer clear of them unless you are already a millionaire (in my opinion the SEC should regulate these things where you need a $1,000,000 net worth in order to invest in them. For gosh sakes you need $10,000 to get approved to trade options and you need $25,000 just to qualify as a day trader.) I first found out about NFTs during the Coronavirus crisis, however it wasn’t until I watched this video on the Deadbeat Super Affiliate page that I actually UNDERSTOOD what NFTs were, and so here I will give you the way I understand the full rundown. Be sure to read on and subscribe to our blog for more details and information on all things business and Finance, including NFTs!
Some of the top NFTs that we will cover on this post include:
Baby Kongz
Cyber Kongz NFTs
The Bat Cowl
The Sandbox
Decentraland
Mutant Cats
Fish Tokens
Banana Tokens
Buzzed Bear Hideout
Loopy Donuts
And much more, read on or subscribe to our blog for additional details and information on all things business and Finance!
What The Hell is an NFT? Let’s Start Out With the CyberKongz and BabyKongz With Banana Tokens Example
I just learned what all this was over the weekend. I knew that NFTs functioned on a marketplace, but I thought you had to have some sort of rare digital artwork, or a piece of a website, or something of the sort. Instead, it’s actually much worse than I thought, and it’s basically completely propped up on nonsense, not that it necessarily means it is always a bad investment, or that you don’t have millionaires being made from it or dipping a toe in the water, but for 99.9% of people I would say that steering clear of NFTs in favor of stocks, bonds and index funds, is going to be your best bet by far.
That being said, what NFTs are in essence are an extremely leveraged speculative asset. It is a way of adding even MORE leverage to Ethereum, which is the primary cryptocurrency token used on the NFT marketplace. Worse than that, I thought you had to have some sort of proprietary online asset in order to make one of these things, but it literally appears that someone just posts a random graphic design image and poof, the NFT market gets going and gets trucking.
And by the way, here’s how it increases your risk on Cryptocurrency and why it vastly increases your leverage on crypto deals on both sides. Say someone has $1,000,000 in Ethereum, which right now is I believe around 50 Ethereum tokens at the time of me writing this article (yes this is correct, $1929 per token so stick with the example here.) That $1,000,000 is likely going to fluctuate between 5% to 30% on any given day or any given month given the volatility of the asset, and that’s just because it’s held in Crypto. Now imagine this, you take $667,000 of that Ethereum and you deploy it into a CyberKong token which is going to pay you $697 per day, via 10 Banana tokens daily, each valued at around $69 a pop. If you hold that for one year, here are some new possibilities on your current blockchain asset position (between both ETH and your CyberKong NFT):
One year at $697 per day is $254,405 in revenue during the year.
However every 10 banana tokens can be cashed in for a BabyKong NFT which is worth $20,000. Meaning you can leverage the Banana Token even further and turn a $7,000 valued stack of Banana tokens into a $20,000 Cyber Kong NFT. So now you could have $750,000 Worth of Baby Kong NFTs. Along with your original CyberKong NFT valued at $697,000, or maybe the value of these has each increased or decreased, or possibly gone to ZERO if the market has become oversaturated, or they run out of tokens, or they hit the max 1,000 tokens generated before you think it will, etc. etc.
In a scenario like the above, your $1,000,000 in Ethereum could easily have been converted into $2,000,000 worth of NFTs, now paying you still $1,000 per day in new Banana Tokens, along with a $337,000 position in Ethereum, which could have tripled to being worth $1,000,000 or is now worth 20% of its original value due to the ETH market. So your $1,000,000 original investment, which should still be worth around $1,000,000 or maybe $1,050,000 in a bond, or maybe $1,070,000 in an index fund, could be worth $100,000 because the NFT tokens expired and Ethereum dropped, OR could be worth $2,000,000 in ETH + a 5x on the original $370,000 ETH remaining + a double on the rest that was converted to ETH (your NFT funds that you “devested” from, not into cash but into Crypto). Long story short, your $1,000,000 could be worth $100,000 now inside of 1 year or it could be worth $12,000,000 if the whole thing went your way. The leverage possibilities here are absolutely astounding!
My recommendation generally would be to steer clear of these unless you are already a millionaire. And if you do decide to get in the NFTs game, I would tell you to treat it as if you are gambling at a hand of black jack, literally only gamble what you can afford to lose and pretend that you’ve already lost it. Now that I know just how much leverage these things can employ, I must say it is nothing short of scary as all hell.
What Are the Best NFT Tokens to Purchase for Passive Income?
The top seven that I’ve found are the following:
Cyber Kongz
Baby Kongz
Loopy Donuts
Mutant Cat – This is actually a good one that pays good cash flow via Fish Tokens. Similar to their gaming value with the above Cyber Kongz and Baby Kongz Tokens.
ZombieToadz – There’s a lot of copycats of these out there now but I believe these pay a good cash flow.
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What is the Mutant Cat NFT?
Same deal. NFT, pays out in fish tokens, I believe it’s cheaper to buy into say $50,000 and pays probably 1% of this daily until the crypto pump and dump collapses, but yeah that’s the game. The more I write about this the angrier I’m actually getting as a Finance guy as I realize it’s all a big pump and dump.
Wait So Does an NFT Only Have Value Because The Other Person is Willing to Buy It? Yes
Yes, mainly. The only argument against this heading above is that some of the reason that things like Banana tokens and Fish Tokens have value is that people use them for online gaming. But even then the only reason that those have value is that people buy it for gaming, and the main reason people spend thousands of dollars on those is that they can use them to get better at gaming and win competitions to win money at, and the reason competitions pay them money to win is that the gamers buy in and it’s a piece of the pool they’re winning. It just goes on and on. So the answer is yes, I’m actually shocked at just how much leverage these things are employing, in fact I never even really thought about it much until I understood what the heck they actually were. Or I guess I should say what the hell they were given the title of this article.
The Only Actual Value That NFTs Have Over The Greater Fools & Castle In The Air Theory – Video Game Tokens That Are Generated, Which Once Again People Buy
See above as I just restated this in detail. If you aren’t familiar with these, the castle in the air and firm fundamentals theory are one’s you’ll find in some of the best investment books ever written, such as:
Random Walk on Wall Street (My #1 Favorite). Burton Malkiel and his Vanguard Index Fund Theories
One Up on Wall Street
Benjamin Graham’s – The Intelligent Investor
Security Analysis – By Benjamin Graham – I always wish I would’ve read this one cover to cover but I never did.
Basically these books, the great investment novels, will re-iterate what I’m saying. NFTs are a castle in the air pump and dump. While you can absolutely diversify a bit by having a portfolio of NFTs, and while I see a lot of the internet SEO guru’s doing this, I think a lot of them could use a lesson in Financial Advising and basic capital management, versus purchasing Cyber Kongz token that mint baby Kongz NFT artwork if you can collect enough Banana tokens first. But don’t forget the Banana tokens only have value because people buy them for online gaming. Its crazy, and the whole thing seems like one gigantic sham meant to allocate capital towards it. Still asking yourself what the hell is an NFT?! You’re not the only one, read on!
Final Thoughts On What The Hell is an NFT? Some Closing Comments and My Synopsis
A disciplined investor would most definitely steer clear of these. If you have the money to lose, I guess you can dabble in these, but really the only way to make money with NFTs is to start a Youtube channel on NFTs and use it to get subscribers. I guess by that logic, me writing a bunch of blog content on NFTs is going to technically “make me money with NFTs” but I’ll tell you this, I will ever buy one, that much I can tell you. Thanks for reading, and remember to subscribe!
Cheers!
*Inflation Hedging.com
Sources:
https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq
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