In the coming days, many families will be gathering together to celebrate the holidays. For young people, family reunions can often mean answering questions on topics their senior relatives are seeing in the news. It could be something from politics or pop culture. It could also be something in finance. Chances are that this year, cryptocurrencies and non-fungible tokens will come up. So while you are eating ham and sipping champagne, how do you explain NFTs to your grandparents?
NFTs remain one of the most timely topics of the season… and for good reason. The third quarter of 2021 saw them surpass $10.7 billion in sales. Another report indicated that NFT sales could surge past $17 billion by the end of the year.
At a time when many among us are still struggling to understand the ever-evolving world of crypto, a frenzy in NFTs promises to generate even more complicated questions. As Shark Tank star Kevin O’Leary told InvestorPlace, though, investors may be missing the point. In turn, they are missing out on the profits.
If your relatives fall into this category and are turning up their noses at NFTs because of the confusion, there’s a chance you can still help. InvestorPlace spoke with several experts to help you explain NFTs to your grandparents. Here’s what they had to say.
The Holiday Guide: How to Explain NFTs
Blockchain Coinvestors Managing Partner Matthew Le Merle once told InvestorPlace that NFTs would be better named “digital ownership certificates for assets which are scarce.” Since that doesn’t quite roll off the tongue, though, a new term was needed. Enter non-fungible token.
For your unfamiliar relatives, then, it’s important to explain what that actually means.
Lyle Solomon, a principle attorney at Oak View Law Group, broke down the phrase in stride. “When something is ‘non-fungible,’ it simply means that it is one of a kind and cannot be replaced.” Solomon compared this to the fungible nature of a dollar bill. In other words, any dollar bill can be exchanged for another. That is not the case with NFTs. Each one is unique.
So what about the second part of non-fungible token? Solomon explained that “a token is a digital certificate held on a blockchain, [which is] a secure and distributed database. As a result, when you buy an NFT, you’re essentially purchasing a tamper-proof digital receipt.”
This all goes back to what Le Merle said. Each NFT is one of a kind, and each one you own comes with a digital ownership certificate (on the blockchain). There is no denying that it belongs to you.
Compare NFTs to What Your Relatives Know
Once you get the basics down, it can be helpful to compare NFTs to other types of assets that your relatives are likely more familiar with. Solomon has an example for this too: digital art. Your NFT could be used as a wallpaper for your smartphone (or tablet) in addition to serving as a tradable asset.
“NFTs are similar to digital art,” Solomon said. “You receive a computer representation rather than receiving the Christmas card as an artwork on a canvas.”
And what makes investors go crazy for NFTs? If your grandparents are struggling to understand the frenzy around a CryptoPunk or Bored Ape Yacht Club NFT, CMORQ CEO and founder Hossein Azari said it can be helpful to remind them of other popular collectibles.
“NFTs are like baseball cards, but digital,” Azari said, calling to mind images of the infamous T206 Honus Wagner or 1951 Bowman Mantle card for Micky Mantle. “You could compare them to anything with collectible value, in digital form. The more rare the card, the higher the price in collections that are in high-demand.”
So, if your grandparents are struggling to understand how digital artist Beeple sold an NFT for nearly $70 million, consider the baseball cards that sell for $6 million each. Not everyone will see these assets as being worth millions of dollars, but some buyers certainly do.
Focus on Value Appreciation
OK, you’ve covered the basic definitions and explained how some of the prices can be so high. But can you remind me (or your grandparents) why investors are actually buying NFTs?
As Pipeline Marketing CEO Jonathan Teplitsky told InvestorPlace, it’s not all that different from investing in stocks. Many investors buy stocks with the intention of holding them for several years — or even a lifetime. Some even pass their stock holdings on to children or grandchildren. Over time, the hope is that stock will appreciate in value.
“Many people who purchase NFTs are actually purchasing a piece of art in hopes that the art will appreciate in value,” Teplitsky said. “Instead of storing your proof of ownership on a piece of paper under your bed, like you do for a stock, your ownerships rights are stored online — so there’s no chance you can lose it.”
Want to Learn More?
There has never been a better time to learn about NFTs or to help those close to you learn about them. O’Leary has been betting on a decentralized future, backing companies in the NFT space. Former chess champion Garry Kasparov recently released an NFT collection allowing buyers to invest in his legacy. Musicians from Grimes to Shawn Mendes to Kings of Leon have all released NFTs.
And while 2021 was a record year for these digital assets, many experts are continuing to look ahead to the future. That’s why the holidays are a great time to help your loved ones shake off their confusion. Not everyone has to be an investor in NFTs, but understanding their disruptive potential is important.
If you are looking to invest, InvestorPlace Assistant Financial News Writer Brenden Rearick argues that “the safest way to secure NFT profits is in the underlying currencies themselves.” In other words, purchase the cryptocurrencies that create the networks that NFTs are stored, tracked and traded on. He recommends Ethereum (CCC:ETH-USD), Decentraland (CCC:MANA-USD) and Solana (CCC:SOL-USD) as NFT cryptos worth a close look.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
The post How to Explain NFTs to Your Grandparents This Holiday Season appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.