The Motley Fool

Can NFTs Make You Millions?

Image source: Getty Images

A non-fungible token, or NFT, is an innovative new concept that is based on the same technology that made Bitcoin possible. Now, artists and writers from across the world are using these tools to try to generate dollars online. While the hype overshadows reality, growth investors should take a closer look at this emerging new technology. 

Here’s what an NFT is and how it could impact the digital economy as well as your portfolio. 

What is an NFT?

If you understand Bitcoin and the underlying blockchain technology, NFTs should be fairly simple to grasp. A quick refresher – blockchain technology allows us to store data on digital blocks that are chained together. This framework lets people interact with the data without the need for an intermediary. 

The most popular use of blockchain technology is to create a digital currency, namely Bitcoin. Over the past 12 years, Bitcoin has steadily gained value. The collective value of all Bitcoin is now US$1 trillion – which makes it larger than most national economies. 

NFTs are a relatively new way to use that same blockchain technology. The difference is that these digital assets can be easily created by anyone. They can also store any sort of data, ranging from pictures to soundtracks. That means an artist can now store their digital work on a blockchain they created themselves. 

Jack Dorsey recently sold his first Tweet via NFT for US$2.5 million (CA$3.2 million). A piece of digital art sold for a record-breaking US$69 million (CA$86 million) last week. The National Basketball Association (NBA) has used NFTs to allow fans to buy, collect and trade short video highlights of their latest games. 

Effectively, NFT technology can help artists monetize their digital art and content independently. 

How can you make millions?

Even if you’re a digital artist with serious skills, the chances of your artwork selling for millions of dollars via NFT are slim. Remember, NFT technology can only make your work tradable, not popular. 

However, there is another way you can make money from this trend – by betting on the underlying technology. NFTs are based on Bitcoin’s rival Ethereum. All NFTs are created using the Ethereum network. Fortunately, Canadian investors can buy The Ether Fund (TSX:QETH.U), a listed security that tracks the value of Ethereum. Each unit of the fund represents 0.01766634 ETH tokens.

If NFTs continue to be popular and generate millions, usage of the Ethereum network should skyrocket. Meanwhile, the upcoming supply cut could further enhance the value of each ETH. With the recent dip in crypto assets, this could be the perfect time to buy the Ether Fund for your portfolio. 

Bottom line

NFT technology helps artists and digital content creators monetize their work. Anyone, including you, can easily create a token to represent ownership of an image, GIF, voice note or article online. Major corporations have already adopted the technology to make money.

But launching your own NFT most likely won’t make you rich. Instead, you could bet on the popularity of this concept via its underlying technology. Consider adding some exposure to the Ether Fund if you believe NFTs are here to stay. 

Looking for another intense growth stock? Here's a pick.

Should you invest $1,000 in Hive Blockchain right now?

Before you consider Hive Blockchain, you may want to hear this.

Motley Fool Canadian Chief Investment Advisor, Iain Butler, and his Stock Advisor Canada team just revealed what they believe are the 10 best stocks for investors to buy right now... and Hive Blockchain wasn't one of them.

The online investing service they've run since 2013, Motley Fool Stock Advisor Canada, has beaten the stock market by over 3X. And right now, they think there are 10 stocks that are better buys.

Learn More Today!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.