An NFT is a network term for Non-fungal tokens or in other words a digital asset. A non-fungible virtual commodity is a unit of currency on a virtual distributed ledger called a blockchain, in which each NFT represents a unique, digital entity, and so are they essentially not interchangeable. NFTs may represent digital information like art, music, videos, digital items in computer games, and various forms of creative output. A good example of a non-fungal digital product would be a lottery ticket.
Now depending on the business you are looking to place your investment money in there are a few things that need to be understood before rushing out and buying yourself a bunch of these NFTs as they seem to be skyrocketing in value. Most of us would agree that value for money is very important in these times and rightly so. As such, if we are considering investing in the music industry or creative industry, it is wise to first take a look at how these kinds of investment might fit into our overall portfolio planning.
For starters, what is Non-Fungible Financial Products? Non-fungal assets are those which are not subject to any kind of market operations that may in any way affect their value. In other words anything that cannot be destroyed or altered will not be of any use to us and hence is classed as a non-fungible, meaning that no matter how hard we try we cannot make money from it. How are Non-Fungible tokens created? NFT’s are created by way of tokenization – where tokens (digital items) are issued on the basis of some kind of agreement between two or more entities.
The most common NFT’s within the music industry would be rights managed stock certificates, performance rights, master recordings and performance master recordings. Typically, the issuing company that issue such certificates or logs will have chosen an artist or group, who in turn has agreed to grant the rights to the company for a particular period of time in return for some kind of financial compensation. It could be a cut of the profits or something similar, though it really comes down to what the issuing company wants to get out of the deal.
So what kind of financial returns can we expect from NFT’s in the music industry? Well, it really comes down to what kind of business you intend to get into in the music industry. If you intend to just be an artist/band, then you can use your musical compositions and recordings as means to earn yourself a living. This means that you will be selling copies of your music either through recording companies or online to the general public. What is NFT if you intend to be a manager for an existing musical composition or recording company?
Well this all depends on the issuing company and so the investment properties that you are looking at. Basically, what are NFT’s then? Are they investments in the long term or are they short-term investments? Short term investments will mean that you will be receiving an income from your work that you have created based on the revenue generated by the composition. Longer term investments on the other hand mean that you are going to be earning an income from the company you are working for and its products over a longer period of time. The value of the company and what they produce may fluctuate over time so depending on the financial situation of the company and the value of your work you will receive a payout.