NFT Investment Complete Guide: A Comprehensive Overview from Basic Understanding to Market Outlook

What Are Non-Fungible Tokens? How Do They Differ from FT

NFT stands for Non-Fungible Tokens. In simple terms, NFTs represent unique digital assets, each with its own distinctive characteristics, such as digital art, game items, virtual real estate, and more, which cannot be exchanged on a one-to-one basis.

In contrast, FT (Fungible Tokens) are “fungible tokens” that are completely identical and interchangeable. Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Dogecoin (DOGE), and others are all fungible tokens, with each one being indistinguishable from another.

Essentially, both NFTs and FTs originate from blockchain technology, but they follow different standards. NFTs adhere to standards like ERC-721, ERC-1155, or BEP-721, while FTs use standards such as ERC-20, BEP-20, or BRC-20.

The Evolution of NFTs: From Niche Experiments to Market Explosion

The history of NFTs dates back to 2017. That year, a landmark project—CryptoKitties—emerged, where users traded and bred virtual cats passionately, causing Ethereum network congestion. The most expensive CryptoKitty, named “Dragon,” sold for up to $110,000.

After this craze, the NFT space experienced a cooling-off period but continued to develop. In 2018, the digital art piece “Everydays: The First 5000 Days” sold for $6.9 million, once again expanding the imagination of the NFT world.

The true boom occurred in 2021. With the rise of projects like CryptoPunks, Bored Apes (BAYC), Women’s World (World of Women), Art Blocks, and others, the NFT market attracted a flood of artists, celebrities, and brands, leading to diversification in project types and content forms.

It’s worth noting that early NFT markets were rife with speculation, but this phenomenon has shifted in recent years. A clear change is that PFP profile picture NFTs are beginning to empower physical assets through branding, attempting to establish a more solid value foundation. However, this support is still weak and requires further reinforcement.

From a market cycle perspective, NFT bull markets often accompany FT markets but usually lag behind them, a pattern that investors should pay attention to.

Current NFT Market Status: Scale and Opportunities Coexist

According to data, Opensea hosts NFT projects across nine major fields including art, gaming, domains, and virtual worlds, with about 1,000 active projects. Among them, top projects like CryptoPunks, BAYC, MAYC, Art Blocks, and DeGods account for nearly half of the entire market capitalization.

However, overall, the total market cap of NFTs is declining, trading volumes are shrinking, and the floor prices of many blue-chip NFTs are hitting new lows.

Future Breakthroughs: Linking Physical Assets and Real Value

Compared to the previous bull run, this cycle’s NFT development features a new characteristic—integration with the real economy. The most promising development opportunity is physical asset on-chain.

The potential of this concept lies in enabling rapid, convenient, and efficient trading of physical items via NFTs, giving NFTs real-world application scenarios and value support. This creates a virtuous cycle of mutual promotion. Currently, fields like paintings, jewelry, and real estate are actively exploring NFTization, a model widely regarded as promising and likely to become a major growth driver in the next bull cycle.

How to Identify Promising NFT Projects

Why do CryptoPunks, Bored Apes, Art Blocks, Azuki, and Doodles rank among blue-chip projects? Many might think it’s because they are visually appealing, artistically valuable, or backed by strong teams, celebrity endorsements, and compelling stories.

While these are important labels for quality projects, projects lacking a viable business model tend to fade once hype subsides. Jay Chou’s endorsement of Fantom Bears (PhantaBear) is a cautionary example.

So, why haven’t Bored Apes declined? The key factor is continuous IP value creation. Bored Apes generate income through derivative products, giving investors hope and encouraging long-term holding.

Choosing promising NFT projects hinges on whether their business models can “generate revenue”—i.e., sustain profitability.

For projects with genuine commercial backing, long-term holding can be considered, but the cycle should be at least 2-3 years, as these projects need time to build reputation and attract users. The problem is such projects are very rare. Most NFT projects have short lifespans; for these, only short-term trading (less than six months) is advisable, and long-term holding should be avoided—since project teams often quickly cash out and exit, showing little interest in long-term operation.

To assess whether a project has a viable business model, it’s recommended to browse official websites, forums, Telegram, Discord, and other community channels, observe discussions, and gradually develop a keen eye. Pay special attention to red flags like contract risks, minting risks, or scam indicators, and avoid them without hesitation—stay as far away as possible.

Comparison of NFT Trading Platform Ecosystems

Currently, there are about 40 NFT trading platforms. Based on trading volume rankings, the top three are Blur, Opensea, and X2Y2.

Blur

• Advantages: Strict quality control of artworks, strong artistic and unique features, currently zero fees
• Disadvantages: As a new platform, user base and liquidity still need growth; project selection is relatively limited

Opensea

• Advantages: The earliest entrant, one of the largest NFT marketplaces, with a broad user base and active trading volume; diverse NFT categories and ample liquidity
• Disadvantages: Higher centralization, relatively high transaction fees

X2Y2

• Advantages: Decentralized architecture, emphasizing user privacy and data security
• Disadvantages: As a newer platform, faces challenges in user scale and liquidity

Recommendation: If safety is your priority, X2Y2 is a good choice; if you care about transaction costs, Blur and X2Y2 are advantageous; if you seek project diversity and are less sensitive to costs, Opensea is a solid option.

Risks That Must Be Guarded Against in NFT Investment

Liquidity risk is the primary concern. NFT trading liquidity is far lower than that of fungible tokens. Buying and wanting to sell quickly may require waiting days or longer for a buyer. For non-blue-chip NFTs, long-term stagnation is common. Therefore, short-term trading in the secondary market requires psychological preparation for possible long periods of no sales or transactions below the floor price.

Contract fraud risk cannot be ignored. NFTs are often issued as blind boxes, making it impossible to verify authenticity through previews. This opens opportunities for scammers. For example, the well-known project Cool Cat has had many counterfeit versions. Many investors, after paying ETH to open blind boxes, ended up with fake items that couldn’t be sold. Always verify contract addresses through official channels—this step is essential.

Wallet authorization risk. If your wallet holds NFTs, never authorize signatures on third-party sites casually, and be cautious when using NFT+DeFi products. Such operations can lead to theft or destruction of your NFT assets, which can never be recovered once it happens.