As the rapid development of blockchain technologies, we see plenty of blockchain-based projects coming up one after another. Particularly, many of these projects are likely to issue their own tokens or create NFTs for the purpose of seeking funds and attracting more users. To some extent, the most majority of users are also probably crypto investors. They are looking for investment opportunities of crypto markets just like other traditional markets.

However, the nature of cryptocurrencies like tokens and NFTs are quite different from traditional equity. In the following paragraphs, we will briefly outline the characteristics among tokens, NFTs and traditional equity, so that it helps investors to identify the differences among these investment tools. Moreover, with the basic background knowledge, investors are likely to make a better decision and reduce potential mistakes.

Important things you have to know before investing tokens

A token is a kind of cryptocurrencies generated by the smart contract and then deployed on the particular blockchain. Some kinds of tokens have a fixed maximum total supply or so-called hard cap. On the other hand, some kinds of tokens are inflationary tokens which mean the number of tokens is continuously growing over time.

In addition, remember to check as much relevant information as you can. In particular, studying the roadmap and tokenomics of these blockchain projects are highly recommended. The roadmap is a timeline-based plan showing how the project will be developed over time, while the tokenomics indicates how these tokens will be distributed to different parties such as team, advisors, community, ecosystems and so on.

Important things you have to know before investing NFTs

NFTs stand for Non-Fungible Tokens that follow ERC721, ERC1155 or ERC721R standards. Each NFT could be different from one another if it belongs to ERC721 and ERC721R. For ERC1155 tokens, the contents of the particular NFTs could be the same, but they still have different token IDs.

From the investment point of view, NFTs are not just digital collectibles, but more like the virtual goods. It is important to know the background of these NFT projects including the founder, community, use cases, total amounts of NFTs, on-chain data etc. in order to make your own decision whether entering the NFT markets.

Moreover, keep in mind that the liquidity of NFTs could be very bad. If no buyers, no deals. There is no guarantee that NFT holders could sell them in the secondary marketplaces like Opensea, Rarible, Magic Eden and so forth. Thus, if you are about to buy NFTs lack of popularity, it could be difficult to sell them at satisfactory price.

Something about traditional equity

Traditional equity investment is also popular for investors to support companies in the early stage. People purchase the shares of the particular company in the stock market and they expect to make the higher profit as the growth of this company in the future.

How individuals and investment clubs make a good decision to invest tokens, NFTs or traditional equity

As mentioned earlier, tokens, NFTs and equity are all investment tools with different characteristics. They are potentially high risk, especially altcoins and NFTs compared to other traditional investment methods like bank savings. This is because tokens and NFTs relying on smart contracts and lack of financial regulations. In other words, anyone can create tokens or NFTs anytime anywhere if they want. In fact, huge amount of tokens are NFTs are produced every day, and most of them are just garbage without any value. This is why investigating the relevant information of the project behind issuing these tokens and NFTs are extremely vital.

By contrast, the blockchain technology has changed human’s life over the past few years. It brings huge DeFi dapps, NFTs scenario, Web3, metaverse into real world. The ROI could be very high as long as investors take the right investment strategies as well as control the potential risks.