FAQ- NFTs

What is an NFT? A Non-Fungible Token is a unique digital identifier recorded in a blockchain. NFTs point to digital files such as photographs, films and music. An NFT can represent nearly anything, can be bought and sold, and cannot be replicated as each one is unique.

Is an NFT cryptocurrency? While NFTs and Cryptocurrency rely on similar technology, they are very different. NFTs are “Non-Fungible” – or unique, and non-interchangeable. However, cryptocurrencies are purely economic with value derived from utility as a currency.

 How do you value an NFT? The answer to that question begins with a question – what kind of NFT is it? Is there an associated physical asset, is it part of a collection? Once parameters are determined, the appropriate valuation approach is applied. The end use of the report also informs the valuation approach.

 Can NFTs get stolen or lost? Yes, NFTs can get “burned” – sent to a faulty wallet address. If an owner loses the seed key, the wallet is no longer accessible and the NFT cannot be retrieved.

What is an Appraisal of an NFT? As defined by the Appraisal Standards Board (ASB) in the Uniform Standards of Professional Appraisal Practice (USPAP) is an Appraisal is “the act or process of developing an opinion of value.” According to the ASB, value can “be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g. assessed value, collateral value).” The document contains a valuation executed for a specific purpose and follows specified guidelines. An Appraisal of an NFT follows suit of Appraisals of physical assets, defining a purpose, approach to value, and additional details as required by the end user of the report.

Does an Appraisal predict prices? Never! An Appraisal is an opinion on value with data available at the Effective Date of the Appraisal. Appraisers do not predict markets or prices.

Do NFTs have value? Absolutely. Appraisal Bureau’s proprietary technology tracks the volatility of the markets to deliver the most accurate opinion of value.

If I own the license to the intellectual property (IP) of my NFT, does that affect the appraisal? The valuation of the IP is separate from the valuation of the asset. IP may be an income generating asset, which has a different valuation approach than Personal Property – which is classified as non-income generating.

How do I buy an NFT? NFTs are purchased on marketplaces such as OpenSea or Nifty Gateway. You will need a Web3 wallet, such as MetaMask.

 

Can an NFT be insured? Yes! While it’s a burgeoning field, NFT insurance does exist. Depending on how you store your seed key, there are multiple options available from full liability insurance with a BIP38 wallet stored in a bullion vault, to multi-party computation approaches. To insure the value of the asset you will need Appraisal Bureau valuation reporting!

Do NFTs lose value? Just like any other asset, the markets can change. We offer valuation reporting subscriptions to keep track of the value of your portfolio.