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NFTs: Important Preliminary Risk and Return Analysis

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NFTs are taking the cryptocurrency trading world by storm. NFTs stand for the non-fungible tokens which have emerged as another possible usage of blockchain technology. NFT can be used to record/verify/track the ownership of a unique – hence the non-fungible – asset. Commonly, NFTs are connected with art (visual art, music, etc.), but there are also several decentralized finance or gaming-related projects. 

Same as for the other blockchain-related projects, the critics are easy to find, so a research paper with hard data concerning the NFTs can be of great importance. The research paper by Mazur (2021) studies the NFT startups traded in the crypto markets. Therefore, the paper does not analyze the individual NFTs (such as some piece of art), but rather the whole projects and their tokens traded on the Binance crypto exchange. For example, one of the projects is the Audius aiming to allow anybody to share, monetize, and listen to audio. The platform has its own token $AUDIO (examined by the paper), which is used to secure the platform, and by staking it, people can access exclusive features and receive a share of network fees. 

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