What is an NFT?
In economics, a fungible asset is something that has easily interchangeable units, such as money. When it comes to money, you can exchange a £10 note for two £5 notes and have the same amount of money. This is impossible if anything is non-fungible, which means it has unique qualities that prevent it from being interchanged with something else.
It could be a home or a one-of-a-kind picture, such as the Mona Lisa. You can photograph the artwork or purchase a print, but only one original painting will ever exist. In the digital world, NFTs are “one-of-a-kind” assets that may be purchased and sold like any other piece of property, but have no physical form of their own.
How much are NFTs worth?
In theory, anyone can tokenize their work and sell it as an NFT, but recent headlines about multi-million-dollar purchases have piqued attention. An animated Gif of Nyan Cat, a 2011 meme featuring a flying pop-tart cat, sold for almost $500,000 (£365,000) on February 19.
Grimes sold some of her digital paintings for more than $6 million a few weeks later. Art isn’t the only thing that is tokenized and sold. With bids reaching $2.5 million, Twitter CEO Jack Dorsey has sponsored an NFT of the first-ever tweet. Christie’s auction of a digital artist Beeple’s NFT for $69 million (£50 million) set a new high for digital art. Sorare, a French company that offers football trading cards in the form of NFTs, has raised $680 million (£498 million).
How do NFTs work?
Paintings and other traditional works of art are valuable precisely because they are one-of-a-kind. Digital files, on the other hand, may be simply and indefinitely reproduced. Artwork can be “tokenized” with NFTs to generate a digital certificate of ownership that can be purchased and sold.
A record of who owns what, similar to crypto-currency, is kept on a shared ledger known as the blockchain. Because the ledger is maintained by thousands of computers all around the world, the records cannot be fabricated. NFTs can also include smart contracts that, for example, offer the artist a percentage of any future token sales.
Why are people not simply copying and pasting it?
Nothing. Beeple’s painting, which sold for $69 million, has been seen by millions of people, and the image has been reproduced and shared countless times. In many circumstances, the artist keeps copyright ownership of their work, allowing them to continue producing and selling copies. However, the purchaser of the NFT receives a “token” proving ownership of the “original” work. It’s been compared to purchasing a signed print by others.
Are NFTs just a bubble?
“I honestly do believe there will be a bubble, to be quite honest,” Beeple, whose real name is Mike Winkelmann, told the BBC a day before his record-breaking auction. “And I believe we are currently in that bubble.” Many people are even more pessimistic.
NFTs, according to David Gerard, author of Attack of the 50-foot Blockchain, are analogous to buying “official collectibles” like trading cards. “Some artists are absolutely making money on this stuff… but you probably won’t,” he said.
He described the folks selling the NFTs as “crypto-grifters.” “The same guys who’ve always been at it, attempting to come up with a new type of worthless magic bean that they can sell for money,” says the narrator.
The premise of buying NFTs, according to former Christie’s auctioneer Charles Allsopp, “makes no sense.” He told the BBC, “The thought of buying something that isn’t there is plain weird. I believe the investors are a bunch of jerks, but I hope they don’t lose their money.”