Just when people are starting to grasp the world of crypto-currencies, another bizarre world called Non-Fungible Tokens (NFTs) have made their way into the news cycle and has garnered considerable amounts of capital. Essentially, NFTs uses the same underlying blockchain technology that crypto-currencies operate on.
What does NFT stand for?
A fungible commodity is something that can be replaced by an identical item. For example, fiat money or cash is fungible as a Rs 100 currency can be easily replaced by another without losing value. Whereas a non-fungible item is something that is unique and does not have a substitute. For example, one-of-a-kind artwork or a collector’s item. An NFT is a digital token that fulfills these properties.
In February alone, NFT sales grew by 400 percent from the previous month. Many brands have jumped on the NFT bandwagon and are offering limited edition products.
Why have NFTs become all the rage?
NFTs have been around since 2015, but have recently shot to popularity thanks to their endorsement by Jack Dorsey CEO of Twitter Inc and Tesla Inc’s Elon Musk. Both the senior tech executives are also ardent supporters of Bitcoin and the wider crypto-universe.
Two weeks ago, Jack Dorsey put out an NFT representing his first tweet “just setting up my twttr.” It sold for $2.9 million. Later on March 11, Mike Winkelmann, the digital artist known as Beeple, sold an NFT of his digital art piece titled Everydays: The First 5000 Days. It fetched $69 million at an auction held at Christie’s, the 255-year-old auction house that has sold some of the most famous artworks in history.
Adding to the frenzy, Elon Musk tweeted that he is also selling a tweet containing a song about NFTs as an NFT. The bids for the tweet exceeded $1 million before Musk pulled out saying he didn’t “feel quite right selling” it. Nevertheless, it made NFTs more popular than ever before.
What can be an NFT?
Almost any digital asset can be a NFT. This article too can be an NFT, if there is buyer out there. For a NFT to have value it has to represent something that is unique and rare. Pizza Hut Canada recently sold digital images of its pizza as NFTs, Taco Bell sold taco-themed gifs, NBA sold video highlights, and Time magazine released three special-edition NFT magazine covers. The possibilities here are endless: images, art, tweets, music, virtual spaces in games, blockchain domains, among other assets.
Until now digital art has been undervalued because it’s freely available. But NFTs representing digital art is not freely available. By adding the crucial ingredient of scarcity, NFT has made itself appealing to artists and content creators. For many digital artists, NFTs have been a game-changer.
Until last October, Beeple’s work fetched at most $100, but his fortunes changed when he started selling his work as NFTs. A pair of his first few NFT-linked digital arts sold for $66,666.66 each. In December, he sold NFTs totalling $3.5 million. And this month he became one of the top three most valuable living artists with the $69 million sale. For artists, the utility is that they are able to directly monetize their work without having to sell in galleries or through auctions. They still have copyright over their work as well and can earn money in perpetuity on resales of the NFT.
NFTs offer lots of possibilities in the gaming world as well. For example, a virtual space within a game can be sold as an NFT by the game developer and the buyer of the NFT can get a commission from players who pay to use that land.
How NFTs works?
NFTs use blockchain technology just like crypto-currencies to verify and record transactions in a distributed digital ledger. The vast majority of NFTs currently are live on the Ethereum blockchain, but Bitcoin Cash and Flow are some of the other blockchains that support NFTs. Each NFT carries details about its owner, the digital item…