Someone bought this NFT for $69,000.
I vividly remember the moment I realized NFTs were a thing.
I was talking to a friend who’s into cryptocurrency. He was regaling me with a particularly turbulent crypto tale. He’d invested $300 into an altcoin, one of the thousands of tokens not named Bitcoin or Ether, but the developer vanished. Then, after months of silence, the developer returned, revealing they had been working on the coin the whole time. That coin became the hot ticket in crypto town, and my friend’s $300 became $30,000. Just typical crazy crypto shit.
“I’m not going to sell,” he told me. “If you hold the coin for a certain number of days, the developer gives you an NFT. So I’ll wait for that.”
I was staggered. I knew NFTs to be nifty-but-worthless pieces of digital art, but my friend was willing to risk a once-in-a-lifetime jackpot to get one. Then he explained that someone had bought an NFT for 800 ether, or $1.2 million, the week before.
Ah.
Non-Fungible Tokens, or NFTs, are digital products whose authenticity has been certified on a blockchain. It can be pretty much anything digital: Kings of Leon are selling tokens that give owners access to their new album. A gif of the Dogecoin cryptocurrency mascot (pictured above) sold as an NFT for $69,000, and Christie’s last week auctioned a digital art NFT for $69 million.
This is where “non-fungible” comes in. A fungible asset is one that’s interchangeable with others of its kind — like money. There are 1.8 billion $50 notes in circulation, and all of them are worth $50. Assets that aren’t fungible, like houses, cars or paintings, aren’t interchangeable and are valued on a case-by-case basis.
At this point, you’re probably confused and maybe even beating yourself up for not getting it. But actually, there’s nothing to get. It’s incomprehensible that clips, memes and gifs are selling for six figures, seven and even eight figures. Know what else is incomprehensible? Cryptocurrency, but that hasn’t stopped it from becoming a trillion dollar market.
Just because NFTs are crazy doesn’t mean they won’t be around for a long time.
NFTs and you
There are a few reasons people are buying NFTs.
NFTs are all about ownership. Take Jack Dorsey auctioning off his first tweet as an NFT: Everyone can see that tweet, but only the person who buys its NFT will own it. That ownership will be certified unchangeably on a blockchain, which is a digital ledger that records transactions for all to see. It’s the difference, NFT buyers will tell you, between having a print or an original painting.
Others buy NFTs because they believe in the technology. One of the dominant criticisms of cryptocurrency is it’s a solution searching for a problem. Some are flocking to NFTs because they’re true believers in blockchain. They see Non-Fungible Tokens, which are proof of ownership, as a real-world application of that technology.
There’s something to this. What NFTs really do is create scarcity. It’s artificial scarcity, but that’s nothing unusual: Nike and Kanye West created artificial scarcity when they decided to only produce 200 Yeezy Red October sneakers, which is why that particular pair of sneaker runs over $10,000. When the Kings of Leon released their new album as a $50 NFT, they only made it available in that form for two weeks, essentially making a blockchain-powered limited edition.
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