NFT stands for non-fungible token. Fungibility is a concept in economics and stands for the ability of something to be interchanged while keeping the value intact. For e.g. money is fungible. You can exchange a $10 currency note into two $5 notes. Similarly, options, cryptocurrencies and shares are other examples of fungible assets because they can be traded or exchanged. Conversely, assets such as diamonds or baseball cards are not fungible because each unit has its unique qualities. Likewise, if Person X lends his bike to Person Y, it is not acceptable for Person X to return a different car in spite of the same model, colour etc.
Non-fungible tokens are cryptographic assets on a digital ledger, a blockchain, and can be thought of as certificates of ownership for virtual or physical assets like art, photos, videos, audios etc. Even though access to a copy of the original file is not restricted to the buyer of the NFT, the ownership is unique and cannot be replicated. Typically, NFTs are Ethereum-based tokens and they are a way of authenticating ownership of whatever asset is attached to the token.
NFTs have been around since 2014. However, it is in recent times that it has caught the limelight and has become a popular way to buy and sell digital artwork. Some of the most expensive NFT purchases are as follows –
- Everydays: the first 5,000 Days – $69.3 million (It is a compilation of the first 5,000 digital arts of Beeple.
2. The first Tweet – $2.9 million
3. CryptoPunk #3100 – $7.58 million (This is one of the first NFTs created and now are selling at millions)
NFTs enable artists and content creators to monetise their works. They no longer have to rely on expensive galleries or auction houses to sell their artworks. Instead, they can sell their work directly to the consumer as an NFT. In addition, artists are also entitled for royalties whenever their art is resold to a new owner.
It might appear that you are paying loads of money for just one GIF OR JPEG file. However, it is much more than that. In an analogical way, if NFTs are just JPEG files, traditional art is just paint on canvas.
How to BuyNFTs?
- Make an NFT marketplace account on Opensea, NBA Top Shot etc.
- Fund your account with cryptocurrency such as Ethereum.
- Buy your NFT by submitting a bid for the NFT you want to purchase.
Even though anyone can create an NFT by making an account on NFT marketplace, it is not sure that it might sell. Value of any NFT is associated with the significance of the media and is linked to the reputation or the historical significance of the media. It is the flex of owing original artwork even though it may seem that in digital art, a copy is as good as the original.
Is this just a bubble?
It is being said that the concept of NFTs is trying to solve a problem which did not even exist. Additionally, the crazy valuations of artworks is also a red signal to it being only a rich-people playground and nothing to do with the masses. An animated GIF of Nyan Cat sold for more than $500,000 which sounds insane. Even though it might seem to create value for artists, the business model seems to be flawed and inflated. Let’s hope, people don’t lose their money and it is actually a saviour for artists and the entry of blockchain into the mainstream retail transactions.