A digital artwork was recently sold at Christie’s auction house for a whopping £50 million. But the winning bidder won’t receive a print, painting, or sculpture. Rather they will get an NFT (non-fungible token).
What Is A Non-Fungible Token (NFT)?
A fungible asset can be defined as units that can be quickly interchanged such as money.
With money, you can easily swap the £50 note for five £10 notes and it would have the same value.
Nonetheless, this is impossible with non-fungible, because non-fungible assets have unique traits, so they can’t be interchanged with anything else. It could be a painting or a house. Although can choose to take photos of the house, you cant interchange the original house with the painting.
The NFTs are unique assets in the digital space that can be sold and bought like any other type of property, but they don’t have any tangible form.
Digital tokens can be considered to be certificates of ownership for physical or virtual assets.
How the NFT’s Work
Traditional artwork like paintings are valuable since they are unique.
But the digital files can be quickly and infinitely duplicated.
With the NFTs, the artwork might be tokenized to create the digital ownership certificate that can be sold or bought.
As with bitcoin, the record of who owns everything stored on the shared ledger is referred to as the blockchain.
The records can’t be forged since the ledger is usually maintained by hundreds of computers across the globe.
Also, the NFTs can contain smart contracts, which might give the artist, a commission on any future sales of that token.
Why Are The NFTs So Popular Right Now?
There are multiple factors that have caused NFTs to become increasingly popular. Mainstream celebrities such as Paul have latched onto the trend to try and push it to the spotlight. The sale at Christie’s auction house are doing the same, the auction house bestowed some sense of legitimacy to this genre.
The NBA Top Shot is another major player, a website launched in October 2020 for virtual video-based NBA trading cards. The moments are often sold in 5 card packs and then sold in a flourishing secondary market; the collections are later displayed in profile pages that can be viewed by the public.
Should You Purchase One?
Whether buying a cryptokitty, a 1982 Mouton Rothschild, or fine art, investing in optional markets carries a lot of risk and fewer rewards than money that’s put into the mainstream places like equities. For instance, recent research by Citi showed that the contemporary art market generated a 7.5% yearly return between 1985 and 2018.
Zoe Kleinman – Technology reporter. (2021, August 27). Twelve-year-old boy makes £290,000 from whale NFTs. Yahoo News – Latest News & Headlines. https://news.yahoo.com/twelve-old-boy-makes-290-231021681.html
Howcroft, E. (2021, May 20). NFT enthusiasts hold firm despite crypto price plunge. Reuters. https://www.reuters.com/technology/nft-enthusiasts-hold-firm-despite-crypto-price-plunge-2021-05-20/
Paul R. La Monica. (2021, April 5). The NFT bubble might be bursting already. CNN. https://edition.cnn.com/2021/04/05/investing/nft-prices-falling/index.html