You might have seen the news about a set of 107 non-fungible tokens (NFTs) representing images of the cartoon ‘Bored Apes’ sold for $24.4 million in an online sale at Sotheby’s auction house on Thursday. This got me thinking and I wanted to understand what’s going on with these NFTs, so I spent the weekend doing some research.
Well, what are NFTs?
NFTs are Non-Fungible Tokens. The abbreviation by itself doesn’t make much sense to a layman. Investopedia tells us that
“Fungibility is the ability of a good or asset to be readily interchanged for another of like kind. Money is a prime example of something fungible, where a $1 bill is easily convertible into four quarters or ten dimes, etc.”
Non-Fungible entities are unique and can’t be replaced with something else. Entities like a house or a painting like Mona Lisa are non-fungible. You can take a sketch or buy a print but there will only be one OG Mona Lisa Painting.
NFTs are "one-of-a-kind" assets in the digital world that can be bought and sold like any other piece of property, but they have no tangible form of their own. NFTs are supposed to be “Non-Fungible” and thus you can’t use these tokens for commercial transactions as they are all unique, whereas fungible tokens like cryptocurrency can be used for transactions as they are identical to one another.
How do they work?
It’s common knowledge that digital files can be easily duplicated. What if you could assign a unique “token” to one digital file to distinguish it and what if this “token” could be bought/sold? This token will be unique and will vary from NFT to NFT. So upon ownership of this “token”, it’s like you own the original digital file.
The above Nyan Cat artwork was sold for $590,000.
“I can just download the Nyan Cat artwork and use it for stuff, why would I buy it?”
Yes, you can. But NFTs are designed to give you something that can’t be copied i.e. ownership of the work. It’s somewhat like owning the original Mona Lisa Painting and looking down at people with the copies (no offence, but the flex though).
They are a part of the Ethereum Blockchain. These blockchains serve as a digital ledger that is maintained by thousands of computers around the world. Euromoney tells us that “Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.” Basically, we can say that there’s no risk of your NFT being “stolen” or even “duplicated” in its true sense.
It’s also worth mentioning that NFTs can also contain smart contracts that may give the artist(creator of the digital file), for example, a cut of any future sale of the token.
NFTs can be used to represent items such as photos, videos, audio, and other types of digital files(can be your consciousness injected into a computer too), but a lot of the current excitement is around using the tech to sell digital art.
Not to mention, people are literally paying millions of dollars for these “tokens” to acquire ownership.
What’s the point of NFTs?
This depends on whether you are a buyer or an artist.
If you are a buyer then you’d be buying an NFT as means to support your favourite artist or just as a collectable. Or maybe, you are buying an NFT in hopes that the price will increase and that you’ll be able to sell it at a higher rate someday.
If you are an artist, NFTs serve as a way to sell your work. They also have a feature that every time your art piece is sold or changes hands, you get a commission out of it.
Y’all would’ve seen the above meme (disaster girl) at some point in the past few years. Zoë Roth, now a college senior in North Carolina has made 500,000$ off this one picture which went viral years ago. Let’s practice our meme-face, shall we?
Doge is everywhere these days. The coin is going to the moon 🚀. And the NFT sold for a HUGE chunk of change. In June 2021, it sold for a record-breaking $4 million worth of Ethereum.
If you were on the internet in the 2010s, then I’m pretty sure you would’ve come across these types of memes which were called “Bad Luck Brian” memes. The same dude who’s in this picture just sold the meme template as an NFT for $36,000 in Ethereum. I mean, for real let’s get our meme-faces ready.
All in all, we can say that NFTs are here to stay and it is essential that the common folk appreciate it. 98% of the world has no idea about NFTs and that needs to change. It has opened a brand new marketplace and many upcoming artists can use this opportunity. Can this article be sold as an NFT? Technically, yes ;)