A piece of artwork by one Mike Winkelmann, a digital artist also known as Beeple, was sold by auction house Christie's for $69 million.
This piece of artwork exists only digitally, and is an example of a non-fungible token (NFT), a phenomenon that has exploded recently.
NFTs are backed by the blockchain, the same technology powering cryptocurrencies. A blockchain is a digital ledger storing data of any kind. While cryptocurrencies are a blockchain's main application yet, it also backs NFTs and digital contracts. Another characteristic of the blockchain is that it is distributed on many networks, or identical versions of the same data are stored across locations, making it difficult to hack or cheat the system.
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But except the underlying technology, the two have little in common.
Cryptocurrencies like bitcoin and dogecoin are fungible, meaning that can be exchanged like-for-like, similar to most currencies or related financial assets. NFTs, however, as the name suggests, are non-fungible, and are thus tokens that represent unique, and one-of-a-kind objects. This property of an NFT has propelled its usage as a preferred means to acquire memorabilia, collector's items, funky artwork, domain names and snippets of significant sporting history.
There is no limit to what these objects can be. Experts suggest that these could extend to proving ownership of cars, land, real estate and other physical assets, and have the potential to replace real deeds. NFTs could also be a medium used to hold verified educational degrees and diplomas.
The only similarity among all of them is that they exist exclusively online.
How does an NFT work?
The blockchain is able to lend an authenticable and verifiable digital signature to an NFT. This makeup enables them to be tokens to represent anything distinguishable, with the signature lending itself to an NFT's genuineness. The most common blockchain backing NFTs is Ethereum, that powers the cryptocurrency ether.
For buyers, an NFT ensures the genuineness of the media or object it carries and certified ownership courtesy the signature provided by the blockchain. For an artist or seller, an NFT is a medium to stamp their brand on authenticity on their creation, and to inhibit its plagiarism or forgery.
It is also quite easy to covert artwork or media into NFTs, as most popular NFT marketplaces lets one sell them, and buy the creation of others.
Such marketplaces include:
- Openseas.io
- Rarible
- Foundation
- SuperRare
The process first involves "tokenisation" media or artwork, which can then be auctioned or sold on these marketplaces. They are perpetually running auctions for a variety of digital artifacts, that can be paid for in cryptocurrencies, similar in spirit to those held for real-world physical artwork.
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However, to possess an NFT, you will need a wallet; the same ones that hold cryptocurrencies. For ethereum, which is the most commonly used blockchain for NFTs; information on obtaining its wallet can be found here.
This wallet, in turn, can be linked to marketplaces such as the ones mentioned above, from where transactions and bids for NFTs can take place.
However, these marketplaces may also accept payment directly through traditional means such as cards or bank transfers.
NFT jackpots
The blockchain-backed stamp of authenticity provided by NFTs has helped tokenise a cross-section of objects and made them collector's items' digital equivalents.
British computer scientist, Sir Tim Berners-Lee, also know as the 'Father of The Web', will auction the original source code of the World Wide Web as an NFT, as did Twitter's founder Jack Dorsey his first tweet for $2.9 million.
Actor William Shatner of Star Trek fame sold an x-ray of his teeth from 1953 as an NFT, while the National Basketball Association has launched 'NBA Top Shot' that sells video snippets and highlights of basketball history as NFTs.
One of them involving inimitable player LeBron James sold for $208,000 in March. Overall, NBA Top Shot has generated $700 million in sales in a year, with their collection starting from prices as low as $9.
Popular musicians too are on the NFT bandwagon. One of the 'big four' of thrash metal, Megadeth listed their first NFT media clipping in April. They sold an NFT just north of $18,000 and Kings of Leon, will go a step further and release an entire album as an NFT. Rapper Snoop Dogg sold an original track on crypto.com as an NFT, which can be heard below (contain expletives).
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