Despite its eye-watering $69 million price tag, the winning bidder of a digital-only artwork at Christie’s auction will not receive a carving, drawing, or even a painting. Instead, the buyer gets a unique digital token known as an NFT. Where Bitcoin was deemed the digital equivalent of currency, NFTs are said to be the digital equivalent of collectables.
However, a multitude of naysayers thinks the whole thing is a bubble that will inevitably burst.
Hold on. What is an NFT?
NFT is an abbreviation for non-fungible token. Money is a fungible asset. As long as you have some money, you can trade in a £10 note for two £5 and end up with the same amount of money. It is, however, impossible if something is non-fungible, which means it has unique properties. A painting such as the Mona Lisa could be one of a kind, as a house is one of a kind. To capture the original artwork, you have the option of taking a picture of it or buying a print. However, only one original piece will ever be for sale. The Internet makes it possible to create an asset that is unique in the digital world. NFTs (non-fungible tokens) can be bought and sold like any other piece of property, but they have no physical form of their own. In a metaphorical sense, digital tokens are analogies for certificates of ownership for physical or virtual assets.
How do they work?
Because they are unique, great works of art like paintings are worth something. In contrast to physical files, digital files can be easily and endlessly replicated. NFTs, using a technology known as “tokenization,” allow artwork to be “tokenized” and thus turned into a digital certificate of ownership that can be sold and bought.
Every single transaction made on the blockchain is a record of who owns what. Because the ledger is maintained by numerous computers around the world, the records cannot be faked. Alternatively, tokens may contain smart contracts, such as a cut of future sales of the token for the artist. As for why they don’t duplicate digital art, what is stopping them? Absolutely nothing. Beeple’s art sold for $69 million, and the image has been duplicated and circulated widely. Artists who retain copyright can keep making and selling copies of their work. However, the person who acquires the NFT acquires a “token” that serves as proof that they own the “original” work. It is said to be comparable to purchasing an autographed print. You’ve got to be kidding. Buyers are paying millions of dollars for tokens? Actually, yes. If you thought it was strange before, you haven’t heard anything yet.
NFTs are how much they’re worth.
On paper, anyone can use the process of tokenizing their work to sell it as an NFT, but increased media attention has helped to fuel interest. On February 19, an animated GIF of Nyan Cat, a popular internet meme that dates back to 2011, sold for more than $500,000.
Over the course of a few weeks, musician Grimes sold digital art she created for more than $6 million. Not just art, but other commodities are tokenized and sold as well. Dorsey, the founder of Twitter, has offered an NFT of the first-ever tweet, which has reached bids of $2.5 million. For $69 million, Christie’s auctioned a piece of digital art by Beeple, which set a new record for digital art.
Concerns have been raised about the environmental impact of maintaining the blockchain, just like with crypto-currencies. But with that, this new technology gives digital artists new ways of being fairly funded for their work.
We will be keeping a close eye on this one.