5 things you need to know about NFTs
Non fungible tokens. You’ve probably heard about the latest internet phenomenon that is dominating headlines in the art world and beyond.
Little wonder. Digital artist Beeple sold his artwork for an incredible £69 million ($96 million) earlier this year, while even Twitter founder Jack Dorsey got in on the act by attracting $2.5 million for his first-ever tweet.
If you’re wondering how you can get in on the action on the technology that promises to revolutionise the way we trade, here are five things you should know first.
They’re unique digital certificates of ownership…
A non-fungible token, or NFT, derives its name from the idea of fungibility. Put simply, this is the idea that something can be replicated, or traded for something else of a like kind. A 10-dollar bill is a prime example of a fungible item: there are billions of them in existence thanks to the US Federal Reserve printing them out regularly, which means their value will always be kept to whatever 10 dollars is worth. It can also easily be traded to buy 10 dollars’ worth of goods or service.
A non-fungible item, on the other hand, is completely unique. Take a winning lottery ticket: yes, someone else might have the same numbers as you, but it’s impossible to replicate that ticket at will.
The Mona Lisa is another example. People can copy it, but they’ll never produce the original. This is why Da Vinci’s masterpiece is priceless – and non-fungible.
When somebody has something non-fungible, then it’s natural that they want to certify its validity. This is where an NFT comes in: it’s a unique virtual certificate that is verified by Blockchain. A Blockchain acts as a kind of independent secure public ledger, so that people can see the details of the transaction and who owns the item.
In short, it’s an assurance of authenticity – and people are prepared to pay big money for the NFTs of certain things.
… but people can still download digital copies of an item
It’s important to note that an NFT doesn’t prevent people from digitally copying the item in question. With a physical piece of art, you control where you keep it and who sees it, but people can still download an NFT artwork to their own collection if they want.
The value in an NFT, therefore, is proving that you own the original version of that work, rather than a copy.
So, while a digital copy might be a cool thing to have, its value will never actually increase. An NFT, on the other hand, ensures that a coveted work achieves its true value for being the original.
A good example is an NFT for an album. Fans can download digital copies, but the musician with its NFT is the only one who can claim to be the owner — and earn a percentage of the resales and royalties.
Anyone who likes to collect things knows that most of the fun comes from having something that other people don’t have. Whether it’s a rare type of stamp or football sticker, there’s a certain thrill in possessing something special.
NFTs are the ultimate collectible. In the NBA, some of the most memorable clips in the organisation’s history have been converted into the tokens so that fans can buy and trade them. While fans can still view any clip they want, some of the most wanted sell for thousands of dollars, simply so the owner can say they possess it — and potentially sell it later, of course.
The human need to collect things is something that runs deep, something that some theorists say harks back to our hunter-gatherer days when survival meant accumulating as many things as possible. It might explain why the NFT craze has taken off so rapidly and ensure that it continues to dominate the headlines for some time yet.
They could eliminate ticket fraud
Ever paid over the odds for concert passes or, even worse, unwittingly bought a forged ticket? NFTs may make this a thing of the past.
If an event organiser uses the token to sell tickets, they would have a cast-iron seal of authenticity and fraudulent sellers would be unable to replicate them. What’s more, because blockchain allows the NFT owner to verify which tickets are acceptable, they will have the control to reject those that are sold above their face value and prevent the transaction.
This promises to be a huge business with so many major artists expressing their dislike of ticket fraud in the past. Platforms such as Mintbase already allow organisers to easily produce tickets as NFTs and the process is likely to get even simpler over the next few years.
It has led to some bizarre ideas…and will continue to do so
Monochrome Bleu Numérique. It might sound like a French arthouse movie, but it’s just a blue rectangle. Or, to be more precise, a digital artwork of a blue rectangle.
It’s one of many unusual ideas that are being sold as a non-fungible token on Rarible, the website where people can trade NFTs. The artist behind it, Damien Thirst, admitted that it was ‘a bit of a joke’, but wanted it to challenge the concept of ownership in the digital world. It certainly has people talking, and its price was set a 0.3 Ether (the cryptocurrency for Blockchain platform Ethereum), or $1,173 at the time of writing.
Other bizarre NFTs include buyers paying over half a million dollars for a picture of a New York Times column and a similar amount for a ‘digital house’ that is, naturally, impossible to live in.
It’s fitting for a concept that seeks to challenge the way we view ownership. While we can use NFTs to improve our lives, maybe we should accept that there are certain aspects of this technology that we’ll never fully understand.