NFTs have taken the creative world by storm. They are altering the way that artists and galleries authenticate original works of art. These tokens came to the spotlight in March 2021 when a digital art piece by Mike Winkelmann, alias Beeple, sold for a record-breaking $69.3 million at a Christie’s Online Auction. These Non-Fungible Tokens (NFTs) are now digital assets whose price may vary according to the demand and uniqueness of the token.
What are NFTs?
In economics, a fungible asset is something with easily interchangeable units, such as money. With money, you can exchange a £10 note for two £5 notes and the value will be the same. However, if something is non-fungible, this is impossible; it has unique properties that prevent it from being interchanged with something else. It could be a house or a one-of-a-kind painting, such as the Mona Lisa. You can photograph the painting or purchase a print, but there will only ever be one original. NFTs are “one-of-a-kind” digital assets that can be bought and sold like any other piece of property but have no physical form. The digital tokens can be thought of as certificates of ownership for virtual or physical assets.
How do NFTs work?
The unique identity and ownership of an NFT are verifiable via the blockchain ledger. They were first launched on the Ethereum blockchain, but other blockchains including FLOW and Bitcoin Cash now also support them. Whether the original file is a JPG, MP3, GIF, or anything else, the NFT that identifies its ownership can be bought and sold just like any other type of art – and, like with physical art, the price is largely set by market demand.
If you wandered into a gift shop of an art gallery, you’d find several replicated prints of famous masterpieces, well there are some NFTs that act the same way. There are valid parts of the blockchain, but they wouldn’t hold the same value as the original.
NFTs will most likely come with a license to the digital asset it points to, but this doesn’t automatically confer copyright ownership. The copyright owner may reproduce work and the NFT owner gains no royalties.
Meanwhile, NFTs are shaking up the concept of in-game purchases in video games. Up until now, any digital assets bought inside a game still belonged to the game company – with gamers buying them to temporarily use while playing the game. But NFTs mean that the ownership of assets has shifted to the actual buyer. That means that they can be bought and sold across the gaming platform with extra value applied based on who has owned them along the way. Whole games are now being made based entirely around NFTs.
People have just begun to scrape the surface of NFT’s utilitarian usefulness. With more developments and innovations happening in the crypto realm, we would witness many utilities given life with NFTs. It is reasonable to expect that more ideas and projects will emerge in the future, resulting in even more opportunities for NFTs to become a part of our life.