NFTs have been around since 2014, though they really got popular in 2017, with the launch of blockchain based virtual game CryptoKitties.
They became a symbol of the 2017 bull run, as people paid huge amounts for collectible digital cats, though most people were not even really calling them NFTs back then. People mostly thought they were a bit of a joke. Well, they are not laughing anymore. Things have really kicked off for the NFTs this year, reaching a pinnacle when digital artist Mike Winkelmann, known as Beeple, sold his 5,000 days piece for an astonishing $69 million.
To understand why that value is even vaguely reasonable, let’s break down exactly what they are. Put simply, an NFT is a digital token created on a blockchain.
when we’ve screenshot this tweet of Jack Dorsey for free?
Madness? Maybe; but let us explain why it might not be quite as crazy as you think. This screenshot is actually a non-fungible token, better known as an NFT.
Anything digital can be copied infinitely, right? This was a key reason why early attempts to build digital money failed. They are used to prove exclusive ownership of a digital item, whether that’s art, music, video games, or whatever. Think of NFTs as being to digital possessions what Bitcoin is to money. Bitcoin solved what’s known as the double spend problem by using blockchain technology to ensure that each coin was unique and could not be reproduced.
NFTs use blockchain technology for a similar purpose. To ensure exclusive ownership of an original digital item by storing and tracking it on the blockchain to provide buyers with proof of ownership. They also use smart contracts to facilitate the secure sale of the item.
So, that’s what it is, but the big question still probably is, why NFTs?
NFTs have many benefits. For artists, NFTs offer a simple and innovative means to sell their work to a global audience. It’s probably not a coincidence that they have taken off during the COVID pandemic, with lock downs restricting physical events and leaving artists needing a new income stream. The barriers to entry are also pretty low for customers and artists, anyone can do it because the technology’s secure and simple to use.
You don’t need to be in a specific place or use a currency associated with a country to get in on the action. For the buyer, only one person actually owns the original version. It’s an easy way to support your favorite artist and to claim the blockchain based bragging rights of ownership.
Do NFTs actually have value?
Value is a tricky concept at the best of times, and it’s all relative. There are people out there who will pay $11,000 for a pair of Nike Yeezys.
Does it make sense to spend more on a pair of shoes than you would on a new car? It doesn’t really come down to the object itself, it’s all about the market, and what people are willing to pay. And why should NFTs have more, or less value, than physical paintings?
Which can also be copied, or reprinted?
For instance, you could Google a picture of Van Gogh’s Starry Night tomorrow, print it, and hang it on your wall. The thing is, it wouldn’t be the real deal, because it isn’t the original, which is worth a fortune. Even though you can make your own copy of a digital item, you don’t necessarily own it outright, and being that person will always have value.
Where there’s demand and hype, buyers and collectors will inevitably lap it up. Whether or not this is a passing fad, or a lasting revenue stream for artists, is a more complicated question. What’s for sure is that the world is going digital, so it makes a lot of sense.
What’s your take on NFTs?
Would you pay a million dollars for a screenshot of a tweet?