In March 2021, a digital work of art by Mike Winkelmann, the artist known as Beeple, sold for US$69 million, in an auction by Christie’s.
What is perhaps more surprising is that this record-smashing NFT sale came after months of increasingly valuable auctions. [1]
In October 2020, Beeple sold his first series of NFTs, with a pair going for $66,666.66 each.
In December 2020, he sold another series for $3.5 million.
And in February 2021, one of the NFTs originally sold for $66,666.66 was resold for $6.6 million.
Yes, you read those massive figures right.
So, what are NTFs, and what is going on here?
NFTs, or non-fungible tokens, are unique, one-of-a-kind files that live on a blockchain and are able to verify ownership.
To go deeper into the concept, some things are fungible, i.e. exchangeable for another, or equivalent to another. Money is fungible. One US dollar is equivalent to another US dollar.
But there are other things in life that are non-fungible, or one-of-a-kind, like a piece of art or a bespoke wedding ring, or a limited edition, autographed collectible card. One wouldn't consider these items equivalent with others, or easily exchangeable for another.
A token is an asset on a blockchain. You own a token if it is associated with your wallet, or your identity online.
When you have a digital asset on the blockchain (when you own it), everyone can see that you (or the account associated with you) own it.
So, an NFT basically indicates which wallet or address it currently belongs to.
Another way of thinking about the issue is that artwork can be tokenised to create a digital certificate of ownership that can be bought and sold. And as with crypto-currency, a record of who owns what is stored on a shared ledger known as the blockchain. [2]
What are NFTs used for?
These days NFTs are mostly used for digital artwork, but technically can be used for other digital and cultural assets, like tweets or even basketball trading cards (https://nbatopshot.com/).
Taking artwork as the primary example, buyers of NFTs are essentially buying bragging rights of owning the original digital artwork (this assumes that authenticity in fact has a value).
They are also buying a speculative asset that they may be able to resell later at a higher price.
Another benefit is "patronage" or "support", where buying an NFT allows one to financially support an artist. [3]
Yet another way of thinking about it is like you are buying an autographed print. [4]
One important point for speculators and investors is that most NFTs are part of the Ethereum blockchain.
As I mentioned earlier, this is one of the possible reasons why the price of Ether (the crypto) has been rising, as more and more people jump onto the NFT bandwagon.
This implies that there are two main ways of speculating or investing into NFTs. One is to create (or mint) NFTs and the other is to invest into Ether, the cryptocurrency that these NFTs are largely traded in.
OK, that's it for today.
Thank you for reading!
More to come on Bitcoin, Dogecoin, and more.
Anything that Interests Me! - On NFTs, Ethereum, and Ether
Sources cited:
[1] https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million
[2] https://www.bbc.com/news/technology-56371912
[3] https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq
[4] https://www.bbc.com/news/technology-56371912
