One of the more common terms that you come across on social media these days is NFT, which means non-fungible token. The concept has left several people perplexed; however, it has not stopped brands around the world jumping at this growing opportunity. Anurima Das delves deep into the fascinating world of NFTs to learn and capture the intricacies of this unique digital addition
Just some time back, multinational financial services corporation Visa announced that it has entered the world of non-fungible token (NFT) commerce with its purchase of CryptoPunk 7610 – an NFT of a female digital punk character launched by creative technology project Larva Labs. Visa’s purchase – worth $150,000 – comes at a time when the fintech giant considers that NFTs play an important role in the future of retail, social media, entertainment and commerce.
With this move, Visa is expecting a wide range of new cases in the years ahead, and its belief that the ability to track and leverage a digital asset, such as an NFT, in multiple environments could mean exciting new opportunities in ticketing, gaming music, art and beyond. With so much going on with crypto and NFTs, it is absolutely the right time to get to know this asset a little more in detail.
What are non-fungible tokens (NFTs)?
Recently, a digital-only artwork was sold at Christie’s auction house for an eye-watering $69 million, wherein the winning bidder did not receive a sculpture, painting or even a print. Instead, they got a unique digital token known as an NFT. This took the Internet by storm. Rightfully so, as it was time to understand why the roar and the sudden hype around something as ordinary as a digital collectable.
In financial economics parlance, a fungible asset is something with units that can be readily interchanged – like money. Unlike money, where you can exchange one currency with another exactly of the same value, it is impossible to interchange NFTs with anything else. It is one of a kind and there will only ever be the one original painting, sculpture, art, or anything else.
NFTs exist in the digital world as a unique asset and it is better to relate to them as a high-value property or asset. But, there is no way that you can tangibly own it. It exists in the form of digital tokens and the buyer or bidder only has claim over a certificate of ownership for virtual or physical assets.
Are NFTs secured and really unique?
There is no instant gratification with NFTs, as you do not get to own them or exhibit them to your social circle. But, then the question remains as to why they are more valuable as compared to traditional works of art. Moreover, you may think that existing within the digital space it is so easy to duplicate the files you own. NFTs can be ‘tokenised’ to create a digital certificate of ownership that can be bought and sold. The records for NFTs are also maintained and cannot be forged because the ledger is maintained by thousands of computers around the world.
Assured that owning NFTs is a valuable perspective, now comes the question of what piece to choose and where. Buying NFTs is just like buying an autographed print. In theory, the seller is the best person to decide the price of the asset. Incidentally, anybody can tokenise their work to sell as an NFT. Recently, for instance, an animated Gif of Nyan Cat – a 2011 meme of a flying pop-tart cat – sold for more than $500,000.
What’s interesting is that Twitter’s founder Jack Dorsey has promoted an NFT of the first-ever tweet, with bids hitting $2.5 million. However, the concept of NFT is still to receive a full confirmation regarding its worth. But to put it simply, in a world of fake paintings, an NFT is like possessing that one original painting; and if you arrive at the thought or concept of NFT from this angle, then it is easier to understand the worth of the hype.
Is it worth the hype?
Being a buyer or a collector of NFTs has its own upsides and one of the obvious benefits is that it lets you financially support artists you like. Plus, when you have the original piece, you can use it anyway you like, given that you own the basic usage rights for the art. Lastly, with NFTs, you get direct entry into the blockchain universe. The most important thing about NFTs is that for a collector the asset is going to pay hefty returns just like any other speculative asset. Where you buy it and wait for the value of it to go up one day, so you can sell it for a profit.
NFTs are diverse and are ready to attract the hardcore fans of musicians and artists, and with easy handling of the art pieces, it virtually becomes a potent asset for investment in the crypto era.