Scrolling on social media, you may have heard about NFTs, with users talking about purchasing digital artwork and other unique items for hundreds and even thousands of pounds.
What are NFTs?
Image Credit: Business Insider
An NFT – Non-fungible Token – is a unique digital asset that represents a physical or digital item such as art, videos, or even real estate.
These tokens are blockchain-based, meaning that they are usually encoded with the same software as many cryptocurrencies, such as Bitcoin and Ethereum.
Whilst cryptocurrency and physical money is “fungible”, i.e they can be traded and exchanged for one another and are always equal in value, NFTs are not.
These tokens have digital signatures that are not equal, meaning that it is impossible for one NFT to be worth the same or be equal to another, just because they are NFTs.
When someone owns an NFT, it acts as a digital certificate of ownership of the asset, whether it is physical or digital.
As they are one of a kind, they create digital scarcities, which incentivises people to purchase the item instead of missing out.
NFTs are sold for thousands
GIF credit: Chris Torres
For example, a crypto-rendition of Nyan Cat – the annoying meme that was popular on the internet in 2011 – was sold for $590,000 (£476,826) at an online auction.
Similarly, Twitter CEO, Jack Dorsey, sold his first tweet from 2006 as an NFT for $3 million (£2.4 million), where the money was converted to bitcoin and donated to GiveDirectly.
What’s the point of NFTs?
You may be thinking: “what’s the point? I can just view these images and videos online for free!”
But an NFT is the complete original item, the “first edition.”
When you own an NFT you essentially have bragging rights to say that you own that piece of art, a gif, or other collectables.
Whilst not relevant to most individuals and businesses, for artists and content creators it provides a unique opportunity to sell directly to consumers, avoiding marketplaces, and auction houses, whilst allowing the creator to earn more money.
However, the trend has caught the interest of many celebrities including Paris Hilton and Snoop Dogg who have jumped on the bandwagon and produced their own exclusive NFTs for their most dedicated fans.
What does the future hold?
It seems that anyone can produce an NFT, which raises the question of whether it’s worth the dosh.
The concept of NFTs is still very new, meaning that their future is unclear, as the price is entirely determined by what someone is willing to pay for it.
In essence, demand will drive the price up or bring it down, meaning that a resale could bring in less money than what you originally paid.
The Social Impact of NFTs
Image Credit: Instagram
It’s worth keeping in mind, however, that Meta has its eye on the NFT marketplace and is seeking to make these transactions mainstream.
Instagram announced last month that it will be introducing a digital collectable marketplace, whereby a handful of US creators will be able to share purchased or created NFTs on the platform.
This new feature includes:
- Connecting a digital wallet for NFTs to be stored
- The ability to share digital collectables
- Automatic tagging of the creator and collector
In the future, this feature could provide creators and businesses with the opportunity to share unique pieces of artwork on a new marketplace that has a larger audience.
For now, it’s not clear what impact NFTs will have other than being a costly trend that doesn’t guarantee profit.
But with Meta at the helm, these tokens could take off and reach new heights: who knows?
What are your thoughts on NFTs?
Let us know what you think about these trending collectables in the comments below.