GIF image of a flying cat with a Pop-Tart on its torso. A symbolic image of the golden jacket. Tweet of 5 words. No, this is not your browsing history, they are NFTs and each of them sells for up to $69 million. But what is NFT?
NFTs are a wonderful new phenomenon. Since about 2014, it is a unique digital asset that is bought and sold online using cryptocurrencies. Used to denote ownership of a specific digital item (often a digital work of art), unique tokens disrupt markets around the world, from art to gaming and from events to insurance.
Confused? Don’t worry, there’s plenty to take in. That’s why we’ve broken it down into an easy to understand guide that contains everything you need to know about NFTs. Let’s dive in!
What does NFT mean?
NFT stands for non-replaceable token. Let’s start from the beginning: what does irreplaceable mean? “Fungible” is an economic term referring to a good or an asset that can be exchanged for a good or other asset of equal value. For example, a dollar bill is interchangeable because it can easily be exchanged for another dollar bill of exactly the same value.
If something is “non-replaceable”, it means that it cannot be replaced by something that has exactly the same value. The plot of land may not be exchangeable, because the land is unique and it is difficult to find another plot of exactly the same value. Art is another example of a non-expendable asset, as its value is very subjective, and this is where NFT comes in.
NFT displays the exclusive ownership of a particular digital material (eg, artwork, in-game purchase, or tweet). You can buy NFT at a certain price, but since it is not tradable, its market value will likely fluctuate.
How do NFTs work? Are they cryptocurrencies?
While NFTs are often bought and sold with cryptocurrencies such as Bitcoin and Ethereum, they are not cryptocurrencies per se. Like the dollar and other currencies, cryptocurrencies can be traded. If you exchange one bitcoin for another, both will have the same value. You will still have one bitcoin. Because NFTs are unique, they have no more equivalent value than the market is willing to pay for them.
What do you get when you buy an NFT?
Since an NFT can only have one owner at a time, when you buy an NFT, you are buying a sole proprietorship of a particular digital asset. However, this does not mean that you have the exclusive rights to who can view or share that specific artwork.
Take, for example, the most expensive NFT sold to date: Beeple’s Everydays: The First 5000 Days, a 5,000-piece digital collage. The owner of the NFT is Vignesh Sundaresan, founder of the Metapurse NFT project and Bitcoin ATM provider, Bitaccess.
While Sundaresan is the official owner of NFT, this image has been copied, shared and viewed by millions of people around the world, and that’s fair game! So when you buy an NFT, it’s a bit like buying a signed copy. NFT is signed exclusively for you, but anyone can see the work.
NFT can be any digital asset. They have included so far:
Artworks
Tweets
GIF
songs
In-game purchases
Articles
Domain names