Introduction to NFTs

Remember that side-eyeing Chloe meme?

Or what about nyan cat?

These were bought for a whopping $76,377.50 and $590,000, respectively.

What about that tweet (the first one ever to exist!) that sold for $2.9 million?

Or maybe the artwork by Beeple for $69 million?

And lastly, that short clip of Lebron James for $200,000. Might as well buy several cars, right?

NFTs, collectively, have gone up to around $2.5B in sales. And that’s just for the first half of 2021. Now, what are these NFTs that have been selling for such an amount? These stand for Non-Fungible Tokens, which are digital assets that are unique and cannot be duplicated. These come in many forms – digital collectibles, music, art, in-game tokens/characters/skins. Some popular examples are Axies, which are tiny little monsters from the famous game Axie Infinity. But we’ll get to that later.

NFTs are one of the many new notable assets in the cryptocurrency space. These can be sold in (NFT) marketplaces such as Rarible, Opensea, Enjin, and many more including cryptocurrency exchanges/platforms such as Binance, crypto.com, and etc. Unlike cryptocurrencies, NFTs have different values that vary. Similarly, both have values that also fluctuate; with cryptocurrency being more volatile.

Now, there are a lot of factors that contribute to its value, such as ownership history, reputation, rarity, utility, and etc. For example, that artwork that was sold for $69 million is by Beeple, a well known digital artist. Another example is when Dolce & Gabbana sold their first NFT collection that sold for around $5.7 million.

So, going back to NFT basics – one might argue that you can just right click and save the picture, and in that way, you can get the picture for free. Well, technically, anyone can do this. But doing this doesn’t add any value to it, just like when you print a picture of Mona Lisa from the internet. It isn’t the same as owning the original. What makes buying different is that you get a digital certificate, which serves as a proof of ownership. You, and everyone else can access and see who previously owned the NFT. This is made possible by the blockchain. But take note that only one person can own an NFT at a time, except for fractional (ownership) NFTs. And yes, you can buy and sell NFTs - and also make one! Some have had major life changes selling their work. And even flipping NFTs (both positive and negative changes though). The process is a bit comparable to flipping houses IRL.

Spending massive amounts for jpegs, videos, or whatnot might seem absurd. But when you think about it, it’s not too far from collecting paintings, bags, Funko Pops, shoes, and etc. Some people also buy it for bragging rights. Going back, these can be an investment and/or collection for some. A lot of celebrities and artists like Snoop Dogg, Eminem, Ellen DeGeneres, Steve Aoki, Lindsay Lohan, Paris Hilton, Reese Witherspoon, and many more have gotten into buying NFTs.

For artists and creators, NFTs are a huge advantage as it enables them to have control over their work and their ownership - especially for those that greatly value intellectual property rights, software licensing, and the like. Artists also get a royalty fee whenever their work is resold; unlike for physical paintings that will only allow the artist to earn after it being sold for the first time. Talk about giving credit where it’s due, right?

Overall, NFTs look like they’re probably here to stay, as it offers a huge improvement in the digital world - both for the creators and users. The concept of collecting is no different than the concept of collecting designer shoes. This one only comes with extra steps though, but the concept of it is somewhat the same. As for those that flip NFTs, it comes with risk too, just as with any other investments - even outside the cryptocurrency space.