Last week the first digital-only artwork auction by Christie’s’ auction house netted a cool £50m for a relatively unknown artist called Beeple (below). The digital art was sold as an NFT.
Nifties, or Non-Fungible Tokens (NFT), are unique digital certificates of authenticity that state who owns a digital asset. Non-fungible simply means that it’s not interchangeable with anything else. A token is a representation of something else.
NFTs are a big deal because they introduce the concept of property rights to digital assets, and they do this through software-based logic. These are assets with no physical presence in the same way a building, painting or sculpture does, they are based on blockchain technologies, the same underlying technology as Bitcoin and other cryptocurrencies.
Back in 2017, a company called Dapperlabs invented the CryptoKitties and it rocketed to popularity. CryptoKitties is a game on the ethereum blockchain that allows participants to buy, sell and breed cats or special NFT tokens. Each token represented a unique cat and Think of it like a cross between Tamagotchi and Pokemon. The undeniable legacy of CryptoKitties is that it raised huge awareness of the concept of non-fungible tokens.
NFTs have a different use case than bitcoin. The market is seen as having vast growth in a broad range of things: virtual land; tokenised real estate, artwork, video game items including skins, weapons and avatars, music, digital trading cards, racehorses and designer trainers; and video footage of iconic sporting moments.
Every NFT transaction is recorded on Ethereum blockchain – which creates a public ledger of ownership that is encrypted and distributed among every computer participating in the peer-to-peer blockchain network.
While the the digital file (e.g. jpeg or mp3/mp4) attached to an NFT might be copied and shared, the blockchain ledger ensures that everyone can see who actually owns the NFT, preventing the possibility of counterfeit.
This concept isn’t new and has been used in the fine art world for centuries by way of provenance, although forgers have become skilled at successfully falsified provenance in the past. The decentralized nature of NFTs render falsified histories and potential fakes a non-issue.
An important feature of NFTs is the fact that they are indivisible. This means you can’t send a portion of a non-fungible token to someone (unlike with, say, Bitcoin). Bitcoin on the other hand is a fungible token, because you can send someone one Bitcoin and they can send one back, it would still be one Bitcoin.
NFT technology could also track the provenance of physical items and memorabilia, potentially making them even more valuable for fans. They started life as a way of selling internet artifacts in online games but the future is unimaginable.
The founder of Twitter and Square is in on the NFT act. Jack Dorsey listed his first-ever tweet for sale. The buyer will receive a certificate and metadata of the original tweet. The highest bid is currently $2.5m.
But it doesn’t end there for gold old Jack. The space is moving very quickly, NFT are also changing the music world, and Square wants some of the action.
Tidal is being majority-bought by the payment processor for $300 million. But why does a mobile wallet want to own this streaming company?
The majority stake in Jay-Z’s streaming service could result in some blockchain-related functionalities on the Tidal.
NFTs will allow artists to certify ownership and other unique digital-only content and experiences.
Fans of Kings of Leon will already know that they’re releasing their first album since 2016. It will be available with a package of a vinyl album and a NFT at a cost of $50. There will also be an auction of six golden NFT tickets that essentially offer a lifetime luxury pass to any Kings of Leon concert.
DJ 3LAU sold out a crypto-digital music album for $11.6m. Could this be the future of music sales?
For some NFTs have become the desired collectible of choice. The value of NFTs, like stocks and rare collectibles, depends mostly on what buyers are willing to pay, and the market is experiencing a boom as NFTs explode in popularity. Since their inception in 2017, rare NFTs have traded at prices reaching hundreds of thousands of dollars, so it is no surprise that people are bidding large amounts of money on early music NFTs.
A 10-year-old cat meme sold for $580k.
An original Banksy from 2006 was burnt and destroyed in a live-streamed video just so it could be sold as an NFT – it sold for $380k while the original was bought for $95k.
Not to mention musician Grimes sold her digital art for a total of $6m through auctions.
NFTs are booming right now, so there is an opportunity for both individuals and businesses to profit from being early adopters.
The top 5 platforms have already made over $500m in sales in 2021.
Creators are realising they have an asset they can sell directly to their audience, and this is still quite novel. Once all creators realise this, supply will go through the roof. In the medium to long term, there will be an oversupply of tokenised art. If you want to diversify your portfolio with exposure to some original blockchain-based assets, PUNK-BASIC or PUNK-ZOMBIE stands in as a derivative backed by the NFTs.
WhaleShark, one of the largest collectors of digital-gaming NFTs already have a collection worth an estimated $7m.
But like any other investment, it’s not without risks. John McAfee was promoting token offerings as early as 2017 and has now been charged with a $13m fraud.
If you’re in the market for NFT, there are a few market places. Two of the most popular are OpenSea and Rarible, my favourite is Niftygateway.
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