The market for NFTs has skyrocketed over the past year – but what are NFTs and why have they taken off so rapidly?
NFT stands for Non-Fungible token. Fungibility refers to the ability of a good or asset to be exchanged with similar assets of equal value. For example, currency is a fungible asset. For non-fungible assets the opposite is true; each one is unique and cannot be swapped with a similar asset. This is analogous to how an original work of art is likely to be worth vastly more to a replica. NFTs are often described as being a digital signature.
The appeal of NFTs is that they fix a problem for digital creators – how to make your work valuable in an environment where work can be replicated so readily.
The most expensive NFT to date was sold for $69.3. The work was sold during an auction at Christie’s, an auction house that previously only sold physical art. The digital artwork was titled ‘Everyday: the First 5000 Days’ and was created by Mike Winkelmann, a digital artist known as Beeple.
The first tweet to ever be published was written by Jack Dorsey, the co-founder and CEO of Twitter. The tweet, which reads ‘just setting up my twttr’ was sold as an NFT for $2.9m to a businessman, based in Malaysia.
NFTs are a type of cryptocurrency. An advantage of NFTs over other cryptocurrencies is that it allows for setting more complex terms such as enabling an original creator to earn commission on each resale of the asset.
However, buyers should be wary that it may be difficult to determine whether a seller is the original creator.
Image: Sourced from Wikimedia Commons