What on earth are NFTs?
Unless you’ve completely stayed off the internet for the last couple of months, there’s a high chance that you’ll have come across a three-letter acronym in relation to very large amounts of money.
But what is an NFT, and why should you care? Well, an NFT stands for Non-Fungible Token, it is essentially a unique online asset (picture, video, music file, etc.) that can’t be replaced with something else.
As for why you should care about this…we’ll dig into why this might be relevant to your life over the next few paragraphs.
So how do NFTs actually work?
That is the million-dollar question – quite literally, in some cases! (more on this later)
The essence of an NFT is that it can’t be replaced by something else. So while a dollar bill can be substituted by another dollar bill, an NFT – by its definition – doesn’t have anything you can switch it with. If you traded it, you would end up with something different.
The way they work is quite technical but the short version is this; the majority of NFTs are on the Ethereum blockchain and they sit next to cryptocurrencies, like Ethereum. But the key difference between the digital assets is that crypto – like Ethereum or Bitcoin – is able to be replaced – whereas NFTs can’t.
Why bother with NFTs then?
This is where it gets really interesting. NFTs can be a unique piece of art or music or another digital asset. When you own an NFT, you essentially have a one-of-a-kind piece of code that says you are the owner of that.
Think of it like this. There is only one original Mona Lisa in the world, and it is sat in the Louvre museum in Paris. Yet there are thousands of identical copies hung in mansions, flats and galleries around the world. These replicas have a fraction of the value of the original – simply down to the fact that they aren’t the original.
An NFT is the way that a digital asset can be distinguished from its many, many duplicates – and that is why their value is rocketing.
What has this got to do with memes?
Practically anything can be turned into an NFT, so why not memes? Remember that meme of the girl smiling in front of the burning house? The original photo recently sold for a sizeable $500,000.
Remember the Nyan Cat meme (the image above should jog your memory)? Well, that sold in February for around $590,000 in an online auction.
Even that is small change compared to other NFT art sales. The digital artist known as Beeple sold an NFT of his work at British auction house Christie’s for $69m – turning him into one of the “top three most valuable living artists”, according to the auction house.
Think of NFTs as enabling fine art collecting for the digital world, and that will probably help you to understand some of these astronomical sales figures.
What do you think about NFTs? An interesting use case for digital assets or a total hype train. Leave your thoughts in the comments below.
Here are some other posts designed to grow your crypto knowledge:
