Did you know that Jack Dorsey, CEO of Twitter, sold his first ever tweet for $2.9 million? This was his tweet.
In the past couple of weeks, you may have come across some other strange headlines like these:
Beeple sold an NFT for $69 million a first of its kind auction
Ethereum based Nyan Cat meme art sells for nearly $600,000
A tweet for ₹21 crores, a jpg image for ₹500 crores or a gif for ₹4 crores. You might think that the world is moving towards a catastrophe with entropy reigning supreme. But this is the reality. People are investing actual money in these digital works of art. Bitcoins, tweets and gifs are the modern day gold, art and collectibles. We live in a different world now. So, what does this new reality mean? How is it that tweets and memes are worth so much? Let’s dive deeper.
What are NFTs?
NFT means Non-Fungible Tokens. Of course, this doesn’t really help.
So let’s understand the meaning of the term, “fungible” first.
Fungibility is a property of goods or commodities whose individual units are interchangeable. Take cash for example. We can exchange one ₹100 note for 2 notes of ₹50, and it would make no difference. Cash, gold and digital money are all fungible assets, including bitcoins.
Non-Fungible things are the ones with some unique properties, like a novel autographed by an author, or a piece of art, or a document such as a house deed. These are all unique and cannot be easily interchanged.
Non-Fungible Tokens are these very assets in digital form. However, unlike physical assets, digital assets can be easily duplicated. To prevent this duplication, blockchain technology helps us create a certificate of ownership, authenticating that this digital asset is the original piece of work.
How do they work?
Just as there are many companies in the world, there are many blockchains as well. Bitcoin, Ethereum, Ripple are some of the popular ones, and most NFTs are on the Ethereum blockchain.
On each blockchain, there are various assets, aka tokens. Tokens are nothing but digital assets. Non-Fungible Tokens are a type of token that can store additional information. The fact that these tokens can store extra information makes it unique. It allows it to store art, music, video in the form of JPGs, MP3s, videos, GIFs and so on. However, JPG file gets value only when it is tokenized on the blockchain. Tokenization is like a certificate of ownership that proves it is original. Visually, it is something like this –
PS: This jpg above has been sold as an NFT too!
This may have confused some of you. So to put it in simple terms, if an NFT is the original Van Gogh painting, the JPG would be the print copy of that painting.
A Non Fungible Token has these properties:
- Each token has a unique owner
- The information of who the owner is is easily verifiable
- The owner can sell the token on any NFT market or peer-to-peer
- The original creator can earn royalties every time it’s sold further
NFTs have various use cases, right from digital content to domain names to investments and collaterals.
NFTs – Art and Collectibles
Like I mentioned, NFTs have various use cases, but art and collectibles have been in the spotlight recently. If you are curious to take a look at what’s selling, OpenSea is a popular marketplace. There is another marketplace solely for buying and selling tweets, Valuables.
However, NFTs are not limited to art. The NFT technology can be used in various ways like storing documents, invoices, contracts, etc. But all of this is only after blockchain becomes mainstream. Until then, know that NFTs don’t work the way our usual investments do. They are not like mutual funds or fixed deposits. Currently, they are more like art, which is another asset class altogether. And if you’ve never invested in art in tangible form, you could simply avoid these too. Unless of course, your tweets are as sensational as Jack Dorsey’s. 🙂
