Non-fungible tokens, or NFTs, are one-of-a-kind items paid for online, usually with cryptocurrency. The catch is they are exclusively digital, ranging from audio files to art pieces.
NFTs differ from intangible cryptocurrencies (like bitcoin) because their value can’t be divided and there is no equal substitution. For example, the painting of the Mona Lisa is non-fungible as it would be difficult to trade equally for another painting. A dollar is fungible as it is equal to another dollar.
Many people are buying and creating NFTs, like Grimes who sold a short video for almost $400,000, or the creator of the Nyan Cat receiving nearly $600,000 for his animation. For artists, NFTs provide a new global market to sell digital work for the price they choose while receiving royalties. From the perspective of buyers, it becomes an asset that can be freely posted or sold again in the future for a higher price. For people that have the hobby of collecting and bidding for rare items, this is a new method that could possibly grow in the future.
But why? Art collecting has always been popular, but now we are seeing a shift towards digital collections. According to the cryptocurrency platform Ethereum, NFTs can represent ownership of any item, and perhaps will be the official digital deed of your car or house in the future. Anyone can see and download the item you bought, but they won’t have the pleasure and bragging rights of owning the authentic version.
However, some believe that it is a high-risk investment and may not be worth much after some time. One of the biggest downfalls of buying NFTs is how easily it has been copied and shared online, but blockchain technology is working to stop this. A blockchain keeps records of transactions and is what allows cryptocurrency to function. Much like physical art, attention and demand drive up prices for NFTs, not necessarily functionality, which can affect a piece’s worth. They can also be taxed at a higher rate for collectibles, along with the cryptocurrencies used to buy them. It is important to know the risks before investing to know if it will be worthwhile to acquire an NFT.
If you are curious about the latest top-selling NFTs, click here to learn what’s popular now.