- NFT is worth what the buyer is willing to pay
- NFT is taking the art world by storm
- NFT is created based on blockchain technology
Non-fungible token (NFT), pronounced as nifty, offers collectors proof of owning digital art by linking ownership into blockchain technology. These tokens prove ownership of the image, sound file, or text, similar to cryptocurrency ownership.
NFT as a value for a digital asset
NFT’s will have different values for each asset; it is only worth what the other party is willing to pay.
No one can falsify the information; it keeps track of the original owner and anyone buying it. Once you buy the artwork from an artist, you can keep it or sell it in the future. The opportunity for an artist is to sell the add ons with NFT. The art industry can move into a more decentralized model that fosters a symbiotic relationship between artists and buyers. Artists will monetize their content, and fans will have transparency while purchasing the asset.
NFT’s are not about understanding the value proposition of the goods. As the value proposition is speculative, it’s worth what someone is willing to pay. The artists can receive the proceeds of the sales in each transaction. No matter how many times the sale happens, artists would receive the share.
In no time, NFT has taken the art world by storm. On March 11, 2021, Christie’s auctioned a collage composed of 5000 digital pieces, sold for US$69 million.
It is the third highest-ever sale for a living artist in all mediums.
We can see NFT of the New York Times column earning half a million dollars for charity. Artists looking to monetize digital art and investors look to trade it like another commodity. The founder of Twitter sold one tweet for $3 million.
The technology behind the NFT
Turning something transitory into value requires two things proving uniqueness and providing ownership. The concept of cryptocurrency is similar to turning a bit of code into virtual coins that have real value in the world. Cryptography is the technique used to protect the privacy of the message by transforming it into a form that can be understood only by the intended receiver. Here concept keys come to picture, public and private keys. Everyone can see the public key as a random set of characters, a private key to see its original form.
Blockchain was specially developed to create fungible assets like cryptocurrency. It has evolved to handle non-fungible assets, with unique values for each asset. If you trade it for a different card, you will have different values. Current NFT’s are developed based on Ethereum to transfer quickly and store it as a value.
The NFT circulation could increase considering any piece of digital information can be coined. Also, excitement for this new type of system comes with the current challenge in energy production because each NFT’s exchange in the ethereum network costs daily energy consumption of two households. The perceived ecological impact has made some artists oppose NFT’s.