On March 11, a piece of art sold during an online auction for $69.4 million. This put the creator, Beeple, among the top three most valuable living artists. While that’s shocking, it still seems plausible. What’s less believable is that this piece of art is a non-fungible token, or NFT. The buyer didn’t acquire a piece of art to hang in their home—they bought the rights to a piece of digital art. And the transaction took place through Christie’s as an inaugual NFT sale in which they also accepted a cryptocurrency payment for the first time ever. The auction of Everydays: The First 5,000 Days is what it looks like when the idea of digital collectibles bursts onto the scene. So, what the heck is an NFT? Let’s talk about that.
What is an NFT?
A non-fungible token is something that is one-of-a-kind, irreplaceable, and comes in a digital format. Think GIFs, JPGs, and MP3s. These tokenized versions of collectibles give the buyer the digital rights of ownership. Each NFT has a unique identifier confirming its authenticity. This is done by recording the relevant details on blockchain, which is related to cryptocurrency. If this explanation sounds like a collection of words you’ve heard but don’t really understand, you’re not alone. We’ll try to break things down further.
How do They Work?
Buying a non-fungible token gives the owner the sole ability to resell, distribute, or license that property as they please. This creates a claim of ownership on something that could otherwise be easily and endlessly duplicated. However, the NFT creator can put parameters on the token’s code that limits how it can be used or resold. The code also contains the creator’s signature that can be verified on any server, browser, or platform. This assures the authenticity on the NFT and the buyer has a certificate of ownership that can’t be replicated. The whole transaction is achieved by using open source code that’s published into a token on a blockchain. Most NFTs are built using Ehtereum, Dapper Lab’s Flow, or Polkadot—all blockchains. The NFT marketplace is growing but right now, most NFT buying and selling is done through OpenSea, Rarible, and Nifty Gateway.
Do we need a new form of digital collectibles and do they have value beyond pricey bragging rights? For one thing, NFTs can be an investment—an owner can resell the collectible. For a user such as a band, it can be a new source of revenue. Non-fungible tokens can also represent a sentimental purchase that makes someone feel closer to a brand, artist, athlete, or whatever else the token represents. The price, and by extension the value, of an NFT can driven up by exclusivity, popularity, and the novelty factor.
NFT for You and Me
The average person doesn’t have $69 billion to spend on a piece of digital art and can’t pay $2.5 million for a Tweet. But there are more accessible NFTs targeting the average consumer. On March 5, American rock group Kings of Leon became the first band to offer their music this way. In just five days, the sales generated close to two million dollars. This tokenized album sold for $50 and gave buyers access to some special perks. For traditionalists, the band’s new album was made available on vinyl after the NFT run.
The creation and sale of NFTs has really picked up in the last few months. Taco Bell debuted the NFTacoBell collection in early March. What do you get when you buy a fast food digital asset? A taco-inspired GIF illustration. Original prices were set at a dollar each, making them the same price as a taco (in the US). But when you have a hot new item that’s getting a lot of press, the price increases along with resales and in at least one case that dollar hit $3,600. Keep an eye out for more businesses and organizations to start offering their own NFTs soon. NBA virtual sports cards anyone?
Is This a Fad?
The idea of buying and selling digital content is steadily gaining momentum, but NFTs are still a new concept. Look at how the value of cryptocurrencies has fluctuated due to the idea still being largely obscure, misunderstood, and unsupported. Right now, it’s a novelty to own an non-fungible token. However, it’s predicted that digital collectibles will stick around after the hype has died down.
Sometimes it’s really hard to explain a new idea or a difficult-to-understand concept. But we have a solution: use an explainer. These are videos that help an audience understand a product or service in an easy-to-digest format. Studies have shown that people would rather watch a video than read an article. Here’s an NFT explainer to help prove our point, which is that video works. Call us today if you need a way to help customers understand your business.