What is an NFT? Everything you need to know about non-fungible tokens

A digital-only artwork was recently sold for a whopping $69 million (almost Rs 5,08,99,13,500) and as the art is not in physical form, the winning bidder cannot own the painting or even a print. Then what does the man who spent an eye-watering $69 million on digital art get? The bidder, identified as MetaKovan, will receive a unique digital token known as an NFT (Non-fungible tokens).

The record-breaking bid left the whole world shocked and people were left wondering what is NFT? As the craze for cryptocurrency is on the surge as a replacement for currency, NFT is being seen as a digital replacement for collectibles. They are the products that operate as digital assets.

With arts selling for whopping prices in form of NFTs, now many celebrities and popular personalities are backing NFT by listing their items for digital auction. While Twitter CEO Jack Dorsey listed his first-ever tweet at an online auction to be sold as an NFT, Tesla CEO Elong Musk too joined the trend recently. Musk announced via a tweet that he is selling a song about NFTS in form of an NFT.

What is NFT?

NFT or Non-fungible tokens are a class of cryptocurrency that has no standard value and they instead have a unique value. NFT can be understood as a "digital file whose unique identity and ownership are verified on a blockchain." NFTs are created by uploading files and are not mutually interchangeable as each of them has a unique value.  

 Nonfungeable.com describes NFT as "a special class of assets on the blockchain characterized by being unique and non-interchangeable with one another for equal value. An NFT is different from a cryptocurrency in that it is defined by metadata that builds-in a role, function, and value that are unique to it. Specifically, a non-fungible token can be a video game asset, a work of art, a collectible card or image, or any other “unique” object stored and managed on a Blockchain."

These "one-of-a-kind" assets can be bought and sold like any other piece of property, but they have no tangible form and exist in form of certificates. NFT can neither be broken down into smaller values like most currencies nor be exchanged with one another for equal value. As they are all characterized by their unique value and authenticity and therefore they cannot be duplicated.

How to buy NFT?

NFT can be traded on marketplaces (eg: OpenSea) like any other asset. To buy NFT, one has to use digital currencies like World Asset eXchange (WAX) or Ethereum's Ether (ETH). While WAX is popular for virtual character and video game-related NFT purchases, ETH enjoys massive popularity. NFT buyers can also purchase digital land and real estate.

Why are NFTs worth millions?

NFTs are worth millions of dollars just as Bitcoins because they are limited in number and cannot be duplicated. They are known for their authenticity and unique value. The easily verifiable tokens can always be traced back to the original creator. NFTs are fully possessed by the owner and cannot be duplicated, deleted, or destroyed. 

In recent times, the interest in NFTs has grown as cryptocurrency craze took over the maket. The number of buyers of NFT rose 66% in 2020 and the value of the transactions increased from around $63 million to $250 million, as per Nonfungeable.com. 

NFTs that sold for a whopping price

Most recently, a digital-only artwork by an artist named Mike Winkelmann, popularly known as Beeple, was sold at Christie's for a whopping $69 million. The artwork, which does not exist in physical form, was a JPG file that was sold in form of NFT adding to the already mushrooming interest around the cryptocurrency. The painting titled 'Everydays: the First 5000 Days' was sold for $69,346,250 setting a new record for digital art.

Earlier on March 3, Tesla Founder Elon Musk's girlfriend and musician Grimes had sold some of her digital art for more than $6m. On February 23, digital comic artist Chris Torres sold one-of-a-kind digital rendition of his 2011 viral Nyan Cat for nearly $600,000. Besides, Actress Lindsay Lohan sold an NFT for $59,000 on February 11 and posted a $15,000 Daft Punk NFT on the trading platform Rarible Sunday.

Even Twitter co-founder and CEO Jack Dorsey has been trying to sell his first ever tweet in form of NFT. He has listed his first tweet which reads “just setting up my twttr” through a digital auction.