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What are NFTs and why are some worth millions?
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What is an NFT?
NFT stands for non-fungible token.
In economics, a fungible asset is something with units that can be readily interchanged - like money.
With money, you can swap a ₹10 note for two ₹5 notes and it will have the same value.
However, if something is non-fungible, this is impossible - it means it has unique properties so it cannot be interchanged with something else.
It could be a house, or a painting such as the Mona Lisa, which is one of a kind. You can take a photo of the painting or buy a print but there will only ever be the one original painting.
NFTs are "one-of-a-kind" assets in the digital world that can be bought and sold like any other piece of property, but they have no tangible form of their own.
The digital tokens can be thought of as certificates of ownership for virtual or physical assets.
How do NFTs work?
Traditional works of art such as paintings are valuable because they are one of a kind.
But digital files can be easily and endlessly duplicated.
With NFTs, artwork can be "tokenised" to create a digital certificate of ownership that can be bought and sold.
As with crypto-currency, a record of who owns what is stored on a shared ledger known as the blockchain.
The records cannot be forged because the ledger is maintained by thousands of computers around the world.
NFTs can also contain smart contracts that may give the artist, for example, a cut of any future sale of the token.
What's stopping people from copying digital art?
Nothing. Millions of people have seen Beeple's art that sold for $69m and the image has been copied and shared countless times.
In many cases, the artist even retains the copyright ownership of their work, so they can continue to produce and sell copies.
But the buyer of the NFT owns a "token" that proves they own the "original" work.
Some people compare it to buying an autographed print.
How much are NFTs worth?
In theory, anybody can tokenise their work to sell as an NFT but interest has been fuelled by recent headlines of multi-million-dollar sales.
On 19 February, an animated Gif of Nyan Cat - a 2011 meme of a flying pop-tart cat - sold for more than $500,000.
A few weeks later, musician Grimes sold some of her digital art for more than $6m.
It is not just art that is tokenised and sold. Twitter's founder Jack Dorsey has promoted an NFT of the first-ever tweet, with bids hitting $2.5m.
But as with crypto-currencies, there are concerns about the environmental impact of maintaining the blockchain.
So every NFT is unique?
In the boring, technical sense, every NFT is a unique token on the blockchain. But, unlike Van Gogh, where there is only one definitive actual piece, it may also be as a trading card, with 50 or hundreds of numbered copies of the same artwork.
People are paying millions of dollars for tokens?
Yes. It's as wild as it sounds.
Well, that’s part of what makes NFTs so messy. Some people treat them like they’re the future of fine art collecting (read: as a playground for the mega-rich), and some people treat them like Pokémon cards (where they’re accessible to normal people but also a playground for the mega-rich). Speaking of Pokémon cards, Logan Paul just sold some NFTs.
Yeah, he sold NFT video clips, which are just clips from a video you can watch on YouTube anytime you want, for up to $20,000. He also sold NFTs of a Logan Paul Pokémon card.
Where to look?
There are several marketplaces that have popped up around NFTs, which allow people to buy and sell. These include OpenSea, Rarible, and Grimes’ choice, Nifty Gateway, but there are plenty of others.
Is this just a bubble?
A day before his record-breaking auction, Beeple - whose real name is Mike Winkelmann - told the BBC: "I actually do think there will be a bubble, to be quite honest.
"And I think we could be in that bubble right now."
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