NFT, stands for Non Fungible Tokens. But to understand it better, let’s dive in step by step.
To understand NFT, you need to understand blockchains. Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger and it’s available through the entire network of computers on the blockchain. This is the basis of cryptocurrency.
Now, when you take an NFT, an NFT is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. For instance, if you and I each have 1 bitcoin and you exchange it with my bitcoin, at the end of the transaction, the net change is zero. But you can’t interchange NFTs. It will be like trying to interchange a Van Gogh with a 2B pencil.
NFTs can really be anything digital (such as drawings, music, your brain downloaded and turned into an AI), but a lot of the current excitement is around using the tech to sell digital art. NFTs are now being used to commodify digital assets in art, music, sports, and other popular entertainment. Most NFTs are part of the Ethereum blockchain; however, other blockchains can implement their own versions of NFTs.
We are really excited about the repetitive royalty functionality of NFT. That means the original artist keeps getting a commission, even after they no longer own the NFT. This is revolutionary.
If you take the Mona Lisa, the true value of it lies in the pedigree. The fact that you can authenticate it as the original art done by Leonardo da Vinci. Similarly, the value of NFT lies in the authentication. It verifies the original artist, avoiding the sale of a replica.
NFT market tripled in 2020. Digital artwork entitled “Everydays – The First 5000 Days”, by artist known as Beeple, sold for US$69.3 million in 2021 along with many others being auctioned for exorbitant amounts.