What are NFTs and why are some worth millions?

A digital-only artwork has sold at Christie’s public sale house for an eye-watering $69m (£50m) – however the profitable bidder will not receive a sculpture, painting or perhaps a print.

Instead, they get a novel digital token known as an NFT.

Where Bitcoin was hailed as the digital reply to currency, NFTs are now being touted as the digital reply to collectables.

However there are many sceptics who think it is all a bubble that’s going to burst.

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 cash, you possibly can swap a £10 note for two £5 notes and it will have the identical value.

Nevertheless, if something is non-fungible, this is unimaginable – it means it has distinctive properties so it cannot be interchanged with something else.

It may very well be a house, or a painting such as the Mona Lisa, which is considered one of a kind. You can take a photo of the painting or buy a print but there will only ever be the one authentic painting.

NFTs are “one-of-a-kind” assets in the digital world that may be purchased and sold like some other piece of property, but they haven’t any tangible form of their own.

The digital tokens could be considered certificates of ownership for virtual or physical assets.

How do NFTs work?

Traditional works of art corresponding to paintings are valuable because they are one in all a kind.

However digital files will be simply and finishlessly duplicated.

With NFTs, artwork will be “tokenised” to create a digital certificate of ownership that may be bought and sold.

As with crypto-currency, a record of who owns what is stored on a shared ledger known because the blockchain.

The records cannot be solid because the ledger is maintained by thousands of computers across the world.

NFTs may also include smart contracts which will give the artist, for example, a cut of any future sale of the token.

What’s stopping people copying the digital art?

Nothing. Millions of people have seen Beeple’s artwork that sold for $69m and the image has been copied and shared dependless times.

In lots of cases, the artist even retains the copyright ownership of their work, so they can proceed to produce and sell copies.

However the purchaser of the NFT owns a “token” that proves they own the “authentic” work.

Some people examine it to purchasing an autographed print.

People are paying millions of dollars for tokens?

Yes. It’s as wild as it sounds.

How a lot are NFTs price?

In theory, anybody can tokenise their work to sell as an NFT but curiosity 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.

Just a few weeks later, musician Grimes sold a few of her digital artwork 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.

Christie’s sale of an NFT by digital artist Beeple for $69m (£50m) set a new record for digital art.

But as with crypto-currencies, there are issues about the environmental impact of sustaining the blockchain.

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