What are NFTs and why are some price millions?

A digital-only artworkwork has sold at Christie’s auction house for an eye-watering $69m (£50m) – but the winning bidder will not obtain a sculpture, painting or perhaps a print.

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

The place Bitcoin was hailed as the digital answer to currency, NFTs are now being touted as the digital answer to collectables.

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

What’s an NFT?

NFT stands for non-fungible token.

In economics, a fungible asset is something with units that may be readily interchanged – like money.

With money, you may swap a £10 note for 2 £5 notes and it will have the identical value.

Nonetheless, if something is non-fungible, this is inconceivable – it means it has unique properties so it can’t be interchanged with something else.

It could be a house, or a painting such as the Mona Lisa, which is certainly one of a kind. You can take a photograph of the painting or purchase a print but there will only ever be the one unique painting.

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

The digital tokens will be regarded as certificates of ownership for virtual or physical assets.

How do NFTs work?

Traditional works of art comparable to paintings are valuable because they are one among a kind.

However digital files might be easily and finishlessly duplicated.

With NFTs, artworkwork will 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’s stored on a shared ledger known as the blockchain.

The records cannot be forged because the ledger is maintained by hundreds of computers across the world.

NFTs can even contain smart contracts which will give the artist, for instance, 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 many cases, the artist even retains the copyright ownership of their work, so they can proceed to produce and sell copies.

However the buyer of the NFT owns a “token” that proves they own the “unique” work.

Some individuals compare it to buying an autographed print.

People are paying millions of dollars for tokens?

Yes. It’s as wild as it sounds.

How a lot are NFTs value?

In concept, anybody can tokenise their work to sell as an NFT however curiosity has been fuelled by latest 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 couple of weeks later, musician Grimes sold a few of her digital art for more than $6m.

It’s not just artwork that’s tokenised and sold. Twitter’s founder Jack Dorsey has promoted an NFT of the primary-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.

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

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