What are NFTs and why are they selling for millions of dollars? MoneyBite Newsletter 17 Apr

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What are NFTs that are selling for millions of dollars?

A few weeks back we wrote about Cryptocurrencies. If cryptocurrencies are being touted as the alternative to the currency we use now, NFTs have taken the world by the storm as a digital alternative to collectibles.

What’s happening here?

In Feb 2021, an auction of an art piece called EveryDays – The First 5000 at the famous Christie’s fetched  $69 million. You must think it must be a piece of art by a renowned artist which the buyer can hang in his/her living room and flaunt. No, it was neither a painting, nor a sculpture, or even a replica of the original piece. It was just an NFT- also called a Non-Fungible Token. What are NFTs which the world is going crazy over and selling for millions of dollars?

There are many more mind-boggling figures? at which NFTs have been sold in addition to Christie’s auction of artist Beeple’s work for $69 million. Here are some of them

• An animated Gif of Nyan Cat which is nothing but a meme of a flying pop-tart cat that came out 10 years back was sold for $7,15,860 or 300 ETH (Ethereum – a cryptocurrency)
• Musician Grimes sold some of her digital art for more than $6 million
• Twitter’s founder Jack Dorsey first tweet was sold for $2.9 million in the form of an NFT
• Virtual land on the blockchain gaming platform Axie Infinity was sold at $1.5 million.
• A video clip of basketball player LeBron Jones went for $1,00,000.

You must be wondering what are these NFTs and what makes them so valuable? We tell you more. 

What are NFTs?

In simple terms, Non-Fungible Tokens or NFTs can be called the digital certification of authenticity of a collectible. Each token has a unique code stamped on it and is stored on a virtual ledger called the blockchain. 

These tokens are Non-fungible, which means that each token holds a special value that cannot be exchanged or replaced by anything else.  For Example, you could exchange Rs 10000 for $135. Even cryptocurrencies like Bitcoins can be exchanged for other currencies or other denominations like One bitcoin can be bought for Rs 45 lakhs or I Ethereum equals 0.39 Bitcoins. 

Any collectible asset like a house, a painting, or a sculpture can be bought or sold by NFTs but these tokens do not have a tangible form. They are more like certificates of digital ownership. 

Does possessing an NFT give exclusive rights of ownership?

Well,  Yes & No ! You have a non-fungible token,  but that doesn’t stop others or even the owner from sharing copies of the art. For example, The Christie’s auction piece that went for $69 million has been viewed and shared by millions of people across the world. (FYI the feature image here on our article is the piece of art that was sold at Christie’s). 

But the original image sold will have an Ethereum annotation in its blockchain. 

Can you and I sell art or other collectibles through NFT?

Yes, you can! Anyone can make an NFT or tokenize your work and try selling it on marketplaces like OpenSea, Rarible, Super Farm, Ethernity, etc. India-based WazirX has also launched a marketplace for NFTs, where artists could auction their work or intellectual properties. 

The process of creating an NFT is pretty simple but a gas fee will have to be paid as Ethereum Transaction cost. The process of creating (minting) and selling an NFT can cost anywhere between $1 dollar to $1000 dollars. 

But more and more artists are becoming cognizant of the fact that mining of an average NFT has the environmental impact of 200kgs of planet-warming carbon equivalent to driving 800kms in petrol powered car, as it uses up enormous amounts of computing power and electricity. 

Is NFTs more of a bubble?

Looking at the kind of hype created by NFTs, some say it is a mass hysteria created due to the pandemic or it might be the next digital movement that could allow lesser-known artists to list and sell their art easily. Which of them is true, only time will tell!