Neville Hobson

Get to know ‘non-fungible tokens,’ NFT for short

A phrase you’ll probably be hearing or reading about quite a bit in the coming weeks and months is ‘non-fungible tokens.’

I’d not come across it until I read a Reuters report about a guy who sold a 10-second video artwork by the digital artist known as Beeple for $6.6 million at a Christies auction in Florida last month. He’d bought it last October for just $67 thousand. Nice ROI!

While this in itself is an interesting tale, what makes it a notable one is two things:

  1. The video clip was authenticated by blockchain, which serves as a digital signature to certify who owns it and that it is the original work.
  2. It’s a new type of digital asset – known as a non-fungible token (NFT) – that has exploded in popularity during the pandemic as enthusiasts and investors scramble to spend enormous sums of money on items that only exist online.

The Reuters report goes into some detail of Christies’ thrust into the world of digital artwork where the auction house launched its first-ever sale of digital art – a collage of 5,000 pictures, also by Beeple – which exists solely as an NFT.

Bids for the work have hit $3 million, with the sale due to close on March 11.

In recent days more news has appeared about other events where NFTs are the star feature, plus opinions galore on the future for NFTs.

And this, from the NFT Wikipedia article:

Non-fungible tokens first became popular when CryptoKitties went viral and subsequently raised a $12.5 million investment. RareBits, a Non-Fungible Token marketplace and exchange, raised a $6 million investment. Gamedex, a collectible cards game platform made possible by NFTs, raised a $800,000 seed round. Decentraland, a blockchain-based virtual world, raised $26 million in an initial coin offering, and had a $20 million internal economy as of September 2018. Nike holds a patent for its blockchain-based NFT-sneakers called ‘CryptoKicks’. The album When You See Yourself by Kings of Leon will be the first musical album distributed as non-fungible tokens. In February 2021, the musician Grimes sold around $6 million worth of digital art on Nifty Gateway.

If this were a tech topic, there would probably already be a Gartner hype cycle to illustrate where NFTs sit in the life cycle. Right now, I’d say we’re approaching the peak of inflated expectations as mainstream awareness builds: there does seem to be a bubble emerging.

Bubble or not, expect to see more reports and opinion pieces about NFT.

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