A digital-only artwork recently sold at Christie’s auction house for $69 million. However, the winning bidder will never receive a physical sculpture, painting, or print. Instead, what was delivered is a unique digital token better known as a non-fungible token (NFT). Cryptocurrency and FinTech expert Jason Simon is intimately familiar with the latest addition to the cryptocurrency ecosystem and explains what they are, as well as the role they’re playing.
Bitcoin was once hailed as the digital answer to currency. Now, NFTs are being highlighted as the digital answer to collectibles. Explains Simon, “In economics, a fungible asset is something with units, such as money, that can be readily interchanged. For example, if you swap one $10 bill for two $5 bills, you still have the same value. However, non-fungible assets don’t follow that same principle. They have unique properties that prevent them from being interchanged directly.”
NFTs are assets that exist in the digital world and can be purchased and sold like any other piece of property. These digital tokens are best described as immutable certificates of ownership for virtual or physical assets. With NFTs, artwork can be tokenized to create a digital certificate of ownership that is impossible to forge or alter. “The records cannot be altered because the ledger is maintained by thousands of computers around the world,” asserts Simon. ” NFTs can also contain smart contracts that give an artist, musician or the original owner a percentage of any future sale of the token. This adds more value and guarantees monetization of someone’s work.”
In theory, it’s possible for anyone can tokenize their work and sell it as an NFT, but interest has skyrockets lately because of multimillion-dollar deals, such as the Christie’s auction. In addition, musician Grimes has sold some of her digital art for over $6m. Even social media posts can be sold, as proven by Twitter’s founder Jack Dorsey, who sold the world’s first-ever tweet, his own, for over $2.5 million.
The benefit is that the record of ownership is immutable and the item being sold as an NFT cannot be altered. There are numerous forged baseball cards, pieces of art and more, but this isn’t possible with NFTs. It’s also impossible to ever argue ownership, as the blockchain ledger is also immutable and will exist forever, always being able to verify the true owner behind a particular object.