What are NFTs and why are some worth millions?
In economics, fungible assets are interchangeable while non-fungible ones are unique properties.
Non-fungible tokens are the digital-only “one-of-a-kind” properties. Think of the Mona Lisa painting. There are countless reproductions of this painting printed on various items such as postcards, cloth bags, and cups. However, the original artwork is unique and non-fungible. Or think of trading cards (pokemon, footballers, etc.). You can trade a card for a completely different one since each one is unique and non-fungible.
NFTs have a similar logic. These unique tokens work as digital certificates of ownership so that the easy and endless duplication of the original artworks is prevented. At this point, we must say that digital paintings are copied and shared online anyway. What NFTs provide is proof that you keep the original property. There are thousands of copies of a book on the market, but you own the autographed print.
NFTs are mostly a part of the Ethereum blockchain. This blockchain supports both the Ethereum cryptocurrency and the NFTs. Some other blockchains also implement their own NFTs. Blockchains are the shared ledgers maintained by many different computers at the same time. Therefore it is almost impossible to forge crypto-currency records on these ledgers. NFT records are also stored on these blockchains. And through fair contracts, artists can earn money each time the relevant NFT pass into another hand.
NFTs, unlike material properties or collectibles, do not have a tangible form. For this reason, some people find it quite strange that there are buyers who pay millions of dollars for NFTs that do not exist. Most of the works that are tokenized are easily downloaded and duplicated makes the whole story even stranger.
Being interested in paying a considerable amount for digital work is understandable if you are a collector or an investor. You would like to own the original one either as a collectible or an investment that might make you rich at some point! In any case, some considerable amounts in the market clearly show that it is becoming a new playground for the mega-rich!
Every digital work is open to be tokenized and sold as an NFT. Some are accessible to anyone; however, some have lucky creators or smart owners who can sell them for multi-million dollars. And it is not necessarily artworks that are tokenized as NFTs. The founder of Twitter, Jack Dorsey, sold the first-ever tweet for over $2.9 million!
After the rise of the decentralized finance (DeFi), especially bitcoin (BTC), NFTs are the new trend in the digital marketplace in the last few years. OpenSea and Rarible are only two of the many marketplaces that emerged for people to buy and sell NFTs. Some people are sure that this is all a bubble. Nevertheless, it seems that NFTs will be much more popular in the following period and we will see an increase in the number of people who create NFTs to make money. Let’s see how long it will take before the bubble bursts!