What is a Non-Fungible Token (NFT)?

Mike Winkelmann, known as Beeple, sold his product as NFT. The JPEG image “Everydays: The First 5,000 Days” was sold for $ 69.4 million, the highest price paid in an NFT. The work is also the third most expensive work among living artists. So what is this Non-Fungible Token, and how expensive is it?

Non-Fungible Token

A Non-Fungible Token is a single token that is encrypted on the blockchain network. As it is known, bitcoin is a changeable coin, but NFTs cannot be changed. The most important feature of NFT is that it is a unique and proprietary asset. In the simplest terms, tokens are different from normal coins because they are produced in different values and originality that cannot be interchanged.

How NFT Works?

NFTs, also known as immutable tokens, use Blockchain infrastructure. With this technology, digital storage of all visual, written, and audio works in digital can be achieved. NFT is used to describe assets created using blockchain technology.

Most NFTs are part of the Ethereum blockchain. Ethereum is a currency like bitcoin and dogecoin, but the blockchain also supports NFTs. What makes an NFT unique is that it is tied to the token. NFTs have metadata processed through a cryptographic hash function, an algorithm that computes a unique string of letters and numbers. NFTs are also used to create the possibility of asset interoperability across multiple platforms.

NFTs are a new type of collection. However, unlike a stamp or ticket, it is completely digital. NFTs are a certificate of authenticity created by the blockchain for a digital asset such as artwork, music, or video. It is a digital market. The market has attracted a lot of attention, with a digital artwork sold for $ 69.3 million at Christie’s auction.

Still confused, aren’t you? Come on, let’s mix a little more. Does buying an NFT mean you own the asset? The answer is, unfortunately, no. The person who buys the NFT is not the owner of the real asset. The token owner owns a record and hash code that shows ownership of the unique token associated with the particular digital asset. People can download the asset if they want or use it on social media, but they will not have the token.

Where Are NFTs Used?

Non-Fungible Tokens are often used in collections and areas that require digital ownership. Crypto can be found in artworks, digital collectibles, and digital items in online games. NFTs can be items such as a work of art, stamp, basketball card, Lebron James dunk.

NFTs can be anything that exists in digital, even tweets. For example, Twitter founder Jack Dorsey’s first tweet was sold as NFT for $ 2.9 million. He was paid $ 580,000 for each word in his tweet just “just setting up my twttr”. Dorsey announced that its income will be converted into Bitcoin and donated to the charity, GiveDirectly, providing COVID-19 aid to six African countries.

Kings of Leon sold NFTs of their latest album and made over $ 2 million. Last February, the Lebron James match NFT card on the NBA Top Shot platform was sold for $ 208,000. That same month, Axie Infinity, a digital land title in the video game, was sold for $ 1.5 million.

Why Do People Pay NFTs?

Think of artworks, like The Starry Night. Investments are also made in such works of art, such as precious metals, company shares, and cryptocurrencies because unique products can maintain their value for decades or even centuries. Art, in essence, is an investment tool for aesthetic pleasures and providing prestige. The same conditions apply to the digital version of this.

Here you may be thinking, “How can a digital artifact, such as a tweet or a photograph, be unique? It can be copied with one click. “After all, you can’t draw The Starry Night again, but you can download it from the internet. Why would you pay millions of dollars for this kind of digital product?

This is where the difference in NFTs becomes important. Blockchain technology is the factor that adds value to digital products from rarity. Thanks to the blockchain’s unique cryptography features, it offers real ownership of the product to its owners. In other words, the product you buy is a “real digital copy,” and nobody can claim NFT.

If it still doesn’t make sense, think about it this way. As a result, gold, diamonds, or US dollars actually have no value. The dollar is a piece of paper. But can we get a Tesla with any paper? No, we need dollars for that. So what separates these two products with the same raw material? It is the society valuing it. The logic of NFTs is the same. Putting up for sale digital products that the society valued and wanted to have. Who knows, maybe even TikTok videos will be available in the future in the market where only products such as art or tweets are sold now.

What About Anti-Money Laundering in NFT?

Financial crimes exist wherever there is money. There is no known case of money laundering as it is a very new market, but as with anything sold at high prices, the NFT market is also risky for AML. Crypto companies have to provide a safe experience to their users to avoid loss of reputation and financial problems.

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What is a Non-Fungible Token (NFT)? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.