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NFT’ was one of Google’s top-ranked global searches of 2021, surpassing even ‘crypto’. So what’s it all about? Here’s what you need to know about the exploding NFT market.
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NFT’ was one of Google’s top-ranked global searches of 2021, surpassing even ‘crypto’. So what’s it all about? Here’s what you need to know about the exploding NFT market.
What is an NFT?
An NFT is a digital record confirming who owns a piece of digital work such as art, music, video, a voice recording, a Tweet, or a GIF. NSA whistleblower Edward Snowden, for example, sold his first NFT in 2021 - a digital artwork of his profile set against the US appeal court decision that found the National Security Agency’s bulk collection of American telephone records violated US law. The profits from Snowden’s $5.4m NFT sale were given to the Freedom of the Press Foundation.
Are any real-life objects sold as NFTs?
Yes and no. Former ANC president Oliver Tambo’s spy pen gun - beleved to be a gift from the East German Stasi during apartheid - was sold as an NFT. Rather than sell the pen itself, Liliesleaf, a South African heritage body, auctioned off a photorealistic digital image of the gun which is stored in Liliesleaf’s archives and not accessible to public viewings. The person who bought the NFT also bought the right to experience and view the pen gun at the Liliesleaf Museum ‘for life’.
How do NFTs work?
NFTs are collectible tokens that are recorded on a blockchain - a distributed digital database which ensures the creation and ownership data of the NFT isn’t tampered with. NFTs are available in a number of marketplaces, including OpenSea and LooksRare. Most NFTs are recorded on the Ethereum blockchain, which means that you’ll need the cryptocurrency “Ether” to buy them. (You’ll find dozens of YouTube videos to walk you through the process of making, buying, and selling NFTs but you’ll need patience and time.)
Are NFTs a safe investment?
Sales of NFTs as digital assets reached $40bn in 2022 but the market is still highly speculative, driven by hype, scarcity, and FOMO (fear of missing out). You might be willing to spend $1,000 for a sniff of digital perfume, but that doesn’t mean someone else will want a whiff if you want to sell your NFT later. As with other assets, there is no assurance that the NFT you buy will appreciate with time.
NFTs can support an artist or a cause
Some buyers are more interested in supporting artists, charities, or causes than in making money, however. Ukrainian artists are raising money for humanitarian aid during the conflict with Russia by selling digital art. Kiev also has plans for Ukraine to become the first developed country to raise money through an NFT.
An NFT can be divided into fractional shares
Here’s where it gets a bit complicated. NFTs may be divided into fractional units and purchased by more than one buyer. (Think of it like multiple shareholders buying shares in one company.) In the case of Clock, WikiLeaks founder Julian Assange raised more than $50m in cryptocurrency by selling an NFT of the artwork Clock (above) to a blockchain-based collective set up to pay Assange’s legal bills. The collective owns the digital asset. Assange gets the money to fight his extradition from the UK to the US.
Is Bitcoin an NFT?
No. The cryptocurrency Bitcoin is ‘fungible’, which means one Bitcoin can be replaced by another - much like a $1 bill can be traded for another $1 bill. They are interchangeable. ‘Non-fungible’, on the other hand, means the work is unique. It can’t be replaced. NFTs are often issued in editions, with numbers used to quickly distinguish one NFT from another. Even if edition number #1234 looks similar to edition #4567, it isn’t the same and the token for each edition is recorded as a unique entry on the blockchain.
What are some of the strangest NFTs ever sold?
Charmin introduced digital toilet paper in 2021 which sold for $4,100. Colors are for sale as well, including Vampire Black and Piggy Pink. Twitter founder Jack Dorsey sold his first tweet for $2.9m as an NFT. Sure, you can still read it on Twitter, but you don’t own the digital record of the original. That honor goes to Bridge Oracle CEO Sina Estavi, who paid more than $2.9m following a bidding war with tech entrepreneur Justin Sun. Estavi now owns the NFT.
Valuables, the platform Dorsey used, said buyers who 'own' a tweet are purchasing an NFT ‘digital certificate’ of that tweet which is signed by its creator’s @handle on Twitter. Somewhat like an autograph on a baseball card, the NFT is the creator’s ‘autograph’ on a digital file which makes it unique and valuable but doesn’t confer copyright or commercial rights to the buyer.
