Tag: NFTS

Explainer: What are NFTs, and why the sudden frenzy about them?

Banking & Finance

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NFT stands for Non-Fungible Token. Ok, let’s explain. Non-fungible means unique and something that cannot be substituted with another. For example, while a ₹2,000 note can be substituted by another note of the same denomination, or a ten-gram gold coin with another gold coin of equal weight, that is one is fungible (inter-changeable, non-unique to the other).

MS Dhoni’s bat, which he used in the 2011 World Cup final to help India win the title, is unique, and has no substitute.

Similarly, think of an original handwritten letter by Mahatma Gandhi or a particular painting by MF Hussain. These are unique and non-fungible – there is no substitute to the original.

The currency note, gold coin, cricket bat, letter and painting examples used above are all real physical things. If you extrapolate that to the digital world with the help of blockchain, you would have an NFT. It is like a digital world collectible, a digital asset, which is available to be bought and sold online, with digital proof of ownership through blockchain. But then, what is blockchain?

What is blockchain?

Unless you have been living under a rock or are a sworn technophobe, you would have at least heard of ‘blockchain’ being mentioned in the news and daily conversations. Blockchain is a decentralised ledger, where data is stored in the form of blocks, and comes together as chains (thus blockchain). As the name suggests, it is ‘decentralised’ – it is distributed.

Since there are multiple copies of the shared database, no single user can tamper or change any data, thus ensuring trust and large-scale acceptance. The innovation with blockchain is that it guarantees the trustworthiness and security of a record of data without the need for a trusted third party. Think of blockchain as a ledger whose records of transactions cannot be altered, deleted or destroyed. Each new block is added to a chain, but the old ones cannot be altered or manipulated.

While the blockchain technology has been around for nearly three decades – it was first proposed in 1991 – it become mainstream over the last decade, mainly due to the popularity of cryptocurrencies such as Bitcoin, which use the blockchain technology. This is the technology which underpins everything from cryptocurrencies, decentrailised finance (DeFi) applications, NFT’s and Smart Contracts.

How do NFTs work?

Most NFTs are part of Ethereum blockchain. Ehtereum is a cryptocurrency like Bitcoin, Shiba Inu or a Dogecoin. Other cryptocurrencies, too, can and indeed, are offering NFTs, but the most popular one right now is the Ethereum blockchain and transactions happen using ETH coins. NFT, is thus, any digital asset such as a piece of music, image, photograph, painting, GIF, meme an audio or video file or game that can exist in a digital format.

Just like in the real, physical world where we assert ownership and usage rights, as we move to an increasingly digital world, there, too, if you own something digital, you can assert your ownership and how the asset could be used. That creates value. For instance, Twitter CEO jack Dorsey sold the NFT to his first tweet for about $2.9 million, the proceeds of which Dorsey had said would be given to a charity. Are you asking yourself what the buyer got for the purchase of Dorsey’s NFT? The tweet itself continues to be live on Twitter, but the winning bidder would own the NFT, which is signed and verified by the creator, similar to a virtual autograph. By now you would be wondering why one cannot can’t just save the tweet and what is so unique about it.

Think of what you get when you buy, say, a painting by your favourite artist. You feel happy and proud about owning something. NFTs are similar to it. What is the value of your painting? Whatever the market is ready to pay. That is the case even in NFTs. This is also a new alternative investment asset class, which is hugely speculative. For instance, this article could be sold as an NFT if there is a buyer who wants to purchase it.

NFTs in India

Recently, Amitabh Bachchan sold a number of NFTs, including his recital of his father’s famous poem Madhushala, apart from various other NFT offerings from his movie career, for $1 million. Similarly, actress Sunny Leone sold her NFTs in a private sale. Others, too, including Salman Khan, singer Mika Singh, poet Priya Malik and numerous others, have offered NFTs or are in the process of doing so.

In India NFTs can be brought on various trading places such as crypto exchange WazirX, NFTically, Wall.app, Zebpay and a number of other platforms. These platforms act as digital middlemen. Sellers can set a price for their NFTs or opt for an auction. While we are still in the early days of NFTs, the type, range and price available is likely to go up.

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What’s this craze for ‘NFTs’ all about, anyway?, BFSI News, ET BFSI

Personal Finance

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LONDON – A digital art piece, tweaked using cryptocurrency technology to make it one-of-a-kind, sold at auction this week for nearly $70 million. That transaction made global headlines and buoyed already-mushrooming interest in these kinds of digital objects – known as non-fungible tokens, or NFTs – that have captured the attention of artists and collectors alike.

A NON-WHAT TOKEN?

In economics jargon, a fungible token is an asset that can be exchanged on a one-for-one basis. Think of dollars or bitcoins – each one has the exact same value and can be traded freely. A non-fungible object, by contrast, has its own distinct value, like an old house or a classic car.

Cross this notion with cryptocurrency technology known as the blockchain and you get NFTs. These are effectively digital certificates of authenticity that can be attached to digital art or, well, pretty much anything else that comes in digital form – audio files, video clips, animated stickers, this article you’re reading.

NFTs confirm an item’s ownership by recording the details on a digital ledger known as a blockchain, which is public and stored on computers across the internet, making it effectively impossible to lose or destroy.

At the moment, these tokens are white-hot in the collecting world, where they’re being used to solve a problem central to digital collectibles: how to claim ownership of something that can be easily and endlessly duplicated.

I STILL DON’T GET IT. CAN’T ANYONE JUST COPY DIGITAL STUFF OFF THE INTERNET?

Sure, anyone can download a copy of Beeple’s art from his social media feed, print it out, and hang it on the wall. Just like you can take a photo of the Mona Lisa in the Louvre or buy a print from the museum gift shop. But that doesn’t mean you own those original artworks.

One purpose of NFTs is that they can be used to trace an object’s digital provenance, allowing a select few to prove ownership. In the broader picture, it’s a way to create scarcity — albeit artificial – so that you can sell something for higher prices thanks to its scarcity.

“All the time, money and effort you spend in your digital life, you can create value for that,” said Chicago fund manager Andrew Steinwold, who started an NFT fund in 2019. “You have property rights in the physical world. Why don’t we have property rights in the digital world?”

Some NFT issuers give full copyrights to the buyer, though others do not.

SO WHAT’S A BEEPLE?

Beeple is an American digital artist based in South Carolina whose real name is Mike Winkelmann. He’s been creating digital sketches using 3D tools on a daily basis for the past 13 years. Auction house Christie’s calls his work “abstract, fantastical, grotesque or absurd.” He has 1.9 million followers on Instagram.

In December, the first extensive auction of his art brought in $3.5 million, an eye-catching amount that was surpassed by this week’s record-shattering sale of his collage “Everydays: The First 5,000 Days” for nearly $70 million, paid in a digital currency known as Ethereum.

SO WHO ELSE IS SELLING NFTs?

William Shatner of “Star Trek” fame sold 90,000 virtual trading cards last year for $1 each. Electronic musician Grimes sold $6 million worth of her digital art last month, including a video clip featuring winged cherubs floating in pastel dreamscapes that went for $389,000. Clips of NBA star LeBron James dunking are selling for as much as $225,000. Actress Lindsey Lohan sold an image of her face. You can also buy virtual land in video games and meme characters like Nyan Cat.

Digital artist Anne Spalter started out as an NFT skeptic but has now sold multiple artworks using the tokens. The latest was a video called “Dark Castles” — of mysteriously distorted castles generated by artificial intelligence technology – that sold for $2,752.

“NFTs have opened up art to a whole bunch of people who never would have gone to a gallery in New York,” said Spalter, who pioneered digital fine arts courses at Brown University and the Rhode Island School of Design in the 1990s. “They’re investors, they’re tech entrepreneurs, they’re in that world.”

BUT WHO WOULD SPEND $70 MILLION ON ONE?

Christie’s on Friday identified the buyer of Beeple’s work as the financer of a digital art fund who goes by the pseudonym Metakovan, an announcement that could fuel concerns of a bubble in the cryptocurrency art market. The buyer founded Metapurse, described as the world’s largest NFT fund, which is likely to benefit from the heightened attention.

The British auction house said the purchase makes Beeple’s piece the third-most valuable artwork ever sold by a living artist, behind works by Jeff Koons and David Hockney.

Spalter said she expects this bubble to pop, though she still believes NFTs hold promise for artists as a way to reduce fraud and misattribution of works.

“I’m still mystified by the prices and how high they are,” she said. “I think there will be a correction.”

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AP technology writer Matt O’Brien contributed to this report from Providence, Rhode Island. For all of AP’s tech coverage, visit https://apnews.com/apf-technology



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