What’s wrong with NFTs? Here’s the madness behind those expensive digital tokens
NFTs, or non-fungible tokens, can be linked to a. But what are they? Think of NFTs as an expensive digital asset that can make you big money in the future (or maybe not) – similar to cryptocurrency but not quite (more below). But that doesn’t quite mean that you own an asset or a work of art (see below).
Tokens are so popular that Time magazine‘s 4,500 TIMEParts would have been exhausted in a minute on Wednesday’s release date. And Tiger Woods recently sold NFTs of digital autographed collectibles (more below). If you are looking to buy an NFT, the starting price may be affordable, but the bidding wars for NFTs could make the digital token worth a lot more. The interest created new levels of hype from Visa, Warner Music Group and Nike.
In short, NFTs offer a certificate of authenticity created by blockchain for a digital asset or work of art.for you, it’s okay. We’ll explain what NFTs really are, how much they cost, and how you can bid on a digital asset to have your own NFT.
What’s an NFT?Â
This is the part that takes a bit of open-mindedness. An NFT is a unique digital token, with most using theblockchain to digitally record transactions. It’s not a cryptocurrency like Bitcoin or Ethereum, because those are fungible — exchangeable for another Bitcoin or cash. NFTs are recorded in a digital ledger in the same way as cryptocurrency, so there’s a listing of who owns each one.
What makes an NFT unique is the digital asset tied to the token. This can be an image, video, tweet or piece of music that’s uploaded to a marketplace, which creates the NFT to be sold.
What kind of NFTs can I buy?Â
NFTs can be tied to any digital asset. Anything you see online can be an NFT — music, social media posts, clip art and more. Today,Â SorareÂ released its “Super Rare” Lionel Messi digital trading card that’s currently bidding at â¬29,992.75, equivalating to over $35,000. Sorare also announced that itÂ raised $680 millionÂ for its next-level sports fantasy game. The funding is currently led by SoftBank.Â
Tiger Woods is currently thousands of digital collectibles onÂ AutographÂ on theÂ DraftKings marketplace. The collection starts at $250. Naomi Osaka, Derek Jeter and Tonk Hawk are also releasing digital collectibles on Autograph, which is co-founded by Tom Brady.Â
But NFTs are going far beyond sports. Recently, Fortune gave its readers a chance to get in on the NFT craze. The company sold 256 copies of the limited edition cover from the graphic artist Pplpleasr forÂ Fortune’s August/September magazineÂ on OpenSea. The copiesÂ sold out within five minutes starting at 1 EtherumÂ (estimated $3,000). But the NFTs were available for resale at three times the cost.Â
And in August, a clip art of a rock, better known asÂ Ether Rock, wasÂ sold for $400,000 EtherumÂ (estimated $1.3 million). Two weeks ago, it was valued at $97,716. And in August, Visa announced its NFTÂ CryptoPunks purchase for $150,000 in Ethereum. The financial corporation believes that NFTs play a big role in the “future of retail, social media, entertainment, and commerce.” And Vine’s co-creator, Dom Hoffman, is reportedly inventing a new way to gamify NFTs with his fantasy gaming console,Â Supdive.Â
As the hype for NFTs grows, expect more digital assets to come up for sale and bring in some big money.Â
Where can I buy an NFT?Â
While you may not want to jump right in bidding six figures, there are multiple NFT marketplaces out there to check out, withÂ OpenseaÂ being the biggest. Buyers can search forÂ art,Â domain namesÂ andÂ random collectiblesÂ to bid on without having to break the bank. And Woods’ digital collection is one of the many NFT collections available onÂ DraftKings marketplace, including Tony Hawk’s collection.Â
And in early October, Christie’s will auction off 200 NFTs of featured Art Blocks art from its Post-War to Present collection, some of today’s most popular NFTs. The live bidding will happen in Ethereum on Oct. 1. The art sale will start at $50,000.Â
On the other hand, if you want to sell an NFT of your art, you can useÂ NFTify, the Shopify NFT store, to sell NFTs without creating your own store. You’ll also need aÂ MetaMaskÂ account to get going. AndÂ Burberry recently announced a partnership with Mythical GamesÂ to gamify buying, selling and collecting toys as NFTs through the Blankos Block Party game. CNET’s own Chris Parker also made a step-by-step guide on how to make and sell your own NFT, in the video below.Â
If I have an NFT, do I own the asset?
That’s the real kicker to understanding the whole concept. The person who buys the NFT doesn’t own the actual asset.Â
“NFTs challenge the idea of ownership: digital files can be reproduced infinitely and you do not (usually) buy the copyright or a license when purchasing an NFT,” said Jeffrey Thompson, associate professor at the Stevens Institute of Technology in Hoboken, New Jersey.Â
For example, the creator of the $590,000. The person who bought the token owns the token, but doesn’t actually own the meme. That still belongs to the creator, who held onto intellectual and creative rights.Âsold an NFT of it for
What the owner of the token has is a record and a hash code showing ownership of the unique token associated with the particular digital asset. People might download Nyan Cat and use it on social media if they want, but they won’t own the token. This also means they can’t sell the token as the owner can.Â
Why are NFTs so expensive?
As with physical collectibles like Beanie Babies, baseball cards, and toys, there is a market for NFTs. Buyers tend to be tech-savvy people who understand the idea of ââwanting to buy digital goods and probably did a murder last year with cryptocurrencies. Ethereum, for example, went from just over $ 100 last March to a current price of approximately $ 3,400. In some cases, buyers are only flexing their digital wallets to show how much crypto they own, but for others, there is a deeper interest.
âEspecially for art-related NFTs, there is a huge increase in demand due to the novelty and creativity of early artists,â Jason Lau, chief operating officer of the crypto exchange. OKCoin, said in an email. Whether it’s a physical work with an NFT attached (think of it as a digital autograph and proof of veracity), or a fully digital work (where NFT is art), this new medium opens up new avenues for collectors and artists to explore their relationship with the work of art itself. “
It’s also great for artists, says Lau. By selling digital art directly to interested people, an artist can begin to monetize their work without having to try and sell it to a gallery.
What are the pitfalls of NFTs?
One drawback is the hundreds of dollars in fees required to create a TVN. If you are creating your own token on the Ethereum blockchain, you have to use Ethereum, which as mentioned earlier is quite expensive. Then, after performing an NFT, there is a âgasâ fee that pays for the labor required to manage the transaction and is also based on the price of Ethereum. Marketplace simplifies the process by handling everything for a fee when an NFT is sold.
There is also an environmental cost. Like Bitcoin, Ethereum requires computers to handle calculations, known as âmining,â and these computing tasks require a lot of energy. An analysis from the University of Cambridge found that Bitcoin mining consumed more energy than the whole country of Argentina. Ethereum is second in popularity behind Bitcoin, and its energy consumption is on the rise and comparable to the amount of energy used by Libya.