By now, you’ve probably heard of NFTs, and the exorbitant prices for NFT digital art that has been reported in the news.
For many of us, it’s hard to process how an easily copied digital file can command prices in the millions. But when you consider that blockchain technology enables owners to document ownership, it starts to make more sense.
This article from Esquire provides an excellent overview of NFTs and why they have become so popular and so valuable.
NFT stands for “non-fungible token.” This kind of token is like Bitcoin, except while you can trade Bitcoin and have more of the same thing that represents real money at a varying market value, each NFT is unique. You possess the token that says you own something, like an art piece, and you can trade it, but if you do, you’ll be getting an entirely different piece. To keep all the parts in place, there’s enforced (artificial, but isn’t everything?) scarcity.
Read the entire article and you’ll get a good sense of what’s going on.
Scarcity is the key. There’s only one “first” when it comes to digital art on the Ethereum blockchain, and that helps explain the wild valuations we’re seeing for CryptoPunks.
As with most things in life, do your research before dismissing new things. Of course some will be fads, but others will have staying power.
Many believe there’s a bubble with NFT valuations, and of course that’s possible . . . even likely. But that doesn’t mean NFTs won’t be a very important tool in the future. NFTs make it easy to create transaction on the blockchain that remove the need for intermediaries. As you learn more about it, you’ll this this is much more than a vehicle to monetize digital art.