Would you pay US$ 3 million to own the first tweet ever?
How about US$ 600 000 for a popular GIF? Well, I am not sure about you but there are plenty of investors willing to pay for these digital objects called NFTs which are becoming a fever between virtual collectors.
But what are NFTs anyway? And why are people investing lots of money in them? Is it just hype like a bubble ready to pop? Or is it a savvy investment?
After extensive research I believe I found the answers for this questions and today I will present you what NFTs are and why people believe they are the next big thing.
Non fungible tokens
Although they’ve been around since 2014, NFTs are gaining notoriety now because they are becoming an increasingly popular way to buy and sell digital objects such as artwork , images, videos, game avatars, songs and even tweets. NFTs can really be anything digital.
NFTs are the initials for Non fungible tokens (I know, that doesn’t make it any clearer) but in order to understand it’s features, the first step is to clarify this expression.
Non fungible means unique, it is one of a kind, while Tokens are digital vouchers. Therefore an NFT is a unique virtual voucher which represents the ownership of a digital object.
So when you buy this token you automatically become the exclusive owner of this digital object and this transaction is stored on blockchain which is pretty safe technology. Therefore, this token is directly linked to a digital object which can be an image, video, song or artwork for example.
Despite this NFT transaction the use and reproduction of this digital object remains free on the internet and anyone can view and use it online for free.
So why are people willing to spend millions on something that could easily be screenshotted or downloaded?
Well, this is because NFTs are designed to give you something that can’t be copied: the exclusive ownership right. Anyone can download a video, but only one person can own the original. And this ownership in form of a token can be sold or traded freely. So people are collecting NFTs for the same reason they collect physical products: as a form of investment or a way of supporting their favorite artists.
How is an NFT different from Cryptocurrency?
They are built on the same technology but that’s where the similarity ends. Cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They’re also equal in value; one Bitcoin is always equal to another Bitcoin. While NFTs are different, they are non-fungible. If you traded it for another NFT, you’d have something completely different.
Examples of popular NFTs
This is the first tweet ever. And was sent by the Twitter founder, Jack Dorsey on March 2006. The tweet said "just setting up my twttr" and recently was sold as an NFT for almost $3 million US dollars.
This is the Nyan Cat, a ten years old meme which has been sold recently as a one-of-a-kind piece of crypto art for about US$600,000. Nyan Cat is a YouTube video uploaded in April 2011, which became an internet sensation and has over 200 million views. Despite the sale, the Nyan Cat GIF and video will still be available online.
One of the most interesting aspects of NFTs is that they can be used in games. There are already games that let you have NFTs as items. One example is CryptoKitties which is an online game built on blockchain. Players can buy, trade and breed adorable digital cats.
This is Dragon, a famous cryptokitty sold for $172,000 US dollars, or 600 Ethereum. It can be compared to a rare baseball card. Since CryptoKitties is on the blockchain, Dragon is completely unique and cannot be replicated. In spite of this, it's hard to figure out why someone paid so much for it. Even if it is cute.
Grimes, the Canadian musician, who is also married with Elon Musk, showed the music industry how lucrative NFTs can be when she sold her collection of video clips in an auction for US$6 million in under 20 minutes. Her video clip “Death of the Old” received a bid for nearly US$400,000.
Conclusion
But are NFTs worth the money? Is it just hype or are they here to stay? Some say they’re a bubble ready to pop. Others believe NFTs will change digital investing forever.
The truth is that NFTs have been growing in popularity over the past few years and the volume and number of users is continuing to go up.
Recently, we have been seeing celebrities and big brands like Marvel, NBA and Coca Cola launching their own NFTs and collections, which seem to be targeted towards more traditional investors, rather than crypto-enthusiasts.
The NFT craze has clearly elements of a hype cycle and Investing in NFTs right now is definitely for people who are risk tolerant. However, it is not only about prices and quick profit. It is a new model of creative monetization and a new type of cultural engagement with fans. That's why I believe that the phenomenon of NFTs is a long-term opportunity, a viable investment, is here to stay and won’t go away.