NFTs are authenticating the originality of digital products
If you’ve been watching tech or financial news late, you may have come across the word NFT for a time or two. NFT stands for non-fungible token, and in the simplest of explanations, it is a particular form of cryptographic token used to build and validate the ownership of digital goods.
Take a piece of physical art like the Mona Lisa, for example. There is only one original and it has been authenticated as unique, although there are many, many reproductions and versions. You can go online and take endless pictures of the artwork, or go over to eBay and purchase a copy at a fraction of the value of the original.
In the field of economics, fungibility means that a commodity or part of a product is interchangeable. Gold is a fine example of something that’s fungible. In its pure state, the fixed sum of gold is synonymous with the same amount of gold, irrespective of the manner of which it is produced.
By design, anything that is not fungible is not synonymous. Take the collector car market, where the word “matching numbers” is also used to identify a vehicle with its original parts. Such vehicles are widely sought after by enthusiasts owing to their originality and rarity, even if modern models with the same components may be remanufactured to the very same condition today.
In essence, the NFT is just like a certificate of authenticity for digital goods, such as photos and animations. Sure, you can make identical copies of a digital art piece until you’re blue in the face, but with an NFT added, you have evidence that your digital good is genuine and original.
It all occurs through a public ledger, a blockchain, which has been recording the whole chain of ownership since the beginning of the NFTs.
It might sound stupid that anyone might be able to pay a premium for anything like a picture or an MP3 that can be cloned free time and again, but that’s the world we live in. Some people have a knack to own something that’s exclusive, and they’re ready to spend big bucks for those rights.
Last month, musician Grimes racked up around $6 million from the selling of digital art on Nifty Gateway. A few days ago, an original Banksy piece of art was bought, digitised, and then burnt by a group of crypto enthusiasts. The digitised NFT was then exchanged for 228.69 Ethereum, or about $380,000 at the time of sale.