By Moya Liu
NFTs, non-fungible tokens, are linked to the blockchain like Bitcoin. However, while Bitcoin can be traded and accumulated, representing real money at a varying market rate, each NFT is unique. These virtual tokens do not represent currency exclusively. Instead, NFTs serve as a digital file which can represent anything from unique art to games to sports collectibles. The advancement of blockchain technology now enables these NFTs to be traded between individuals.
NFTs have long been theorized, but only breached the mainstream when Christie’s became the first major auction house to offer a purely digital work of art with a unique NFT. On March 11, 2021, an NFT of the Winkelmann’s (Beeple), an artist from South Carolina, sold for $69 million at Christie’s. The sale positions him “among the top three most valuable living artists,” according to the auction house. Beeple’s piece, “The First 5000 Days”, is a digital mosaic composed of 5000 pieces of images that he has created every day since early 2007. Christie’s is a legitimizing force for both Winkelmann’s art and NFTs as a technology.
In recent months, some have suggested the view that NFTs will shape the way digital art will be acquired and traded in the future. Experts have likewise pointed out that the current popularity of NFTs does not necessarily supersede its risks. NFTs are a lot more like collectible cards than bitcoin, because sellers need to identify a particular buyer who is willing to pay a certain price for a specific item. Consequently, NFTs are less liquid and tradeable, casting doubt on their capacity to serve as an asset class. Additionally, since there is a lack of mechanisms in place yet to help people price assets, “The NFT market suffers from massive volatility” (Business insider), L’Atelier BNP Paribas COO Nadya Ivanova said. Although the NFT market is maturing and continuing its course into the mainstream, new collectors should consider the risks and uncertainties.
NFTs present significant opportunities for artists, content creators, and investors looking to diversify their holdings. Indeed, they can have a tremendous impact on establishing a connection between the crypto community and culture.