You may have heard the buzz around Non-Fungible Tokens or NFTs. What are they exactly? How do they work and why are people buying them? By the way, if you right-click and
save the above image, congratulations, you now own a perfect $69 million dollar copy of one.
To sum it up in simple English, NFTs are
digital collectibles. These collectibles can contain anything digital, including animated GIFs, tweets, songs, drawings, or even items in video games.
In the spirit of March Madness, let's take NBA Top Shot as an example. NBA Top Shot—a partnership between the NBA and Dapper Labs, a blockchain company—is, in its simplest explanation, an online forum for trading virtual basketball cards.
Fans can buy and sell video clips of their favorite players, called “moments,” from recent seasons. And if you can imagine, these "moments" are in high demand as consumers have spent hundreds of millions of dollars on them.
you own a "moment?"
NFTs allow you to buy and sell ownership of these "moments" by keeping track of who owns them using the blockchain. Blockchain technology acts as a digital ledger, meaning everyone knows who-owns-what based on what's on the
ledger. Put another way, it's a digital record book using cryptography, which makes NFTs unique, impossible to counterfeit, and immediately authenticated.
And when you buy an NBA Top Shot moment,
it brilliantly goes into your blockchain-linked account. You don't have to know any of the technical stuff, only what you want to buy.
they worth so much?
Is this just a way to manufacture scarcity? NBA Top Shot drops "packs" of such moments (similar to a pack of basketball cards) to consumers intermittently, and the demand is huge and far
outstrips supply. For example, in a recent pack drop, there were hundreds of
thousands of buyers in line trying to get a pack, of which only 25,000 were available.
because many of these highlights are very scarce, they become increasingly
valuable. A user even recently paid $208,000 for ONE highlight of Lebron James
dunking on Nemanja Bjelica.
So are NFTs good investments?
And will they be around in ten years? Hard to say. Some will probably succeed,
and many will fail and become worthless. A lot of people said that about art
collecting in prior decades and in 2018 the art market hit $67.4 billion, according to UBS.
digital NFTs the new art then? One thing's for sure: thanks to the recent $69 million sale of his digital collage, Everydays: The First 5000 Days, Beeple probably has
a strong opinion on that.