2 years ago
Picture the scene: you’re in an audio-only chat room on your
iPhone with the electronic two-piece Disclosure, and they are announcing that
they are giving away their new album in the form of an exclusive digital asset.
Involving Clubhouse (the audio-only chat platform) and NFTs (the digital
asset), this is a very ‘2020s’ scenario.
Whilst Clubhouse might be a fairly simple concept to get
your head around, being just another social network, the world of NFTs is
perhaps not so straightforward. First, the basics: NFT stands for ‘Non-Fungible
Token’. The ‘Token’ part of the name refers to its link to a blockchain – NFTs
are a unit of data that’s stored on a digital ledger – something that we are
more used to seeing with cryptocurrencies. This data can be anything at all,
such as a string of numbers, a novel, or a digital image.
What sets an NFT apart from other ‘Tokens’ or ‘Coins’,
however, is the ‘Non Fungible’ part: each NFT is not interchangeable with
another, and cannot be broken up into smaller parts. Imagine if each bank note
of a currency was treated differently based on its own unique serial number,
rather than just being all mixed together, and this will give you an idea as to
how it all works.
It’s precisely this uniqueness which gives NFTs their value:
only one instance of each NFT exists, and it can have only one owner. Another
analogy can be made with trading cards, collectable, unique items whose value
is based on rarity.
Right now, NFTs are proving to be one of the hottest digital
crazes, with around $50 million worth of NFTs being sold every week. Standing
out from the crowd is an NFT artwork created by the artist Mike Winkelmann, aka
Beeple, which sold online for scarcely-believable $69.3m through the
Artists have indeed been quick to embrace NFTs, with the
uniqueness and ease of verifying ownership proving particularly attractive
qualities – similar to how the art industry works in the physical world.
Artists can either store an image of their piece on an NFT, or create a piece
of digital art that exists solely in the form of an NFT. The artist known as
Beeple has been joined by the British artist Banksy and the digital artist Pak
in creating, and selling, NFT artwork.
Musicians of all kinds are also getting involved with NFTs.
They appeal to musicians because it gives them a chance to directly generate
revenue from their music, without record labels taking their own (often large)
cut. Disclosure, as mentioned earlier, have got in on the act, along with
others including DJ 3lau, who sold an NFT collection of his music for over
$11m; Kings Of Leon, who released their album as an NFT; and the musician
Grimes, who pocketed a cool £4.3m after selling their digital art collection.
Whilst the numbers behind such sales of NFTs are
eye-watering, and evidence of the current popularity of this digital asset,
many are questioning if it’s something that’s viable in the long term, or
merely just a passing fad. As the crypto world continues to grow, it’s likely
that these ‘digital trading cards’ will do so as well – particularly if there
continue to be innovative applications of NFT artworks.
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