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What Are NFTs? How Is Digital Art Worth Millions of Dollars?

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A 10 seconds video clip has been sold for a record $6.6 million last week. Welcome to the world of NFTs!

Digital collectables or NFTs are becoming popular lately. They have been around for some time now. However, the news of NFT being sold for millions of dollars is surprising for everyone.

What Are NFTs?

NFTs or Non-Fungible Tokens are digital assets like cryptocurrency. A digital ledger known as blockchain keeps the record of NFT ownership. The blockchain is similar to the ones used by Bitcoin and Ethereum.

NFTs are different from cryptocurrencies in the sense that you cannot exchange one NFT for the other. Each NFT is rare, unique, and cannot be duplicated.

The internet has made many forms of art simply worthless. You can view and download images, videos or gifs free of cost. However, NFT provides makes it possible to keep proof of ownership for a particular digital item. You can sell the holdings for cash.

How do NFTs Work?

NFTs are mostly part of the Ethereum blockchain. Ethereum is a cryptocurrency platform that supports non-fungible tokens. You can read about Ethereum in detail on this blog.

An NFT can be anything digital like drawing, video, animation, virtual cat or even a virtual piece of land etc.

A U.S based NFT platform, NBA Top Shots, lets users buy/sell short clips of the National Basketball Association’s star players. The platform licences the clips to Dapper Labs, a company that digitizes the reel using blockchain technology. The footage is also made scarce to give it value. NBA Top Shot has so far made nearly $290 million in sales.

The Coronavirus pandemic gave a boom to the whole Crypto Market. Non-Fungible Tokens, being part of the digital assets category, rose to popularity subsequently.

Why Buy an NFT?

You can buy NFTs as a speculative investment. The art you buy today for $100 million can be sold tomorrow for $500 million. However, it all depends on speculation.

Some individuals are buying NFT to keep them as digital collectables. It is like purchasing the original portrait of the Mona Lisa. You can have a sense of ownership.

NFT industry started in 2017. Its value has been significantly rising for the past two months. We don’t know where the industry might stand two years from now. Nonetheless, sceptics think that many of the projects in NFT place will no longer exist once the industry matures.

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