What is an NFT?
Zoë Roth, better known by the internet as “Disaster Girl”, has sold the original copy of her meme as an NFT (non-fungible token) for $500,000. This poses the question of what is an NFT?
An NFT is a digital asset that represents a real-world object like, the Disaster Girl meme. NFTs are bought and sold online, usually with cryptocurrency. They are also encoded with the same underlying software as many cryptocurrencies.
NFTs are gaining in prominence, despite having been around for the last several years as they are now becoming an increasingly popular way to trade digital artwork.
NFTs are also generally one of a kind, or at have a very limited run, as well as having unique identifying codes. This is in contrast to most digital works, which are almost always infinite in supply. That being said, many NFTs are digital creations that already exist in some form elsewhere – like the viral Disaster Girl meme, or securitised versions of digital art that’s already available on Instagram.
For instance, probably the most famous NFT of the moment, “EVERYDAYS: The First 5000 Days,” which sold at Christie’s for a nearly £50 million. The individual images that make up EVERYDAYS – or even the entire collage can be viewed online for free.
Is an NFT the same as Cryptocurrency?
NFT stands for non-fungible token. It is built using similar programming as cryptocurrency, like Bitcoin, but that is where the similarity ends.
Cryptocurrencies, like physical currency are “fungible”. A fungible asset means that it can be traded or exchanged for one another and they are also equal in value. A £10 note is worth £10 whether that it is exchanged for another £10 note or two £5 notes – the value is still £10.
As each NFT has a digital signature it makes it impossible for NFTs to be exchanged for, or equal to, one another (hence, non-fungible). So for example, the first tweet that was recently sold as an NFT is not equal to an NFT of the Kings of Leon new album “When You See Yourself”.
How does an NFT work?
NFTs exist on a blockchain, which is a distributed public ledger that records transactions. This is the underlying process that makes cryptocurrencies possible. NFTs are usually held on the Ethereum blockchain.
An NFT is created, or “minted” from digital objects that represent both tangible and intangible items, including:
- GIFs
- Art
- Collectibles
- Videos and sports highlights
- Video game skins
- Music
NFTs are like collector’s items – they just happen to be in a digital format.
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