NFTs have been in the news lately mostly related to whopping sums of money. The artist Beeple’s first digital-only artwork was auctioned at the Christie’s auction house for an unbelievable $69 million. The winning bidder does not get a painting or a sculpture. Instead, they will receive NFTs.

What is an NFT?

An NFT or non-fungible token is a digital asset. Non-fungible basically means that it is unique and can’t be replaced with something else. Like cryptocurrency, NFTs can also be bought and sold online, and the underlying code in most NFTs is the same as many cryptocurrencies.

Cryptocurrencies like Bitcoins are fungible, meaning you can exchange one for another Bitcoin. A fungible asset is something that can be interchanged but still holds the same value. For instance, you can swap a $10 bill for two $5 bills and the value would remain the same.

However, when it is a non-fungible asset, you can’t interchange it with something else. It could be a one-of-its-kind painting like the Monalisa by Leonardo Da Vinci or a mansion. You could take a photo or a print of the Monalisa but there will only be one original painting.

How do NFTs work?

Every NFT is a unique token on the Ethereum blockchain. Each token has some additional information on them, and that is what sets them apart. The extra information could take multiple forms, such as art, music, videos, and more.

Since NFTs hold value, you can buy and sell them just like other pieces of art. The value of an NFT is influenced by the market and demand.

When it comes to art, several prints of an original masterpiece are sold for a fee. In the same way, copies of an NFT can also be bought as these copies are also valid parts of the blockchain. However, just like an art print does not hold the same value as the original, the same is true for a copy of an NFT too.

How much are NFTs worth?

It may sound surprising but NFTs are being bought for millions of dollars. In theory, anyone can tokenize their art to sell, but the growing interest in NFTs is mainly driven by news of multi-million dollar sales.

Musician Grimes sold several pieces of her artwork at an auction for a whopping $6 million. On the 10th anniversary of the iconic Nyan Cat GIF, the artist Chris Torres did a remastered version that sold for an incredible $590,000.

However, before you rush to invest in NFTs, do your research and understand the risks. NFTs have made a significant impact on the gaming and luxury industries, and it has immense potential to go beyond these applications.