Musician Grimes recently sold her crypto art through non-fungible tokens or NFTs for $5.8 million, while Chris Torres, creator of Nyan Cat, a famous internet meme, sold a one-of-a-kind version of his viral GIF for 300 ethereum or around $600,000. Artist Mike Winkelmann, also known as Beeple, sold one of his works for $6.6 million.
The NFT space recently exploded with many musicians and digital artists exploring the route to sell their creations in the form of collectibles or art. We tell you what non-fungible tokens are and how they work.
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What are non-fungible tokens?
A non-fungible token (NFT) is a cryptographic token that represents something unique, and has an individual characteristic that sets it apart. Owning an NFT is like owning a one-of-a-kind work of art or a collectible antique. NFTs are unique tokens or digital assets that generate value because of their uniqueness.
For example, if two individuals hold a bitcoin each, they can exchange their bitcoins, which are replica of each other and have the same value. However, NFTs are not interchangeable, as they are more like pieces of art where each and every token is unique in itself. While bitcoins are also digital assets, NFTs are unique digital assets with each token representing a unique value.
On the blockchain, when you send a bitcoin to someone, a ledger entry gets made. In the case of NFT also, a ledger entry is also made, but in that entry, there is also an address to the file, which establishes the ownership of that NFT.
“When someone transfers one NFT to someone else, the code, which represents the NFT, also gets transferred to the other person on the blockchain. This makes sure that one can check on the blockchain who owns the NFT. When an NFT is created it is put up on the blockchain and is time stamped, therefore it makes digital ownership very simple and easy to identify," said Nischal Shetty, chief executive officer of WazirX.
What are the different uses of NFTs?
Right now, the crypto industry is still trying to figure out what’s going to be the best use case for NFTs. The applications start from as trivial as unique images representing each NFT.
For example, in the real world all of us can have printouts and copies of iconic painting Mona Lisa, while there is only one real portrait. Similarly, in the digital verse, there can be many copies of an art, but the ownership lies with the person who owns that token, and this is the aspect, which caught everyone’s attention recently.
Another application of NFTs could be online to offline integration. “Today when you buy pieces of offline art, you have either custody it or keep it somewhere, that’s how the ownership is decided. But tomorrow, they can also be tokenized where a digital form of that art exists and whoever owns that token, own the real art," said Shetty.
Moreover, digital collectibles of games played by the teams of US-based National Basketball Association have garnered more than $200 million in sales so far.
Outlook of NFTs in the Indian context
According to experts, NFTs is a new concept in India and will take some time for this trend to get popular here.
However, an immediate application of NFTs could be in protecting intellectual property rights of Indian artisans. “India has lakhs of traditional artisans who could benefit from using NFTs to verify their original work. Add to that the growing number of artists working in digital media who can protect their creations with a tokenized “wrapper" to show that it’s an original work," said Rahul Pagidipati, CEO, ZebPay.
The crypto exchange is planning to become the first Indian company to launch an NFT, which will be named ‘Dazzle’, which is the name for a herd of zebras.
“Since we announced the Zebra non-fungible token and Dazzle platform for digital art and collectibles, we have had several galleries and organizations reaching out to us. The NFT market in India, like the global market, is just beginning to take off and looks even more promising than it did six months ago," Pagidipati said.