But even more recently, a new player seems to have entered the blockchain arena: NFTs.
In March 2021, rock band Kings of Leon released a new album “When You See Yourself” as a non-fungible token (NFT), and in the same year an original Banksy was burned and destroyed before being sold via NFT for £274,000.
But that sum pales in comparison to what the work of an American digital artist – Everydays: The First 5000 Days – was picked up for.
Artist, graphic designer and animator Beeple – real name Mike Winkelmann – started creating a work of art every day for 5,000 days in 2007.
The first NFT of an artwork to be listed at famed auction house Christie’s, it sold for $69 million on March 11 – the third most expensive artwork by an artist living.
But what does all this mean? What are NFTs, how do they work and what do they mean for the future?
Here’s everything you need to know.
What is a non-fungible token?
Non-fungible tokens are cryptographic tokens that represent something unique.
Unlike bitcoin and other cryptocurrencies, they are not a mutually interchangeable commodity (in the case of cryptocurrency, money). This means that you can’t part with an NFT and have it replaced with something of equal value later, because you might get some money.
This means that they are – by definition – not “fungible”; you cannot exchange them for other cryptocurrencies or goods, as you can with cash.
When did NFTs start?
Their history dates back to 2017, when the American studio Larva Labs developed CryptoPunks, a series of collectible digital characters exchanged via NFTs, which are a good starting point for getting familiar with the technology.
There are 10,000 unique CryptoPunks to collect. But being digital products, the ability to make copies that could be traded freely – thus reducing their value – is easy.
Thus, CryptoPunks have been made digitally rare through the use of blockchain, a kind of “Cloud” technology for financial assets that keeps track of file ownership through advanced security protocols.
This gives proof of ownership to every Punks holder, meaning there will only ever be one exact copy of each of the 10,000 digital characters in the world.
How are they used?
The primary use of NFTs has been found in the world of digital art.
In the traditional, “physical” art world, when an artist completes a work, it is the only copy of it. There is only one physical copy of Leonardo da Vinci’s Mona Lisa for example, a rarity that helps add to its astronomical value.
Counterfeits are difficult when reproducing physical art, thanks to the combined expertise of art historians and experts around the world, and the technology that can be used to eliminate counterfeits.
But when it comes to digital art, pieces can be copied much more easily, usually with the simple duplication of a file.
NFTs put an end to that, encrypting the digital source of an artwork with a blockchain to ensure it remains the definitive version of that piece.
For example, a digital illustration could be embedded in this article, but it would not be The Illustration.
In theory, this work of art could be copied an infinite number of times, rendering it essentially worthless in monetary terms. However, the person who owns the NFT of a work of art holds something far more valuable; the “original” piece.
How do they affect the music?
In early March, Kings of Leon became the first band to release a major rock album through NFT.
Their eighth studio album is still available in all the usual formats, but fans who purchase any of their $50 NFT albums become owners of blockchain tokens that grant access to limited-edition extras like “animated artwork” and vinyl versions.
These tokens can only be purchased for two weeks after the album’s March 5 release date, after which nothing more will be produced.
This basically means that Kings of Leon have been able to deliver deluxe edition versions of their new album with all the extras fans have come to expect all digitally.
It is particularly practical during a global pandemic, a time when going out to a physical store is a more difficult challenge than usual; NFT tokens can be exchanged for physical goods at a later date.
NFTs even give digital albums and other works of art a collectability and value beyond what one would usually expect from what are essentially a handful of computer files.
They can be sold to other collectors as long as they are willing to pay.
Where can I buy them?
NFT markets are proliferating at an increasing rate, reflecting the new popularity of online NFTs.
There are plenty to choose from, and which one is best for you should only be decided after you have thoroughly researched the pros and cons of each.
Nonetheless, we’ve listed a handful of the most popular (and trustworthy) NFT markets below to help you get started.
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