NFTs, and why people are paying millions to own them

Shawn Knight

Posts: 13,080   +131
Staff member
In brief: If you’ve been following tech or financial headlines as of late, you’ve perhaps come across the term NFT a time or two. NFT stands for non-fungible token, and in the simplest of explanations, it’s a special type of cryptographic token used to create and verify ownership of digital goods.

Take a piece of physical art, for example, like the Mona Lisa. There’s only one original and it has been authenticated as unique, but there are many, many reproductions and copies. You can go online and pull up countless images of the painting, or head over to eBay and buy a reproduction at a fraction of the original's value.

In the world of economics, fungibility means that a product or a piece of a product is interchangeable. Gold is a good example of something that is fungible. In its pure state, a set amount of gold is interchangeable with that same amount of gold, regardless of what form it is in.

By definition, something that is non-fungible is not mutually interchangeable. Take the collector car industry, where the term "matching numbers" is often used to describe a vehicle with original components. Such cars are highly sought after by collectors due to their originality and scarcity, even though new versions of those very same parts could be remanufactured today to the exact same specification.

In essence, an NFT is a lot like a certificate of authenticity for digital goods such as pictures and animations. Sure, you can make exact copies of a piece of digital art until you are blue in the face, but with an NFT attached, you have proof that your digital good is authentic and original.

It all happens through a public ledger, a blockchain, which records the entire chain of ownership since the NFTs inception.

It may sound silly that someone would be willing to pay a premium for something like a photo or an MP3 that can be cloned time and again for free, but that’s the world we live in. Some people have a knack for owning something that is unique, and they’re willing to pay big bucks for those rights.

Last month, musician Grimes raked in around $6 million from the sale of digital art on Nifty Gateway. Just days ago, an original Banksy piece of art was purchased, digitized, then burned by a group of crypto fans. The digitized NFT was then sold for 228.69 Ethereum, or around $380,000 at the time of sale.

Images courtesy Vladimir Kazakov, Rokas Tenys

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ypsylon

Posts: 325   +232
Frankly this could be a amazing for sites like Deviant Art or Art Station. With NFT you have absolute certainty that nobody stole your work and uploaded it on Etsy or Displate for its own profit.

Requirement for NFT token at time of upload and we solved (more or less) the art theft which is like a plague.
 

Plutoisaplanet

Posts: 404   +562
Another way to put this is a cryptographic signature (ie. PGP) of a ledger. This is really just a newish application of an old technology. I bet both the ledger and signature would have to be stored in a public directory so people can’t perform fraud with things they used to own or claim to own something they don’t. But it’s really not that complicated or special besides actually being cheaper than the equivalent physical process (unlike cryptocurrency).
 

Axle Grease

Posts: 195   +117
This is more practical, especially on a Banksy.

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You said "It may sound silly that someone would be willing to pay a premium for something like a photo or an MP3 that can be cloned time and again for free"

yeah it's true for a conversion of something from outside the chain to inside the chain.

But creating in NFT guarantees you that the work cannot be copied, and this is much much more interesting
 

Gastec

Posts: 107   +47
It's absolutely terrifying all the steps and manipulation I'm seeing to sucker people into putting their money into crypto currency.

And the sad thing is: when their money evaporates, there's no recourse. No FDIC. No one to sue. No one to call.
You can call Elon Musk. He surely must have some inside information and a method to recuperate their "investment", him being so close to the top of the pyramid scheme and all :)
 

Adhmuz

Posts: 2,119   +924
But creating in NFT guarantees you that the work cannot be copied, and this is much much more interesting
That isn't at all how I understand it, the NFT guarantees you have an original, copies can still be out there and nothing can prevent that, this just gives piece of mind that what you have is the original.

The Mona Lisa example was a perfect analogy, copies exist but there is only one original, the same will apply with a digital photo with an NFT.
 

Kirby1

Posts: 83   +125
So I get what NFTs are and I get that there are certain digital currencies that are basically NFTs but I've yet to see the name of any of them.
 

Skjorn

Posts: 579   +453
It's absolutely terrifying all the steps and manipulation I'm seeing to sucker people into putting their money into crypto currency.

And the sad thing is: when their money evaporates, there's no recourse. No FDIC. No one to sue. No one to call.
If you're not mining on your 3090s then you're doing it wrong. Could've had them paid off by now and then some. You should keep trying to talk crypto into the dirt, looks like its working out real well.
 

jpuroila

Posts: 323   +181
So... how do you get the original? On an USB stick? I mean, you can't transmit the original via the internet, at most you'll get a copy with a guarantee that the original has been destroyed(and I have some serious doubts about the strength of that guarantee). And you can't ever see the original, you'll only ever see a copy that's been stored into the RAM of your video card.

And even if you receive the original on an USB stick(or SSD or whatever), there's still no way for you to know how many times it was copied before it became "the original." The whole concept is just completely nonsensical.
 

Scrye74

Posts: 27   +53
So... how do you get the original? On an USB stick? I mean, you can't transmit the original via the internet, at most you'll get a copy with a guarantee that the original has been destroyed(and I have some serious doubts about the strength of that guarantee). And you can't ever see the original, you'll only ever see a copy that's been stored into the RAM of your video card.

And even if you receive the original on an USB stick(or SSD or whatever), there's still no way for you to know how many times it was copied before it became "the original." The whole concept is just completely nonsensical.

I love this. It's digital information, therefore, the "original" is just an abstract represented as 1s and 0s. Even the storage of the data is a completely different representation of those 1s and 0s each time it's moved to a different device. On a USB stick it is a series of gates on a memory chip. Whereas, on a mechanical HDD, it's magnetic spots on a platter. Heck, even the 1s and 0s are based what format you are going to represent the item in or on what platform.

In this case, the ONLY thing that really has any value is the public ledger entry for the NFT.
 

mbrowne5061

Posts: 1,808   +1,040
It's absolutely terrifying all the steps and manipulation I'm seeing to sucker people into putting their money into crypto currency.

And the sad thing is: when their money evaporates, there's no recourse. No FDIC. No one to sue. No one to call.
I mean, in this case, it isn't a currency. Or even being advertised as such. Its just a digital certificate of authenticity, and that is really it.
 

Reehahs

Posts: 1,161   +796
Seems utterly pointless to apply this to digital goods when the digital landscape is designed for mass replication and consumption.
 

NightAntilli

Posts: 558   +661
Seems utterly pointless to apply this to digital goods when the digital landscape is designed for mass replication and consumption.
Not really... That is exactly the point. Imagine you write a song, you make it an NFT, and every time someone listens to a copy of the song, it is linked to the NFT, and you get a small 'fee' because someone listened to it.
NFT basically solves the issue of copyright & piracy. It also solves counterfeiting. Right now the hype surrounding it is kind of out of bounds though...

Another use case is what is mostly described here in the article and by everyone... You can see it as Pokemon cards. Right now, the 1st gen cards have become so rare that they are a collectible. Something that is an NFT will pretty much become a collectible, because it makes it unique. Even if there are copies out there, some crazy dude out there wants the 'original' one and is willing to pay for it.

Another way to look at it is... Signatures. Everyone can buy a baseball. But not everyone has a baseball that is signed by Babe Ruth. The NFT functions as the signature of Babe Ruth on a baseball, meaning, it can become extremely valuable, depending on what the NFT represents.
 

PEnnn

Posts: 611   +581
If you're not mining on your 3090s then you're doing it wrong. Could've had them paid off by now and then some. You should keep trying to talk crypto into the dirt, looks like its working out real well.

Maybe he doesn't want to run his 3090 24/7/365 to earn $9 per day. Not everyone is a sucker for crypto.
 

mbk34

Posts: 153   +89
It's absolutely terrifying all the steps and manipulation I'm seeing to sucker people into putting their money into crypto currency.
It's not just crypto currency, it's all aspects of life especially national politics (Brexit, Trump etc). None of it makes sense to me unless people are being manipulated. It's interesting to think who's going to profit from a less unified world. Easiest guess is either China wanting take over the South China Seas area or Russia wanting to reclaim the buffer countries it's lost over the last 30 years. If cryptocurrencies suddenly go worthless then that would hit hard as $1 trillion would suddenly disappear overnight from the economy (the Wall Street crash only caused a loss of $14 billion). On the plus side, at least there'd be some great opportunities to pick up an RTX 3090 cheap on ebay.
 

mbrowne5061

Posts: 1,808   +1,040
... If cryptocurrencies suddenly go worthless then that would hit hard as $1 trillion would suddenly disappear overnight from the economy (the Wall Street crash only caused a loss of $14 billion). ..

While I agree, the crash of all cryptos would be felt world-wide, that $1 trillion would not just "disappear". You still buy crypto with fiat, goods, and services; and sell it for fiat, goods, and services. None of that fiat and none of those goods disappear. The service work can't be 'un-done', but it would be disrupted.

If crypto crashes, every holder of crypto turns into a bag holder, but it's value still exists in the world - just in the hands of people who were smart enough to trade in more tangible things.
 

fl21289

Posts: 208   +241
If you are still in denial that some sort of crypto or digital currency will not replace the current one... you are past your time.
 

mbk34

Posts: 153   +89
While I agree, the crash of all cryptos would be felt world-wide, that $1 trillion would not just "disappear". You still buy crypto with fiat, goods, and services; and sell it for fiat, goods, and services.
I'll admit I'm not convinced. Currencies losing all their value isn't uncommon - France, Germany, Greece, Argentina, Zimbabwe, Venezuela etc etc. I'm not sure why you think a currency that's currently behaving exactly like a bubble market is any more secure. Particularly when it's based on maths that few people understand - remember credit derivatives in 2008? The fact it was originally driven by drug lords and produced on gaming graphics cards just puts the icing on the cake. And don't think you'll be able to sell before it looses too much value because large banks will be using program trading systems that will sell everything before you even release there's a problem. You'll still be able to buy stuff with it but it will just be sweets rather than cars.