Last week, this Website had reported on how Sotheby’s will be auctioning the source code for the World Wide Web, after Sir Tim Berners-Lee’s original time stamped files, signed by him, as an NFT, was given to them. This is Sotheby’s first digital-born artefact to come to auction. So what exactly is a non-fungible token?
NFTs are non-fungible tokens, which are digital works registered on the blockchain the ownership of which can be transferred to buyers who purchase the item using cryptocurrency. The most commonly used blockchain is Ethereum, but any blockchain could perform the same purpose.
Fungible And Non-fungible Assets
Fungible assets are those that have the same value for type across the board, such as a Bitcoin, but non-fungible assets can have different values even if they are the same – such as a digital work of art.
Notable NFTs
Recently, NTFs have shot to fame due to a number of high-profile personalities offering their works for sale. Interestingly, the sale of these works does not result in transfer of copyright, but only transfer of ownership, much like the sale of precious works of art, where a person buys a painting or sculpture but not the copyright.
Another recent NFT mega sale was floated by Mike Winklemann ( a.k.a. Beeple), whose digital artwork of 5000 “daily drawings” called “EVERYDAYS: The First 5000 Days” sold on auction at Christie’s for just over US $69.3 million.
Many of the digital works offered as NFTs are available in a similar or exact form elsewhere, but this doesn’t seem to reduce demand, rather since these works are usually sold as “autographed originals”, the hlurry to own them is similar to that created by the auctioning of a physical signed book written by a famous author.
Buying And Selling NFTs
Obviously, anyone, in theory, can register a digital non-fungible work on the blockchain. However, the fees involved prohibit artists or creators from registering their works unless they can be assured of a reasonable selling price. Therefore, only limited editions, extremely famous, or rare editions are suitable as NFTs.
Similarly, for investors who want a piece of the NFT market, prices are steep & the process fairly difficult even if you only want to buy a “cheap” offering. Before you start making an offer, you need to be set up to buy using cryptocurrency, which involves owning a wallet & purchasing the currency. Next, you need to buy “gas” from the platform you want to use before you can launch your purchasing attempt. There are multiple reports of potential buyers paying as much as $200 in order to buy a digital work priced at under $30.
Where To Buy NFTs
Hidden costs on all platforms include “gas” fees, which are for the computing energy needed to process & validate transactions on the blockchain. The “gas” fees change based on transaction time.
Currently, there are multiple platforms offering NFTs, the most prominent being –
- OpenSea – they charge 2.5 % of the sales price, but there are no buyer’s fees.
- SuperRare – for the initial sale, there is a 15% commission, but creators receive a 10% royalty for future sales.
- Rarible – both buyers & sellers pay 2.5% commission.
- Foundation – 15% commission on a sale. This is an invite only app.
Red flag: The thing with NFTs is that they are relatively new & unproven investments, so proceed with caution.
