During the spring of 2021, the news media erupted with stories about NFTs. Celebrities were selling items as NFTs and making a fortune. Jack Dorsey, the CEO of Twitter sold his first tweet as an NFT for $2.9 million. This sounds exciting, but what exactly are NFTs and why are some selling for such lofty sums? Robert Testagrossa, a leading cryptocurrency developer and industry expert, offers insights about NFTs for the newbie.
The acronym NFT stands for non-fungible token, a term that sounds complicated but is simple. Non-fungible means something is unique and not replaceable by another item. For example, a bitcoin is fungible. If someone trades a single bitcoin for another one, they have the same thing in their hands. An NFT is a singularly unique item like a comic book, where a trade means acquiring and departing with two different things.
NFTs operate on the Ethereum blockchain. While Ethereum is also a cryptocurrency, it’s also a strong blockchain platform that provides NFTs with a secure way to track, trade, and sell items. Robert Testagrossa says with an NFT, extra information is stored on the blockchain that serve as identifiers for an item. This information is what allows the NFT to hold value, which then opens them up to supply and demand and potentially astronomical prices for some items.
And in this context “item” can mean either a virtual thing or a physical item. For example, there are NFTs for virtual art and music files, as well as NFTs for baseball cards and paintings. With an NFT, the owner of the item receives a JPG file with all the related information that’s forever tied to the item. It’s a new method of ownership that allows people to buy, sell, and profit in ways that were unimaginable just a few years ago.
NFTs are available on several different platforms that are often specific to the types of items available for purchase. Some items are also attracting the interest of traditional auction houses, as some NFT-based artwork pieces are selling for tens of millions. The anticipated demand for some NFTs means they are “dropped” like a music album on a set date, which provides eager buyers with a chance to prepare their funds for a purchase.
NFTs present a unique opportunity for buyers, sellers, and developers who have created a secure marketplace on the Ethereum blockchain that’s changing how people own physical or digital items.